India is StanC’s top 2 sustainable finance market, says top executive #IndiaFinance

Mumbai: India is the largest market for sustainable lending for Standard Chartered along with China, partly driven by the government’s policy push towards net-zero emissions, according to the British multinational lender’s chief sustainability officer (CSO).

Policies like support for electric vehicles and related charging infrastructure and the push towards renewable energy are creating “enormous” potential for sustainable finance for the bank to cater to, CSO Marisa Drew said in an interview.

The overseas lender has a diversified customer and product base in the country, she said. It caters to large and small corporate clients and financial institutions in India and offers instruments like loans, bonds and trade finance, she said.

“India is a massive market for us, and has continued to grow very, very healthily,” she told Mint.

Sustainability targets

Standard Chartered has set a target of $1 billion income from sustainable finance by 2025 and hit $720 billion in 2023. India and China were the two largest contributors to this pie, she said.

The bank will be focusing on lending to hard-to-abate sectors like metals and mining for emission reduction, to the renewable energy sector and to new technologies like battery energy storage systems (BESS), Drew said.

The focus of the local industry on vertical integration of the renewable energy supply chain—right from production of components that go into solar and wind energy farms to the consumption of this energy for manufacturing—holds potential for significant future investments, she said.

Speaking about role finance in the global economy’s transition to net zero, Drew, who earlier headed sustainability at Credit Suisse, said that it must be a collaborative effort between different agencies, including those who lend at a concessionary rate to catalyze transition. While private banks like Standard Chartered will always look at commercial prospects of any project, they can have a bias towards funding projects that are sustainable, she said.

“We enter everything thinking with a commercial mindset,” said Drew.

“But we’re also very willing to think about participating in projects with other partners who provide catalytic capital. That can be philanthropists, or funds that are designed to be either ‘no return’ or ‘concessionary return’, or the multilateral development bank community,” she said.

A key upcoming area of focus for Drew is adaptation finance. It refers to the idea that even if the world manages to limit global warming to 1.5 degrees celsius in line with Paris Agreement, there will be climate change effects that need to be built into business models. In a white paper, Drew estimated that even in the best-case scenario, 10 of the worst-hit markets by climate change including India, Bangladesh, China and Pakistan, will incur an estimated cost of $377 billion in damages and lost economic growth by 2030.

“Adaptation finance has just not been in the sphere of the private sector to date. We need to mobilize capital in hundreds of billions, if not trillions. And if the world continues to heat up, we’re going to need to do it faster,” she said.

Making a case for lenders to favour adaptation finance, she explained that unless new projects coming up build climate change into their risk matrix, they run the risk of becoming stranded assets. Similarly, businesses that incorporate sustainability and climate change into their model reduce the risk for the lenders, thus deserving reward in terms of preferential lending rates, she said.