India central bank head calls for climate project pool to boost funding #IndiaFinance

Financial institutions in India should set up a pool of bankable projects to promote investment in green technologies, Reserve Bank of India (RBI) governor Sanjay Malhotra said in a speech.

“Creation of a common pool of such bankable projects will have multi-fold benefits for the entire ecosystem,” he said in a keynote address on climate change risks and finance.

Malhotra noted that financing green projects often had higher credit risk due to the use of new technologies, which had a “relatively limited track record in terms of reliability, efficiency, and effectiveness”. To address this, financial institutions should develop capacity and technical expertise to better appraise these risks when making investment decisions.

“One of the oft-cited constraints to adequate flow of climate related finance has been the lack of bankable projects. Capacity and expertise constraints limit the ability to appraise and thus finance climate change mitigation,” he said.

“Regulated entities with experience of such projects can contribute to the pool for the benefit of others, while also benefiting from such information shared.”

“It is our individual and collective responsibility, to work together effectively and contribute to the global efforts to mitigate the risks associated with climate change and ensure that the Indian financial system remains resilient,” he added.

More than 80% of India’s 1.4 billion-strong population live in areas vulnerable to climate-induced disasters, according to the World Bank. The country pledged in 2021 to reach net zero by 2070.

Malhotra said the RBI is in the process of finalising plans to require banks to disclose their management of climate risks.

Under the draft framework, entities regulated by the RBI will have to disclose the processes, governance structures and strategies they have in place to identify, mitigate and monitor risks related to climate change.

India needs funding of around US$160bn a year to meet its climate commitments made at Cop26 in 2021, Rajeshwar Rao, a deputy governor of the RBI, said in a speech last year.