New Delhi: Banks have always been the backbone of India’s economic growth and as the country pivots towards sustainable growth, the banking sector will need to step up green lending, SBI Chairman Dinesh Khara said on Thursday . He added that there is a growing need to educate India’s financial sector on the importance and benefits of green finance.
âA formal definition of green finance in India would allow more accurate tracking of financial flows to green sectors, which in turn would help design effective policy regulations and institutional mechanisms to increase public and private investment in the sectors. green, âKhara said.
India’s definition of green finance could be formed by combining the adoption of international practices, developing a set of principles for green economic activities, and obtaining views from stakeholders, a- he suggested.
Speaking at the ESG India Leadership Award, Khara said: âUnless banks are able to provide adequate credit to green projects and measure the risks of their portfolio, depositors and shareholders of the bank will continue to bear ESG (environmental, social and governance) risks that can erode returns. ”
To support acceleration and green finance, he said, a number of structural changes will be needed in the traditional lending approach, including the assessment and certification of each project’s green credentials and understanding of the company’s roadmap to achieving net zero.
Speaking about SBI’s ESG initiative, he said the bank aims to become carbon neutral by 2030 and meet the target of a number of measures taken to reduce its carbon impact.
It’s not limited to installing solar power plants, but planting trees, organic farming and banning single-use plastic on campus are other measures, he said. added.
Regarding operations, he said, the bank is also in the process of identifying climate risks that could generate substantial change in the business.
“The bank recognizes the growing risk of climate change embedded in its credit portfolio and has started the process of developing a climate risk management framework in this regard,” he said.
Policies have been put in place to increase the bank’s exposure to climate change and the bank has extended its credit facilities to borrowers in the renewable energy sector on more favorable terms, he added.
He also said that for loans exceeding Rs 50 crore, borrowers are assigned ratings based on their performance on various ESG parameters.
Over the years, he said, SBI has designed products and services to incentivize and facilitate the transition to environmentally friendly technologies.
Green bonds and green loans worth $ 800 billion have been issued since 2018-19, while a green loan worth â¬ 50 million has been raised in 2021.
The proceeds were used in accordance with the bank’s green bond framework to give a positive boost to the environmental impact of renewable energies, he added.
ESGRisk.ai, an ESG rating agency of the Acuite group, announced 21 winners among the top 500 listed companies in 55 sectors.