‘Landers Funding Emerging Green Projects in Higher Risk’

Reserve Bank of India (RBI) Governor Sanjay Malhotra marked the high credit risk for lenders for funding the emerging green technologies with a limited track record.

He said at an RBI event in New Delhi on Thursday, “An important aspect of green finance/lending for sustainable finance is high credit risk due to the use of borrowers of new and emerging green technologies, which is relatively limited track record in terms of credibility, efficiency and effectiveness.”

“Regulated institutions, therefore, need to develop appropriate capacity and technical information, which are for better evaluation in funding projects using such green technologies,” Mr. Malhotra insisted.

Saying that the impact of climate change risks was not limited to the financial system alone, but extended to the real economy, they called for “harmonious coordination and harmony” in the approach between financial sector regulators, regulated institutions and various government agencies. He said, “Given the country’s specific requirements and circumstances, there is a need to adopt a holistic approach to mitigation of climate change risks,” he said.

“Ability and expertise obstacles limit the ability to evaluate and thus climate change gives finance to mitigation. It also increases the risk of financing such projects, ”he said.

He urged regulated institutions to consider ‘seriously’ such pools through a ‘appropriate institutional system’ to deal with the issue.

Given that technology and finance had an important role in infection towards low carbon economy, he said that innovative solutions and abilities were required in these areas.

“The Reserve Bank is encouraging and convenient innovations through its regulator sandbox and hackathon initiative in Fintech Space. We propose to set up climate change risks and permanent finance to install ‘a dedicated on cohort’ under the RBI regulator Sandbox initiative, “he said.

He said that the RBI was also planning to organize a special ‘Greenthon’ on climate change and related aspects.

Stating that the risk management structure in regulated institutions for climate related financial risks was still developing, stating that concrete efforts were required to develop risk management structure; Construction of technical expertise and competencies for comprehensive evaluation and mitigation of climate related financial risks at the range of damage due to such risks.

“The Reserve Bank’s approach to climate related financial risks is oriented not only for short -term, but also for moderate periods. In short -term, our goal is capable of realizing the impact of climate -related risks not only on individual institutions but also on the financial system, ”he said.

“It will include landscape analysis and stress test exercises, using both bottom-ups and top-down approaches,” they insisted.

Quoting Albert Einstein, he concluded, “The world will not be destroyed by those who do evil, but by those who see them without doing anything.”