GREEN FINANCE: An efficient tool for sustainability
Despite the fact that green finance is still in its infancy, it has received a lot of attention in recent years in the field of financial markets. Due to the lack of enthusiasm among the investors and major ineffective policies of the government, there has been a downfall in scope of green finance in India. However, from the past few years, green finance's potential and importance are being recognized by potential investors. There are many research studies on the interaction between green finance and its stakeholders in particular. Trying to determine the current state of green finance is the focus of research. Green finance is a financial pattern which integrates protection of the environment and economic profits. To protect environmental sustainability, organizations are focusing more towards greening their business process. Also, for many functions of business, financial management also turned towards the activities which are environment friendly.
Green finance has recently acquired a tremendous attention in the modern financial market by issuing Instruments like green bonds, green equity and green debenture. The first green bond was issued by the world bank in 2008 when the intergovernmental climate change provided the data on climate change and its political and economic impact. The report depicted an undeniable link between human action and global warming. The report also talked about the increasing occurrences of natural disasters. After the deep investigation of the report the World Bank wanted to take some corrective steps which can reduce the risk of investors along with positive impacts. Since then, green bonds became the history making event which fundamentally changed the way of investment.
Green Finance means financing one's initiatives and agencies which shield or deteriorate the surroundings less. Green finance refers to finance meant for sustainable improvement. It comprises public as well as private finance. It considers the positive and effective environmental results even as financing the tasks and business investment in renewable electricity, strength efficiency, clean energy, management of pollution, waste management, water sanitation, mitigation and adaptation strategies of climate change, bio-diversity safety and improvement of green merchandise for material like cotton bags etc. Thus, the term green finance means any financial activity which is related with environmental conservation and generation of new renewable energy sources as well.
Green finance is a field of modern finance that majorly emphasizes environmental sustainability as well as the profitability of the involved parties. It encompasses various measures which have a wide-ranging positive impact that ensures the preservation as well as the protection of the environment and environmental resource conservation for the future generation. Securitization of forestry, weather derivatives, and nature-linked securities, electronic securities, electronic payment services automobiles, and any other technique that either minimizes or eliminates the use of natural resources or develops new sources to assist financial transactions.
Benefits of Green Finance:
Green finance has numerous benefits to the economy as well as to the environment. It brings harmony
between the monetary aspect and nature. The major benefits of green finance are:
1) Efficient energy management: Various incentives are provided for installing and usage of
renewable energy resources and funding is provided to projects which aims at reducing wastage
of energy under green financing. Therefore, efficient energy management is achieved.
2) Environmental protection: The main aspect of green finance is funding the projects which aim at sustainable development. Environmental protection is an integral part of the funding. This is where this concept comes in handy. Pollution reduction, climate change adaptation, ozone depletion reduction, conservation of biodiversity is necessary for the survival of living things.
3) Reputation Improvement: As various stakeholders are willing to contribute to society through their involvement in order to make an investment and thereby carry out socially responsible work, they prioritize such companies that work for the environment. The state also offers incentives for environmentally friendly projects. As a result, green finance helps organizations build and improve their reputation over the long term.
4) Help attract foreign direct investment: Environmental protection issues are growing over the
world as a result of which foreign investors who invest in local businesses evaluate projects with social considerations keeping in mind its Costs and benefits. Therefore, the issuance of green investment products attracts foreign direct investment.
In the present scenario, green financing which is an effective tool of sustainability is gaining more importance. Investors are now thinking beyond risk and returns, they are becoming more and more responsible towards society. Emerging awareness about protection of nature and increased funding of green projects has opened a wide variety of opportunities in the area of green finance. It can be now summarized that green finance if managed properly will surely work as an efficient tool for sustainable development.
By Anmol Panwar