Green Financing: The Sustainable Way Of Development

As the world was witnessing environmental degradation due to rapid industrialization and infrastructure growth, global leaders met on a global platform for evolving innovative ways for environment protection, without compromising on the economy. At this point, Green Finance was brought into existence.

- Nand Gopal Anand, Harshit Dusad, Vrindesh Patel

Green Finance is an integration of finance and innovation towards those products that lead to environmentally sustainable growth. In other words, it combines opportunities for economic growth as well as reaping environmental benefits, simultaneously. Green Finance had gained popularity after the Paris Climate Agreement when countries had committed to fighting climate change but faced a parallel challenge to achieve sustained economic growth. Green Finance includes various financial products and services (viz. green bonds, green loans, green insurance, etc.) focused towards creating a positive befalling impact on the environment.

According to the United Nations Environment Programme, Green Financing can be promoted inter alia through changes in countries' regulatory frameworks, harmonizing public financial incentives, increase in investment in clean and green technologies, etc.

With an aim to reduce the carbon footprint, and keeping in consonance with the Paris Climate Agreement, countries are now developing strategies and policies for encouraging Green Finance. This is being achieved by redirecting capital flows to environmentally responsible projects and technologies.

The World Is Going Green

With increased awareness in relation to environmental protection, banks have now introduced green finance products within their existing product portfolios. These include green home loans, green construction loans, green car loans, green project loans, green securitization products, etc.