Deployment of Blended Finance Instruments

Deployment of Blended Finance Instruments

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April 23, 2023

Blended Finance is in line with the Prime Minister's aim of reducing emissions to zero by 2070. According to reports, the Finance Ministry is looking into the idea of allowing financial institutions to generate cash using Blended Finance instruments to invest in green climate initiatives. Blended Finance entails utilising public sector or philanthropic financial resources to phase in private sector investment, therefore catalysing private finance in high-risk and long-term projects. The Union Cabinet adopted India's amended Nationally Determined Contributions (NDCs) last year, which included the Prime Minister's 'Panchamrit' policy revealed at the Glasgow conference into increased climate objectives.

According to the sources, the use of Blended Finance encourages investments in new and emerging sectors and attracts commercial capital to projects that contribute to sustainable development while providing financial returns to investors. It also has the potential to catalyse private finance in such projects. It is still being tested, so the ministry is looking at it from every perspective conceivable, according to the sources.

In Glasgow in 2021, Prime Minister Narendra Modi declared India's goal of reaching Net Zero Emissions by 2070. Last year, India's amended Nationally Determined Contributions (NDCs) were adopted by the Union CabiNet, which included the Prime Minister's 'Panchamrit' policy unveiled at the Glasgow conference into increased climate objectives.

According to the revised NDC, or Nationally Determined Contributions, India is now committed to reducing the emissions intensity of its GDP by 45 percent by 2030, compared to 2005 levels, and to achieving approximately 50 percent cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030. Nationally Determined Contributions (NDCs) are national plans and promises made by a country to fulfil the objective of keeping global temperature rises well below 2 degrees Celsius over pre-industrial levels, with a goal of 1.5 degrees Celsius to avoid the worst effects of climate change.

According to sources, the SEBI or, the Securities and Exchange Board of India and the Reserve Bank of India are collaborating with the ISSB or, the International Sustainability and Standards Board to develop standards for sustainable and climate finance. According to insiders, there is a need for involvement with the standard-setting body so that the requirement is not too harsh and unviable for Indian enterprises, and that it is not skewed towards established countries and that emerging economies are unable to implement it. According to insiders, the ISSB is expected to issue criteria for sustainable finance and climate finance in the coming months.

Source - Financial Express