April, 06, 2016

Green Finance : Innovations in the field of Finance

Financial Services

Green finance is considered most innovative in the field of finance.  It comprises

  • financing of public and private green investments (including preparatory and capital costs) in the areas of environmental goods and services (such as water management or protection of biodiversity and landscapes)
  • Prevention, minimization and compensation of damages to the environment and to the climate (such as energy efficiency or dams).

In short Green Finance is a market-based investing or lending program that factors environmental impact into risk assessment, or utilizes environmental incentives to drive business decisions.

The world is going the “go green” way. We now have Smart cars to reduce emissions and supermarkets that offer customers reusable.  Manufacturers are going gung-ho on energy efficient versions of consumer items. Every school is talking about the importance of preserving the environment and recycling.

According to a new report from Standard & Poor’s (S&P) renewables, clean technology and green finance sectors set to receive at least $16.5 trillion of investment as countries embark on climate plans agreed as part of the Paris Agreement.

Given the Indian Government’s focus on renewable energy with a target of 175 GW of additional capacity installation by 2022, it is estimated that the renewable energy sector will require significant and structured financing. At the moment, sector limits, high street interest rates and asset-liability mismatch are the main challenges faced by the existing financing mechanisms. Therefore, a need for innovative financing mechanisms to finance projects in renewable energy and energy efficiency space has risen. Financial institutions around the world must tap into green wave as well, by offering products and services that appeal to more environmentally-friendly consumers such as green car loans, energy efficiency mortgages, alternative energy venture capital, eco-savings deposits, and “green” credit cards.

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