Govind Tekale
There is happy news for environmentalists as the green drive has reached the area of finance. Indian Banks, especially those in the public sector, are weaving green initiatives into their business decisions amid rising risks of climate change. They are looking for external help to create frameworks to help them make better decisions on the sustainability front.
India’s largest bank, State Bank of India (SBI), and the second largest public sector lender, Bank of Baroda (BoB), are the government-owned lenders leading the way. SBI wants to hire a consultant to measure carbon footprints in its loan portfolio, and benchmark the bank’s loan mix based on high- and low-emitting sectors, while taking into account the portfolios of other local and global factors.
BoB is looking to appoint a consultancy for advisory on green finance. The bank is embarking on an ambitious journey to enhance its green financing portfolio. Another public sector bank, Union Bank of India, has empanelled EY, Deloitte, PwC, KPMG, and Crisil as consultants to aid its ESG (Environment, Social, Governance) transition.
To be sure, large private sector banks like ICICI Bank have also shown similar commitment towards sustainability. For instance, ICICI Bank’s green financing portfolio stood at ₹11,900 crore as on March 31, 2023.
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In April, this year the RBI (Reserve Bank of India) introduced a framework for accepting green deposits. These are interest-bearing deposits where proceeds would be earmarked for certain Environment-friendly sectors. The guidelines are meant to protect depositor interest while allowing better flow of funds towards green projects.
Bheeshma says in Mahabharat that a person is a slave of money – Arthasya purusho dasah. So money makes the mayor go. In the field of finance too, these are the first steps.
Already certain large private banks have started to adopt ESG risk management frameworks as a part of managing credit risk, besides addressing regulatory and investor demands for more ESG disclosures. On the whole, the green drive by state-run banks is a welcome step in the right direction of sustainability.
SBI raised a $1 billion syndicated social loan in February, 2023. This response is an indication of the possibility of success of a green drive in the coming months and years.
