In a first, the Indian Banks’ Association (IBA) has set up a large working group, comprising representatives of about a dozen-and-a-half key banks, solely for handling issues covering the entire spectrum of sustainability and green financing, in light of the growing importance of this segment in the financial sector, senior bankers told FE.
This working group will play an important role in firming up recommendations on sustainability finance and could be a useful tool for authorities ahead of India’s G20 presidency in December, where environmental, social and governance (ESG) issues will be a major talking point among participating countries, the sources said.
The members of the working group include representatives of top five state-run banks (State Bank of India, Punjab National Bank, Bank of Baroda, Canara Bank, Union Bank of India), six major private banks (HDFC Bank, ICICI Bank, Axis Bank, Yes Bank, IndusInd Bank and Kotak Mahindra Bank) and four foreign banks (Standard Chartered Bank, Bank of America NA, Qatar National Bank QPSC and Mashreq Bank PSC), banking sources told FE. The two other members are Exim Bank and SIDBI.
The IBA is also considering a proposal to set up a committee on ESG, which may subsume its existing working group on greening of financial system that has limited focus.
“Given the growing importance of sustainability issues, it’s very important that we develop capacity at the IBA level for proactive policy-making, especially in sustainable financing,” said a senior banker.
Globally, sustainable finance is broadly defined as any form of financial product/service that promotes environmental, social and governance purposes while contributing to the achievement of relevant targets adopted by countries under frameworks, including the Paris agreement on climate and the Sustainable Development Goals of the United Nations.
India is expected to focus on “Sustainable Living–Lifestyle for the Environment (LiFE) Movement”, an initiative championed by Prime Minister Narendra Modi to promote a lifestyle that is in sync with the planet, at the upcoming G20 meetings. Greater co-operation in global sustainable finance will likely feature prominently in talks as well.
Already, finance minister Nirmala Sitharaman has stressed the need for “more global co-operation and probably less talk” on fighting climate change, in a veiled reference to the failure of the usually-vocal developed nations in meeting their financial commitments to help developing countries better tackle global warming.
Also, as FE has reported, banks, under the aegis of the IBA, may approach the Reserve Bank of India (RBI) to extend the priority-sector lending status to “sustainable finance” to improve credit flow to this segment. They have already decided to undertake a comprehensive analysis on sustainable financing. The analysis will be deliberated on at the IBA, which will then take a call on submitting the proposal to the central bank for consideration.