By Sushmit Nath
The emergence and adoption of digital payments over the past couple of decades have contributed significantly to a greener planet. Digitisation of businesses and innovations like virtual cards and mobile wallets reduce carbon footprint and the use of paper. More importantly, it encourages planet-conscious behaviour and drives financial inclusion, a key Sustainable Development Goal (SDG). Taking this further with sustainable finance is the next frontier of how digitisation can make a better world.
Sustainable finance is a critical tool for India’s green transition, which is gaining momentum in the country. This approach integrates environmental, social, and governance (ESG) considerations into business or investment decisions, which not only is a risk mitigation strategy but also a catalyst for innovation and competitiveness. India, the incumbent host of the G20 Presidency for 2023, is pioneering the cause of sustainable finance, making it one of the major work streams during its term. This is a significant step towards aligning financial flows with low-carbon, climate-resilient development. The UN has estimated that the world will need to spend between $3 trillion and $5 trillion annually to meet the Sustainable Development Goals (SDGs) by 2030.
At the current growth rate, ESG assets are estimated to contribute 21.5% of total global assets under management in less than five years. This trend is reflected in India as well with its clear drive towards sustainability. However, the development of standardised ESG metrics and the promotion of transparency and disclosure are critical to the success of sustainable finance in India.
The potential of sustainable finance in India is vast, but realising it will require a strategic, data-driven approach that leverages the power of analytics to drive sustainable growth. The government, businesses, investors, and civil society all have significant roles to play in this green transition. The government can provide the regulatory framework and incentives needed to promote sustainable finance. Businesses can integrate sustainability into their operations and supply chains. Consumers around the world are united in adopting the goal of addressing climate change. In the face of these challenges and opportunities, it is crucial to remember that sustainable finance is not just about financial returns. Accurate, reliable, and timely data enables investors and financial institutions to make informed decisions, businesses to develop sustainable strategies, and policymakers to design effective regulations. Basic features like ‘Carbon footprint calculation’ in combination with personalised education are powerful tools to encourage sustainable spending.
Financial institutions can offer their customers options to offset their carbon emissions in the form of charity donations. By enabling green rewards on their loyalty programmes, the earn/burn is focused on green activities alongside incentivising engagement with rewarding sustainable behaviours.
The writer is head of Visa Consulting & Analytics, India & South Asia