In a first, the Indian Banks’ Association (IBA) has formed a large working group comprised of representatives from about a dozen and a half key banks to handle issues covering the entire spectrum of sustainability and green financing, given the growing importance of this segment in the financial sector, according to senior bankers.
According to the sources, this working group will play an important role in finalising 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.
Working group’s members
According to banking sources, the working group’s members include representatives from the top five state-run banks (State Bank of India, Punjab National Bank, Bank of Baroda, Canara Bank, and 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 Mas Exim Bank and SIDBI are the other two members.
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 financial product or service that promotes environmental, social, and governance goals while contributing to the achievement of relevant targets adopted by countries under frameworks such as the Paris Agreement on Climate Change and the United Nations Sustainable Development Goals.
Sustainable Living-Lifestyle for the Environment (LiFE) Movement initiative
At the upcoming G20 meetings, India is expected to focus on the “Sustainable Living-Lifestyle for the Environment (LiFE) Movement,” an initiative championed by Prime Minister Narendra Modi to promote a planet-friendly lifestyle. Greater cooperation in global sustainable finance will almost certainly be discussed as well.
Already, finance minister Nirmala Sitharaman has emphasised the need for “more global cooperation and probably less talk” in combating climate change, a veiled reference to the failure of the usually-vocal developed nations to meet their financial commitments to assist developing countries in combating global warming.
Furthermore, banks operating under the auspices of the IBA may approach the Reserve Bank of India (RBI) to extend priority-sector lending status to “sustainable finance” in order to increase credit flow to this segment. They have already decided to conduct a comprehensive study on long-term financing. The IBA will deliberate on the analysis before deciding whether to submit the proposal to the central bank for consideration.
