What role can financial institutions play in promoting green financing in India?
Power generation is a capital-intensive business; accordingly, the availability of accessible and reasonable capital is the primary requirement. FI’s might not be involved directly, but as capital providers to the developers, there is no alternative to seamless funding for green infrastructure development. In India, the government did formalize policies encouraging banks to align with the country’s sustainability goals, but greater momentum is needed to address the massive requirement. The industry primarily depends on the banking sector, and low-cost funding is still a concern. Indian banks must benchmark the definition of green financing and associate with global institutions to support this structure by developing financial models that are befitting to the needs of the Indian market. Even with the available funding, longer tenures and fluid operations are needed. A few banks in the country have also started giving green bonds, but the value of these bonds is small compared to the total size of bond issuance in India.
What are the future prospects as well as challenges and opportunities for green financing in India?
Green financing is an ecosystem that cannot be ignored if India wants a global edge in its net-zero goals. A huge opportunity lies in green equity and bonds, but first and foremost, we need a supportive policy framework. For reference, a favorable taxation policy for green finance can help decrease transaction costs and promote better lending. In addition, much thought needs to be put into harnessing technology and green finance instrument innovation that is uniquely suited for the Indian market.
What are some of the biggest challenges businesses and investors face in accessing green financing in India, and how does “Company Name” address these challenges?
There are a limited number of financial institutions that are involved in the funding of renewable energy projects in India. These institutions, in turn, also have their internal limits on the amount of exposure they can take to a particular group of companies. This leads to a scarcity of financing options available for businesses especially. Another challenge investors face is the difficulty in availing of non-recourse long-term project financing. Due to these constraints, the companies turn to foreign banks and the bonds markets and provide funding for short tenures only, thereby increasing the project risk and at times, exposing them to foreign exchange risk as well. At Amplus, fortunately, we have never faced many delays in funding courtesy of our track record of delivering excellent quality projects across the spectrum with strong offtake agreements.
