As per the Intergovernmental Panel on Climate Change (IPCC) Special Report on “Global warming of 1.50 C”,

• Human-induced warming reached approximately 1°C above pre-industrial levels in 2017, increasing at 0.2°C per decade.
• It demands for unprecedented efforts to reduce GHG emissions.
• In 2018, annual mean surface air temperature of India was +0.41°C, significantly above normal. It was the sixth warmest year on record since the nation-wide records commenced in 1901.

• It was launched in 2008.
• India made voluntary commitment to reduce emission intensity of its GDP by 20 to 25 per cent by 2020 over 2005 levels.
• State Action Plans on Climate Change (SAPCC) was also drafted in line with the NAPCC.

• It has been launched in 2014 with a total cost of `290 crore.
• It aims to build and support capacity at central and state levels, strengthening scientific and analytical capacity for climate change assessment, establishing appropriate institutional framework and implementing climate related actions.

Paris Agreement Work Programme (PAWP) was adopted in UNFCCC Katowice conference. Achievements in CoP 24 in Katowice, Poland in 2018:

• Recognition of different starting points for developed and developing countries.
• Flexibilities for developing countries.
• Consideration of principles including equity and Common but Differentiated Responsibilities and Respective Capabilities.

• UNFCCC and Paris agreement recognize the importance of climate finance in strengthening the global response to climate change.
• The Scope, Scale and Speed of climate finance required to take climate actions effectively.

Scope- Climate finance should support both the adaptation and mitigation activities of the developing countries in accordance with the country needs and priorities.

Scale- Climate finance requirements of developing countries are likely to be enormous due to existing developmental challenges.

Speed- Global action on climate change is contingent on the delivery of timely and adequate finance.

An important feature of Paris Agreement is that it seeks to elicit ambitious action by each country by basing it on a countrydriven approach with the contribution by each country to the global fight against climate change determined at national level. Each Party’s successive NDC will have to be a progression of Party’s previous efforts. India’s NDC outlines the post-2020 climate actions India intends to undertake under the Paris Agreement on climate change adopted in December 2015. India ratified the Paris Agreement on October 2, 2016.

• At the national level, the roadmap for implementation of India’s NDC is being prepared. An overall assessment and quantification of finance requirements for adaptation and mitigation for a country with so much diversity and demand is a difficult task given the rapid pace of changing technologies and innovation.
• India’s NDC states, “Preliminary estimates indicate that India would need around US$206 billion (at 2014-15 prices) between 2015 and 2030 for implementing adaptation actions in key areas like agriculture, forestry, fisheries infrastructure, water resources and ecosystems.”

Apart from this there will be additional investments needed for strengthening resilience and disaster management. NDC further provides the preliminary total estimates for meeting India’s climate change actions between now and 2030 which is at US$2.5 trillion (at 2014-15 prices). Finding required financial resources is going to be a daunting challenge for the country.

Implementing 2030 Sustainable Development Agenda and the Paris Agreement requires investments of scale and size which is unprecedented. This essentially means that along with domestic public budgets and international public finance, resources would have to be mobilized from a variety of sources, in particular, private sector. Currently, private sector financing has been mostly done by the banks and resides on their balance sheets.

However, in future to increase the scale of sustainable investments there may be funding capacity problems for the banks if they are the primary provider of sustainable debt. Therefore, capital market products are required to free-up the banks’ balance sheet capacity and allow them to underwrite loans to meet the accelerating demands for new sustainable investments.

Further, by doing so institutional investors and certain retail investors can get access to sustainable debt as institutional investors are well situated to hold long term sustainable debt and they look to match long term liability funding requirements with long term assets.

• Globally, the green bond market has seen remarkable growth over the past 5 years as increasing number of investors have sought environmentally sustainable investments without having to sacrifice financial returns.
• In India, SEBI has provided a regulatory environment for issuance of green bonds in May 2017, the fruits of which are reflected in the cumulative issuance of green bonds in India.
• India stands at 11th position in global country ranking and accounts for 33 per cent of the Certified Climate bonds by number in emerging markets.

Going forward, possible capital market structures for sustainable finance may include Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) which can be leveraged for transfer of green and sustainable assets such as energy efficient buildings, renewable power projects, mass transportation systems, etc. to the institutional investors.

Another option is that banks and financial institutions may securitize the future cash flows emanating from their existing set of assets, thereby selling such securitized debt instruments to the investors including institutional investors. This provides investors with an opportunity to invest in regular yielding investment which is backed by sustainable assets.