ESG | Global banks eye bigger share: Report

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Amid increasing environmental and social consciousness, global banks are ramping up financing options for ESG (Environmental, Social and Governance) compliant loans and bonds in India, according to a report in The Economic Times. A large pool of global funds are in line to be invested in these securities and there is a big opportunity for such projects in the country. Investors and businesses are focusing on best practices with regards to ESG and some banks are providing them incentives to do so.

The rising investor interest in Indian debt is also because of the country’s self imposed stringent targets in the Paris agreement on climate change in 2015. As per the agreement, the country has committed to reducing the greenhouse gas emissions intensity by 33-35% of its GDP below 2005 levels by 2030 and 40% of power from non-fuel based sources by 2030.

In January 2020, HSBC was the first bank in India to offer a green loan in India and is in discussions to offer sustainability linked loans which will have incentives like discount on rates to multiple companies.

Global lenders set ambitious targets to achieve low carbon footprint

As per its loan documents, Bank of America (Bofa) is offering a 5-7.5 basis points incentive or levying a penalty based on the success or failure of companies in achieving their green targets. one basis point is 0.01 basis point.

Every company has its own set of green targets, it could be a reduction in carbon emissions, water consumption or social causes, the publication said.

Bofa had helped agri and industrial chemicals maker UPL raise a $750 million sustainability-linked loan, earlier this year. This would be a part of the $1.5 trillion sustainable financial commitment that the bank is looking to achieve by 2030, in which India will play a key role.

HSBC reported that India will need an estimated $2.5 trillion between 2015 and 2030 to meet its commitments under the Paris agreement.

Barclays is looking to achieve $100 billion of green financing by 2030, after facilitating $32.4 billion by the end of 2020.