Komal Priya, Lawyer Practicing in Delhi
ABSTRACT
Environmentally sustainable financing and its interaction with the political economy and the legal policy framework of a country is an emerging but nascent field of study. In this article we discuss the various challenges policy makers, investors and other stakeholders face in taking definite positions with respect to sustainable finance. This ambiguity results in sub optimal allocation of financial resources to environmentally sustainable economic activities. We first discuss the challenges in defining green finance. We then try to contextualise the role of green finance within the wider framework of financial institutions and its interaction with actors within the financial system. The article also discusses the challenges that are specific to framing green financial policies. Central Banks are one of the most important actors in the financial system, this is because they control the financial regulatory framework. Through this article we discuss how Central Banks can facilitate sustainable financing through a mix of regulation and incentivisation. Finally, we discuss how green finance has grown in India despite apparent legal ambiguity and suggest a broad direction that our policymakers, as well as financial actors, need to explore to ensure optimal growth of Environmentally Sustainable Financing.
Keywords: Green finance, Political economy, UNEP, Sustainable financing.
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