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Committee formed by IFSCA on ‘sustainable finance’

  • Published
    10th Oct, 2022
Context

The GIFT City had constituted a committee to file a report on sustainable finance. The panel had given the report to International Financial Services Centres Authority to align the IFSCA regulations with international best practices.

Key Suggestions of the Committee:

  • The committee was exploring ways in which capital flows through IFSC can be enhanced and support the development of innovative financial products in the area of green and sustainable finance.
  • The recommendations by the committee were in the areas including;
    • sustainable green,
    • green products,
    • issuance of sovereign green,
    • green bonds via IFSC,
    • innovative sustainable finance products,
    • voluntary carbon market,
    • sustainable finance for micro small & medium enterprises (MSMEs),
    • enabling de-risking mechanisms,
    • Developing a voluntary carbon market and promoting green fintech.

How the sustainable planning is helpful?

  • Sustainable green products are used to raise money to finance new or refinance existing, green projects or activities.
  • The money raised must be used for these activities, which can be for environmental and social benefits such as greenhouse gas emission reductions or biodiversity conservation.
  • The issuance of sovereign green bonds through IFSC would further validate the green bond market, leading to stronger bids, larger order books, increased pricing leverage and a higher quality investor’s base.
  • In addition to this, enabling sovereign masala bond issuances to be listed at IFSC to broaden the investor base for India’s sustainability transition without taking on currency risk.

What are Green Bonds?

  • A green bond is a fixed-income instrument designed to support specific climate-related or environmental projects.
  • Green bonds may come with tax incentives to enhance their attractiveness to some investors.

Significance of Sustainable Bonds:

  • The voluntary carbon market enables individuals, governments, NGOs, and businesses to voluntarily purchase carbon credits to offset their investments.
  • Credit carbon market deals in the sale and purchase of carbon credits in spot and derivative markets.
  • These markets are created to help companies reduce greenhouse gas (GHG) emissions at a lower price.

About International Financial Services Centres Authority (IFSCA)

  • The IFSCA is a unified authority for the development and regulation of financial products, financial services and financial institutions in the International Financial Services Centre (IFSC) in
  • At present, the GIFT IFSC is the maiden international financial services centre in India.
  • It is headquartered in Gandhinagar. Its current chairman is Injeti Srinivas.
  • Role: The International Financial Services Centre(IFSC) caters to customers outside the jurisdiction of the domestic economy.
  • Such centres deal with flows of finance, financial products and services across borders.
  • London, New York and Singapore can be counted as global financial centre.
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