Date : 10/07/2023

Relevance: GS Paper 3: Disaster-Resilient Infrastructure, GS Paper3: Green economy

Keywords: National Infrastructure Pipeline (NIP), National Monetisation Pipeline (NMP), National Action Plan for Climate Change (NAPCC)

Context -

The National Bank for Financing Infrastructure and Development (NaBFID) plays a vital role in implementing the National Monetisation Pipeline (NMP) and financing projects in the National Infrastructure Pipeline (NIP). However, there is a need to ensure climate-resilient funding to address the challenges posed by climate change.

Integrating Climate Resilience in Infrastructure Funding:

• Limited Focus on Climate Risks: The integration of climate risks within the NIP primarily focuses on acute physical risks, overlooking chronic physical risks such as rising temperatures and biodiversity loss. There is a global trend towards nature-based solutions and green infrastructure, which NIP should embrace.
• Emphasizing Traditional Infrastructure: NIP's focus on traditional grey infrastructure, like stormwater drainage, neglects the integration of green infrastructure options that global cities are adopting for flood mitigation, such as green roofs.

Enhancing Transparency and Accountability:

• Voluntary Climate Disclosures: While global initiatives mandate climate-related financial disclosures, such disclosures remain largely voluntary in India. Extending business responsibility and sustainability reporting (BRSR) to the top listed companies is a positive step, but efforts to mainstream sustainability and climate resilience need practical implementation.
• Addressing Financial Risks: The financial risks posed by climate change are increasingly recognized globally. Central banks have initiated stress testing measures, and Indian regulators have announced frameworks for green/blue bonds and climate stress testing guidelines. However, quantifying climate risks and accounting for credit risks is a complex process.

Leveraging Innovative Financing and Partnerships:

• Transition Bonds: NaBFID can capitalize on the popularity of transition bonds, which finance projects aiming to reduce emissions. By employing entity-level and project-level safeguards and innovative financing structures, NaBFID can attract diverse funding sources.
• Public-Private Partnerships (PPPs): NaBFID's focus on structural measures to improve asset provisioning and quality, along with generating returns on investment, is crucial. Enhancing PPPs through pre-planning, collaborative processes, and lessons from the India Infrastructure Finance Company Ltd (IIFCL) can address cost overruns and delays.

Promoting Climate-Resilient Funding Instruments:

• Green Bonds and Sustainability-Linked Bonds: Green bonds, sustainability-linked bonds, and other financial products divert funds towards climate mitigation and resilience projects. NaBFID can issue private placements for green bonds to increase green capital flows to infrastructure.
• Disclosure Standards and Emerging Infrastructure Standards: Mandating climate-related financial disclosures and adopting emerging standards for infrastructure projects can enhance transparency, and credibility, and integrate nature into decision-making processes.

Conclusion:

NaBFID's role in infrastructure financing is crucial for India's development. By prioritizing climate resilience, embracing green infrastructure, leveraging innovative financial products, and implementing robust disclosure standards, NaBFID can ensure climate-resilient funding and channel funds toward sustainable projects

Source : The Indian Express