A Conceptual Study on Implications of Green Finance in India

Abstract

Abstract: The financial industry can help reduce the risk of climate change and lessen the effects of unfavourable climate occurrences, which is a significant contribution to the battle against climate change. Maintaining financial stability and spreading climate-related risks can be aided by long-term institutional investors. Other financial tools, such as green stock indexes, green bonds, and voluntary de-carbonization programmes, can assist reallocate investment to "green" industries. Hedging products, such as catastrophe bonds and indexed insurance, help insure against increasing natural disaster risk. For the foreseeable future, climate change is expected to remain the central political and economic issue of this century. Globally, governments, corporations, investors, and private citizens are starting to act on climate change, particularly with regard to decarbonisation strategies. It would take exceptional amounts of new capital investment—green financing, in particular—to support the kinds of initiatives that reduce greenhouse gas emissions and help businesses adjust to the effects of climate change in order to transition to a low-carbon or green economy. For this reason, it's critical to comprehend what green finance is and why it matters. In order to handle the complex risks that climate change poses, central banks and other regulators are modifying their frameworks and procedures from an oversight standpoint. Among the strategies for enhancing climate risk disclosure and categorization requirements are those that will assist investors and financial institutions in evaluating their exposure to climate risk, as well as regulators in assessing systemic hazards. Supporting the development of climate-related stress tests and broader promotion of green finance, the IMF is collaborating with standard-setting organisations such as the Network of Central Banks and Supervisors for Greening the Financial System. The researcher concludes that it is important to pursue this investigation in light of the aforementioned facts