Strengthening Investment in Renewable Energy Sector Through Climate Related Financial Risk Disclosure

Abstract

In current scenario financing, renewable energy projects in India continues to face multiple challenges. The problem is largely entitled to financial risks along with technology risk, policy risk, and regulatory risk, but do not disclose climate-related financial risk which has compounded the problem further. The objective of this study is to asses investors’ perceived risk while investing renewable energy projects and disclosure of such risks. Does climate risks are included and disclosed to financial institutions while investing to make project bankable and credible. Though several mechanisms developed over a time to mitigate financial and non-financial risks, the achievement is far below expectations. It is also found that there is a limited literature available on disclosure of climate-related financial risks and its mitigation measures in this sector. As a result, business and organizations in this sector are exposed to climate risks; its prolonged effect can generate systemic risk that can hinder economic growth. Therefore, this study proposes a climate risk assessment tool to disclose climate-related financial risks information along the supply chain of the project with other identified risks for investors, lenders, insurers and other stakeholders. Thereby, financial markets are in a better position to respond and manage climate-related risks. Thus, an increase in transparency makes financial markets more efficient and economies more stable and resilient against climate related financial risks.