BT Banking & Economy summit: Indian exports will get hit hard if firms don’t comply to global green norms, warn finance veterans

Indian exports across the board will get hit badly if companies in the country don’t comply with green requirements to tap into green and sustainable financing as western nations start coming up with carbon taxes to keep their own corporates competitive, said Vineet Rai, Founder and Managing Partner, Aavishkaar Capital, at the Business Today Banking & Economy Summit 2023 held in Mumbai on Friday. 

The role of banking and financing in mobilising capital more effectively towards projects and institutions working towards climate change has become more crucial as India has committed to achieving a net-zero carbon emission target by 2070. The country is estimated to need an estimated $7.5 trillion by 2070 and $1 trillion by 2030 to finance its goal.  

“Europe is becoming very tough with its own corporates. Basically, western corporates are becoming uncompetitive and the countries come up with carbon taxes which will hit us hard. If you don’t comply, your exports will suffer soon because the world needs to have a level playing field and they will find their ways to do it,” Rai said at the session titled ‘Sustainable Finance in the Green Economy’. 

Saying that government has woken up to it, he gave the example of how the Indian Green Hydrogen Policy is aimed at the big corporates. But it’s also an expensive proposition, he added. “The government will have to put in money, but we need to pull in a huge amount of capital,” he said. Pointing out that India alone needs $7.5 trillion by 2070 to finance its net zero target and about $170 billion currently, he said: “Roughly, $44 billion is what the country can provide. Around 13 per cent of the requirement will be met by overseas sources. After that, where will you get the remaining 75 per cent?” 

The other panelist Ankur Khurana, Managing Director, Corporate, Commercial and Institutional Banking, India, Standard Chartered Bank, pointed out that the change among Indian corporates to switch to renewables or solar power will not happen overnight.  

Explaining how green financing actually works, she said approach towards assessing business to finance in – whether telecom towers or power or shipping and infra or ports — has changed in the last 3-4 years.  “What we encourage our large clients to do, and it’s already happening, is that do you have a transition plan? Are you willing to make investments to move to renewables? Are automobile firms looking at EV as a strategy?"

Saying that the process will involve a transition period, Khurana added: “A lot of international banks and institutions have drawn hardlines about not financing thermal power, though the last 12 months have thrown new challenges. But it is about both financial markets and conglomerates coming together and saying there is a transition, we need the money to get to that transition, which won’t happen overnight.” 

Also read: BT Banking & Economy Summit: Transition to Green Economy will be costly & expensive, say experts

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