Sustainable Finance Scheme

Sustainable financial scheme :

Sustainable development or sustainability is a concept of the United Nations and was first described in 1987 as the development that meets the needs of people at present without compromising those of the future. Sustainable finance is the practice of investing in ways that provide a positive impact on society and the planet. Sustainable finance refers to types of investments such as green bonds and ethical ETFs that hold stocks in companies with good environmental, social and governance records—all with a goal of helping the environment.

Small Industries Development Bank of India (SIDBI) has introduced a scheme called Sustainable Finance Scheme to help the MSME sector to facilitate cleaner production and energy efficiency. The development projects such as the Bureau of Energy Efficiency (BEE), green buildings, energy renewal projects, etc., are applicable in this scheme. This scheme includes assistance to renewable energy projects, investments in waste management, or the production of energy-efficient equipment. They help in strengthening other MSME units financially which do not have bilateral or international lines of credit.

Sustainable Finance, in its fairly newer iteration, is all about keeping things green and slow while investing a lot of time into thinking critically. Savvy corporate and individual investors will be quite familiar with this phrase. They’d know that sustainable investments fall into the category of responsible, risky or impact investing. Sustainability is a complex and evolving topic that the world bank group’s long-term finance unit has been promoting globally through different methods such as data provision, analytical work, instrument design and technical assistance to support everyone in our client countries to ‘green’ their financial systems. 

Objectives of the scheme:  

•   To aid all the new and existing MSME companies’ energy expenditure.
•   Renewable energy projects such as wind energy generators, solar power plants, gasifier power plants, etc., are used to avoid the emission of greenhouse gases.
•   Any investments for waste management are included.
•   Existing MSME companies must show a satisfactory track record of finances and have no record of debt to the source or any bank.
•   According to the internal credit rating model, these companies must show a minimum credit rating of investment grade or above.
•   To provide assistance to OEMs (an existing MSME company)  to supply to other MSME units, dealing with the production of cleaner and energy-efficient equipment.

 Sustainability Financial Scheme in India:

 There are 17 sustainability financial goals and 169 targets adopted by other 193 countries that aim for a better world by 2030. The government created NITI Aayog as a unique business body solely focused on supporting Prime Minister Narendra Modi’s goal of building an “All India Growth for All Indians” economy. Their vision is for a ‘New India’ that has 0% tolerance for corruption and bureaucracy, 25% blended gender ratio by 2025, 100% literacy by 2050 and 0% child malnutrition by 2028, in addition to many other initiatives mentioned above.

NITI Aayog, the Government of India’s advisor, was entrusted with coordinating the SDGs (Sustainable Development Goals). They appointed MoSPI (Ministry of Statistics and Programme Implementation) as their partner for accomplishing this task. They have also asked each state to complete a similar mapping of their own schemes – down to targets and use that as a way for them to get on board with the goals. NITI Aayog is committed to bringing about progress at each level in the country. Interest rates vary among companies. Collateral security can be provided wherever necessary.

Activities eligible for this scheme are

1. Green microfinance provides microloans to micro-companies for energy-efficient equipment.
2. Capital invested in eco-friendly labelling, green rating, BEE star rating, etc.  
3. Expenditure on pollution control and environmental or energy compliance are included.
4. ISO or other environmental certification.

State governments are an integral entity when it comes to India’s progress on the Sustainable Development Goals. Since they are best suited to put people first, state and local governments play a massive role in a lot of programs and initiatives set forth by the government. They have taken the initiative with flagship plans like Swachh Bharat, Make In India and Skill India, to name a few.  

Eligibility criteria:

•   Any investments of the company for waste management can be included.
•   Renewable energy projects like mini hydel power projects, solar power plants, biomass gasifier power plants, etc., generate energy and don’t harm the environment.
•   Assistance is provided to OEMs who are in MSME and supplied to a larger number of other MSME units, which deal with the production of energy-efficient equipment and cleaner production.
•   The project should not have other lines of credit.

  Conclusion 

Sustainable finance is fast emerging in public policy. There has been an improvement in financial education among the people of the country. There is increased public awareness about the topics like global warming, environmental pollution, energy consumption etc. States are responsible for a lot of important initiatives such as Swachh Bharat, Make in India, Skill India, and Digital India that can help ensure that everyone is benefiting from new opportunities. The Union Government of India supports this scheme and is governing all the states to handle this and make it successful. One might assume that India is already one of the fastest-growing economies and therefore doesn’t need to worry about implementing sustainable development goals. The truth of the matter is that even by future projections, India will still have an incredible amount of catching up to do.