India Country Report

Policy Lever: Enhancing Market Practice

 Levers to enhance market practice are focused on improving the efficiency and accountability of financial markets. They  improve risk assessment and pricing - ultimately seeking to improve investor decision-making and returns.  This has to date been the most popular approach to internalizing sustainable development into financial decision-making.

Examples

Key approaches include:
  • Fiduciary duty and capacity: clarifying that duties to clients include sustainability factors and including requirements for knowledge and training on sustainability for fiduciaries.
  • Incentives: Encouraging asset owners to ensure better alignment of incentives along the investment chain.
  • Prudential risk management regulation: Integrating sustainability into guidance & requirements on risk management and controls.
  • Stress tests: Developing scenarios to test impact of environmental shocks on assets and business models.
  • Capital requirements: Calibrating capital requirements to incorporate environmental factors.
  • Disclosure requirements: Making environmental reporting by financial institutions and non-financial corporations mandatory.
  • Equity analysis: Encouraging greater transparency in equity analysis of incorporation of sustainability factors.
  • Credit ratings: Encouraging the integration of sustainability risk factors into credit analysis.
  • Green assets Adjusting standards and rules to facilitate capital raising (e.g. green bonds, green sukuks, green IPOs, yieldcos).
  • Indexes: Ensuring that benchmarks and indices reflect critical sustainability factors.

Impacts

These measures provide critical foundations of information needed to sensitise financial decision making to environmental impacts and risks, but they are likely to have a modest impact unless they are combined with additional shifts that make these risks financially material.   

Inquiry Publications

  • The Experience of Governance Innovations in South Africa

    Date: 17-Jun-2016

    This paper explores whether the extent to which Regulation 28, CRISA and JSE Integrated Reporting Standards (referred to as governance policy innovations) have influenced the level of investment that integrates Environmental, Social and Governance (ESG) in its decision making process. It finds that while governance innovations have increased actors’ awareness about interrelationship between ESG factors and financial performance it

  • 4th Update Report: The Coming Financial Climate

    Date: 07-May-2015

    This is the 4th Update Report of the UNEP Inquiry, it is focused on the challenge of financing the low-carbon transition. Many approaches and instruments will be needed to deliver the financing needed. Public finance, funded by tax revenues and international transfers, will provide part of the solution.  However such finance will be inadequate. Private

  • The Environmental Risk Disclosure Regime

    Date: 06-Jul-2015

    In recent years, a plurality of different governance initiatives has emerged that are designed to expand the disclosure of environmental risk within financial markets. There is evidence for policy convergence among different initiatives but it lacks the enforcement necessary for coherence, and contributes to uncertainty within the financial sector over the impact of environmental risk. This uncertainty justifies an expanded role of international

  • 3rd Update Report: Pathways to Scale

    Date: 07-Jan-2015

    This is the 3rd Update Report of the UNEP Inquiry, it is focused on the challenge of financing the low-carbon transition. It explores how innovative ideas and practices can be made more effective, adopted more widely, and taken to scale—and as a result move the trillions that are required. Scaling-up proven but limited innovations, is a common

  • Greening the Financial System: Enhancing Competitiveness Through Economic Development

    Date: 16-May-2017

    This briefing summarises the discussions held during a roundtable for market and policy leaders in Washington, D.C. on 20 April 2017. The goal of the event was to explore pathways to scale and speed up green finance and to harness its benefits for long-term sustainable growth and competitiveness. The key messages are: Green finance made

  • Lenders and Investors Environmental Liability

    Date: 19-Apr-2016

    This working paper presents an overview of Lender Environmental Liability (LEL) and Investor Environmental Liability (IEL) regimes and issues. Environmental harm and degradation is often irreparable. Therefore, our assumption is that precaution is the main objective of any international and domestic environmental legal regime. The paper explores the conditions under which LEL/IEL can be effective

  • Experience and Lessons from South Africa: An Initial Review

    Date: 17-Jun-2016

    This paper provides an outline of South Africa’s financial sector, the environmental and social issues it faces, the response of government and financial regulators and the extent to which has resulted in measurable sustainable investment flows. In South Africa environmental, social and governance (ESG) considerations appear on the agenda of strategic discussions and are part of the

  • Green Foreign Direct Investment in Developing Countries

    Date: 23-Oct-2017

    This paper focuses on the actual and potential role of foreign direct investment (FDI) in achieving the transition to a low-carbon, just and sustainable world and, more specifically, FDI flows into developing countries. The particular implications of FDI on the environment – both potentially positive and negative – have given rise to an interest in

  • India Country Report

    Date: 29-Apr-2016

    An India Advisory Council of the UNEP India Inquiry was convened by the Federation of Indian Chambers of Commerce and Industry (FICCI). This report highlights key proposals emerging from their discussions for aligning the Indian financial system with sustainability. In the Indian context, they call for development of a more robust and resilient ‘sustainability-oriented market framework’ focused

  • Stock Exchanges and Sustainability

    Date: 23-Dec-2015

    Stock exchanges have historically played an important role in economic growth and development through enabling effective capital allocation. However, exchanges and markets more broadly have changed over time, in structure, inter-connectedness and rate of activity. This has happened against a backdrop of growing recognition of the unsustainability of the current economic growth path in both

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