RBI Dy Guv bats for global unity, tech transfer to fight climate change

RBI Deputy Governor M Rajeshwar Rao has called for enhanced global cooperation including technology transfer and R&D funding to deal with challenges posed by the climate change. 

Stressing that no country can achieve net-zero in isolation, he said climate change is the quintessential global challenge and so the response.

Rao was speaking at the Conference on Green Infrastructure Finance at College of Agriculture Banking, RBI here recently.

"There is a requirement of enhanced global cooperation in this regard which must also extend to technology transfer, R&D funding, and skills development to enable development of technical expertise to identify, design, and structure bankable sustainable and green infrastructure projects," he said.

The Reserve Bank posted his speech on its website on Friday.

The Deputy Governor said that the focus needs to shift from project-based finance to overall market development with policy reforms, development of a project pipeline, and consistent regulatory frameworks, creating systemic conditions for fostering sustainable and green infrastructure finance.

The senior RBI official also made a case for an adequate mix of public and private funding where the public funds crowd in the private funds through appropriate incentive structure.

Specific mechanisms need to be enabled wherein global funds scale their mandates from project-level support to market-shaping interventions, also targeting underdeveloped sectors like adaptation infrastructure, and nature-based solutions.

"There is also requirement for Multilateral Development Banks (MDBs), Development Financial Institutions (DFIs), National Development Banks (NDBs) and Vertical Climate and Environmental Funds (VCEFs) to harmonise approach and operations and enable joint funding to enable shift from being direct lenders to catalytic partners and bring in economies of scale in sustainable and green infrastructure projects financing," Rao said.

He further said the international financial architecture also needs to be reoriented toward sustainability.

The de-risking of sustainable and green infrastructure can work best when national, local, and multilateral institutions co-invest, signalling policy credibility and technical robustness, Rao said.

He emphasised that MDBs and global climate funds may need to revisit their governance structure to reflect the voice of recipient countries, particularly the global south and not just donor countries.

"Innovative financial instruments such as debt-for-climate swaps and climate-resilient debt clauses must also be scaled up to create fiscal space for green investments," he said.

The Reserve Bank of India, he said has been proactive in its resolve to facilitate creation of a robust ecosystem wherein the assessment and mitigation of climate change risks are fostered and its impact on the economy and financial system is curtailed.

Rao emphasised that the scale of the impact of events arising out of climate change requires sizeable investments in technology and scale of finance to both build resilience and enable mitigation.

As per OECD report, the investment required for green and sustainable infrastructure is estimated at USD 3-5 trillion per year until 2050.