Sustainability and ESG standards should not be applied “indiscriminately” across developed and developing countries on a same footing even if the aim may be to ensure only genuine green projects are funded, Chief Economic Advisor V Anantha Nageswaran said on Wednesday. 

There is a need to make allowance for variable pathways of nations and also a recognition that developing countries are “not on the same boat” as the developed countries, Nageswaran said at Fintech Festival 2022 in the capital. The three-day fintech festival is being organised by Constellar and supported by NITI Aayog and six central ministries.

Green projects

Nageswaran’s remarks are significant as foreign investors looking to pump in money in green projects insist on adherence to the uniform applicability of such standards— Sustainability and Environment, Social and Governance (ESG) standards — irrespective of whether these projects are implemented in developed or developing countries.

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“In the process of ensuring that only genuine green projects are funded, the risk is that we exclude a lot of countries from receiving the kind of investments they need , and that would further compound the problem,” Nageswaran said.

He was participating in a discussion at a session with the theme ‘The I.C.E age is coming: How can we overcome the threats caused by inequality, climate and economic instability?’.

Renewable energy

Nageswaran said that India has well laid out plans as regards the aim of share of renewal energy in overall energy mix by 2030, but needed to design concrete plans for the path beyond 2030 and up to the committed targets by 2070.

He also highlighted the current trend of how in the wake of conflict (Russia -Ukraine) the developed countries are looking to prefer energy security over transition to green energy.

“Last 1-2 weeks we have so many countries postponing their plans to cut back on fossil fuel usage , they are reopening their coal fired power plants etc and German minister has said there is no question of phasing out internal combustion engine based cars till 2035. When push comes to a shove energy security becomes more important for every nation rather  than the so called green transition. So that can’t be different for developing countries,” Nageswaran said.

He said that every country does trade off its near and medium term priorities against their long term priorities. “This current ongoing conflict in Europe has only compounded this trade off.

”The focus has shifted from energy transition to energy security, even in Europe . So  I think whatever balance that existed has become more unbalanced in the last 6 months or so”, he added.

Tweaking operating model

Nageswaran also suggested that multilateral institutions like World Bank or the European Investment Bank should tweak their operating model and instead of direct lending, become risk managers to crowd in private capital.” That would actually see amount of funding available globally grow exponentially”, he said.

He suggested that these institutions must consider providing first loss guarantee or back stops, which will lower the cost of funds for the private sector. 

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