Business News | The committee submits its report to the Authority of International Financial Services Centers
New Delhi [India], October 9 (ANI): The Authority of International Financial Services Centers (IFSCA) of the Cité du CADEAU had set up a committee responsible for submitting a report on sustainable finance. The panel had submitted the report to the Authority recently.
The main objective of the committee, which is headed by CK Mishra, the former secretary of the Ministry of Environment, Forests and Climate Change, is to align IFSCA regulations with international best practice. Some of the committee’s recommendations are environmentally sustainable, green products, issuance of sovereign green bonds through IFSC, innovative sustainable finance products, voluntary carbon market, sustainable finance for micro, small and medium enterprises (MSMEs), enabling mechanisms for risk reduction, develop a voluntary carbon market and promote green fintech, an official statement said. The committee’s report said the committee was exploring ways to improve capital flows through the IFSC and support the development of innovative financial products in the area of green and sustainable finance.
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Sustainable green products are used to raise funds to finance new green projects or activities or to refinance existing projects. The money collected must be used for these activities, which can be for environmental and social purposes such as reducing greenhouse gas emissions or conserving biodiversity. Issuance of sovereign green bonds through the IFSC would further validate the green bond market, leading to stronger order book bids, increased price leverage and a higher quality investor base. In addition to this, the Ministry of Finance (MoF) should consider allowing Masala sovereign bond issues to be listed on the IFSC to broaden the investor base for India’s sustainability transition without taking any currency risk.
A green bond is a fixed income instrument designed to support specific climate or environmental related projects. Green bonds can be accompanied by tax incentives to enhance their appeal to certain investors. Masala bonds are bonds issued outside India but denominated in Indian rupees, rather than the local currency. Some of the innovative sustainable financial products are weather derivatives, green securitization and labeled bonds. Weather derivatives are used by companies to hedge against weather/climate related risks. Labeled bonds are products that resemble existing green bonds, but with a more targeted use of the product. The voluntary carbon market allows individuals, governments, NGOs and businesses to voluntarily purchase carbon credits to offset their investments. The carbon credit market deals with the sale and purchase of carbon credits in spot and derivatives markets. These markets are created to help companies reduce their greenhouse gas (GHG) emissions at a lower cost. (ANI)
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