Abstract
The chapter aims to provide insight into the policy framework of green finance. The five-step roadmap begins with a vision whereby the reader is made aware of the concept of sustainability. India's initiative at the G20 summit of the UN Environment on the issue, thereby the first part, is concluded with a positive note on fairness and development. Similarly, a detailed analysis of the strategy undertaken at the national and international levels is discussed. Further, lead entities are enlisted along with the current state of ownership in some countries. No policy framework would be a good guide for policymakers and researchers to rely on if it is presented without including the essential requirements. To provide a sense of the change in green fintech, various examples have been curated related to green lending, crowdfunding, insurance, and ESG data providers. The comprehensive chapter is concluded by listing the essential metrics to evaluate the process of growth.
TopIntroduction
The road to a hundred miles begins with one conscious step followed by another strategic one. As we embark on the journey of change towards a greener future, technology-led financial services proved to have the potential to march the transition. With an increase in transactions, peer-to-peer lending seems a potent solution for financing the green project. Leveraging new emerging technologies such as blockchain technology, artificial intelligence, machine learning, and others provides a safety net for capitalising on such projects. The boom in information technology is supporting society's choice of being green and sustainable.
“UPI has reached a scale where on an annual basis $1.5 trillion worth transactions are done and the average settlement time is 2 seconds” (G20 Summit, 2023) -Ashwini Vaishnaw, Union Minister for Electronics and Information Technology
The transition in proceedings of the financial system has been tremendous. The amalgamation of technology and finance has freed the past constraint of financial inclusion and accessibility (Varga, 2017). Digital penetration has increased the interaction of banking customers to mobile devices and online websites from 32% before the pandemic to 50% (Accenture Banking, 2022). With Financial liberalisation set on the sail to accelerate efficiency and accessibility in the financial ecosystem, the flow of capital has increased manifold. Fintech in India recorded an estimated transaction value of USD 33 billion in 2016, which was further expected to be more than double, approximately USD 73 billion by 2020, with a 22% CAGR at five years on the basis (KPMG Fintech India, 2016).
Fintech has leapfrogged past constraints. But whether this digital penetration is plausible with Green Finance seems a cause of concern. Research suggests that with fintech 4.0, technological innovation such as Blockchain, Big Data, Internet of Things (IoT), and Cryptocurrency adds another feather to fintech, thereby promoting financial inclusion and supporting economic growth (Nassiry, 2018). Technology has proven to be a catalyst for remarkable achievements and unprecedented growth. By incorporating environmental considerations into digital payment infrastructure, we can address the pressing need for sustainability while also fueling economic development. Several examples, such as Alipay in China, Impakt in Switzerland, and Bettervest in Germany (GDFA Green Fintech Taxonomy, 2022), showcase how technology can enable the integration of green features to contribute to a more sustainable financial ecosystem. Similar growth has been seen in the area of digital Investment, Insurance, Banking Services and Risk Analyst. Mapping these changes would provide a better understanding. The spillover created with fintech innovation has been acknowledged by investors and corporate firms, thereby bringing the Government and activists to the forefront to channelise the path towards sustainable growth. Moreover, It is well said that “ There can be no Plan B because there is no Planet B” (Schoenmaker and Schramade, 2019). The Secretary General of the UN is highlighting the pressing need and concern of carrying the capacity of the earth, which is in distress and requires immediate action.
Thereby, it is being outlined that planning the policy frameworks streamlines the execution. This chapter is intended to provide the reader with an overview of changes that have enabled green finance so far in various ways for fintech. The roadmap of change entails following the framework beginning with evaluating fundamental drivers, defining the objectives, aligning the national strategic interest with international compliance, remapping the digital innovation, outlining the setbacks and trajectory regulation and lastly, evaluating the progress in the internalising sustainable finance (UN Environment, 2017).
Key Terms in this Chapter
Sustainable Finance: This refers to financing the transaction in a conscious way that does not hinder the wellbeing of the present and the future stakeholders. Investment at the cost of distress is not sustainable. It emphasises positive externality.
ESG: This refers to environmental, social and corporate governance. It emphasises well-being, inclusive of nature, the social sphere and the regulations associated with it. So, Whether the model of governance is capitalist or democratic ESG index is essential for determining the holistic development
Green Finance: This refers to financing the transactions for sustainable projects such as investment in solar energy, green bonds etc. With the advent of fintech green investment suggestions are provided by automated tools such as Chabot.
Fintech: This refers to financial institutions incorporating technology in their business model. The financial instrument includes digital lending, digital insurance, digital payment etc. Leveraging Blockchain, Internet of Things (IoT), Big data, Machine Learning and Artificial Intelligence.
Carbon Emissions: The release of carbon that adds to the greenhouse gas group is known as carbon emission. The release may vary from the end use to the procurement process. Post industrialization carbon emissions have been exponentially increasing. The ill effects of its emissions are air pollution, respiratory issues, ozone layer depletion, air quality issues etc.
Carbon: Carbon is the sixth element in the periodic table. It is non-metal implying it is brittle, non-malleable, and non-ductile and insulator. With a density of 2.2g and a melting point of 3,550 °C. It supports life on earth and is an important component in the dietary chart of humans.
Net Zero Carbon: This is a target that is proposed under this sustainable development goal of 2030. Net zero carbon refers to the reduction of carbon emissions in every possible way of its release. This step is aligned with attaining a sustainable livelihood.