By Vineet Tyagi
Every year, the Earth Day serves as a great opportunity to discuss perils of climate change and ways to mitigate them. Considering the alarming rise of environmental challenges, the Indian Government has set clear targets to achieve a sustainable future. These include achieving 50% of energy needs from renewable sources and becoming a net-zero economy by 2070. While the efforts are perfectly aligned to these goals, it is noteworthy that India requires about INR 162.5 lakh crores till 2030 for NDCs (Nationally Determined Contributions) and INR 716 lakh crores to obtain net-zero emissions by 2070. This elevates the importance of building sustainable financial systems in the country and also make it imperative to pivot focus on building a green economy to reach the goals successfully.
IntegratingESG into financial services and technology to drive positive impact
Evaluating sustainability levels of any organization is crucial to mitigate environmentally harmful practices. Here, integrating ESG into financial services and technology make it possible to drive positive environmental impact efficiently. Technology can provide crucial ESG data or metrics of any enterprise to determine its sustainability levels. Nowadays, latest technologies such as IoT, AI, blockchain, and big data can provide real-time, authenticated, and structured ESG data for accurate reporting. This can be used to promote sustainable development and mitigate environmental impact of organizations in a hassle-free manner.
Leveraging technology in BFSI to accelerate transition to net zero
The BFSI sector can leverage the latest technologies in facilitating the implementation of green use cases. For instance, technology can result in better management and analysis of large volumes of data to help financial institutions measure and minimize their environmental impact. This can lead further to identify areas of improvement, deployment of green practices, and better and informed decision making. Additionally, technologies such asartificial intelligence, machine learning and blockchain are enabling financial institutions toidentify patterns and trends in data, carry out risk assessments, and track the environmental impact of their products and services. They are also enabling development and implementation of renewable energy solutions and energy efficient systems to reduce carbon emissions, conserve energy and build a low-carbon economy.
Moreover, increased focus on achieving net zero emissions also provides a great opportunity for fintech companies to innovate and develop new solutions to facilitate sustainable development. Like green finance, companies can come up with products and services that support environmentally sustainable projects and business. Such efforts can result in a positive impact on environment, improve profitability of businesses, and open new market opportunities with higher growth potential.
Enabling sustainable finance with green fintech and furthering impact through SMEs
Considering the crucial role SMEs play in economic growth and employment generation, the green fintech companies that focus on providing sustainable finance solutions can support small and medium enterprises to accelerate their sustainability efforts in many ways. For example, with green finance, these fintech companies can make funding accessible for SMEs for sustainable projects. They can further help in reducing carbon footprints, achieving sustainability targets and improving overall performance of businesses.
Notably, the fintech companies can fund digital transformation of SMEs and support them in investing in advance technologies such as artificial intelligence, data analysis and distributed ledger technologies (DLT). These technologies can be utilized to analyse large volumes of unstructured data and get real-time insights. With this, the enterprises can determine if their actions have a positive or negative effect and also assess the environmental impact of their assets. This can help them to develop more sustainable business practices.
Encouraging public-private partnerships to promote sustainability
To accelerate sustainable development in BFSI, more public-private partnerships need to be encouraged. Bringing together the strengths and resources of public and private entities can result in more effective and efficient solutions of sustainability challenges. Recently, the Reserve Bank of India launched a framework for acceptance of Green Deposits of regulated entities. This will encourage the regulated entities to offer green deposits to customers and aid them to achieve their sustainability agenda. This is a great example to show how such positive engagements can result in fostering and developing a green finance ecosystem in India. Also, more public-private collaborations can make way for better policy support, funding and technical assistance to private entities. With this, they will be able to utilize their financial expertise and market knowledge to create sustainable financial solutions better. The partnerships can also encourage innovation in BFSI, leading to development of new technologies or products, crucial for achieving sustainable development goals.
The BFSI sector, undoubtedly, has a crucial role to play in building a green economy for a sustainable future. The efforts have already started and are set to gather pace in the coming period. As focus on embracing sustainability in this sector increases, India will be definitely able to achieve its sustainability target way before the set deadlines.
(Vineet Tyagi, Global CTO, Biz2X. Views expressed are author’s own.)