Sustainable Finance Scheme

Sustainable Finance Scheme programme is intended to introduce mid- to senior-level management to domestic and international developments in sustainable/green finance, emerging trends, new opportunities, and unexpected risks in financing “green” projects, as well as methods by which their organisations may take environmental considerations into account and integrate them into financial solutions.
International efforts to combat climate change have considerably increased since the Paris Climate Change Agreement was signed in 2015. This was preceded by carbon trading through the EUETS (European Union Emissions Trading System) for Indian projects until December 31, 2012, and as the carbon trading experience grew, it became evident that a significant shift in the way capital was handled was necessary to make the transition to a lower-carbon economy. Frequently referred to as “green finance,” “sustainable,” or “climate finance”

This course, which is intended for participants with a basic or intermediate understanding of finance, will cover the fundamentals of sustainable finance as well as new financial instruments that are being developed and emerging domestic and international trends in this field, investor trends, and considerations for stock exchanges, banks, and the role of regulators. Additionally, it will draw a crucial connection between changes in international policy and the ensuing rise of sustainable finance.

Important Terms/Definitions:

MSME: It is one of the ministry in the Indian government is called the Ministry of Micro, Small and Medium Enterprises. It is the highest executive body in India responsible for establishing and enforcing laws, rules, and regulations pertaining to micro, small, and medium-sized businesses.

original equipment manufacturer: A company that manufactures non-aftermarket parts and equipment that might be marketed by another manufacturer is often thought of as an original equipment manufacturer. It is a widely used phrase in the industry that is acknowledged by a number of professional organisations, including SAE International, ISO, and others.

Eligibility Requirements of Sustainable Finance Scheme:

• Any investments made by the business in waste management are eligible.
• Miniature hydroelectric projects, solar power plants, biomass gasifier power plants, etc. are examples of renewable energy projects that produce energy without harming the environment.
• Support is given to MSME OEMs (Original Equipment Manufacturers) who deal with the manufacturing of energy-efficient machinery and cleaner production, as well as supplies to a larger number of other MSME units.
• Other credit lines shouldn’t exist for the project.

Objectives of Sustainable Finance Scheme:

• New or existing MSME units would be qualified for assistance under the programme under the definition established under the MSMED (Micro, Small, and Medium Enterprises Development) Act of 2006.
• Existing units must have a positive performance record, be in good financial standing, and not be in arrears with institutions or banks.
• According to the internal credit rating methodology, the units must have a minimum credit rating of investment grade or its equivalent.
• Renewable energy projects for captive or non-captive use, including solar power plants, wind turbines, small hydroelectric projects, biomass gasifier power plants, etc.
• CP investments that might eventually deal with waste management.
• Suitable support for OEMs that produce energy-efficient, cleaner-producing, or environmentally friendly gear and equipment. Additionally, the OEM must be an MSME or supply a sizable number of MSMEs with its products.

The Sustainable Finance Scheme Application Process:

Step 1	The Detailed Project Report (DPR) must be submitted by the potential lender to SIDBI (Small Industries Development Bank of India) for evaluation by the EEC. If required, EEC will make the sample DPR format available.
Step 2	The report should be sent to the SIDBI Branch Office after it has been vetted.
Step 3	In addition to the loan, the necessary capital subsidy under CLCSS (Credit Linked Capital Subsidy Scheme), TEQUP (Technology and Quality Upgradation), etc. is also authorised in accordance with the regulations currently in effect.
Step 4	In accordance with the terms and conditions of the provisions outlined in the Letter of Intent and related agreements, and in accordance with the most recent DCS regulations, the disbursement must be made. Activities that qualify under the SFS Scheme

Activities that qualify under the Sustainable Finance Scheme:

• This financing programme is open to MSMEs that are registered and engaged in the following activities:
• Solar power plants, wind turbines, mini-hydropower schemes, biomass gasifier power plants, etc. are examples of renewable energy projects for captive or non-captive use.
• CP (Clean Production) investments of any kind that could be made that entail waste management
• Offering microcredits to microbusinesses for green/energy-efficient equipment initiatives, green microfinance offers microcredits up to Rs. 5 lakh.
• Services for auditing, pollution management, and control spending on environmental and energy audits
• The money spent on environmental certification, eco-friendly labelling, BEE ratings, etc.
• Cost to achieve ISO 50001/14000 or another type of environmental/energy certification
• Signing up for confirmation of CDM expenditures
• Appropriate support for OEMs producing energy-efficient, cleaner-producing, or environmentally friendly gear or equipment. Support could be provided through channel partners/referral arrangements, deferred payment agreements, etc. The OEM must be an MSME or it must sell its products to a sizable number of MSMEs.

Features of Sustainable Finance Scheme:

• Carbon markets and carbon finance are used to price carbon.
• Worldwide emerging systems for trading emissions.
• Risk evaluation in relation to climate change at the sectoral and subregional levels.
• Disclosure of climate risk for adaptation and mitigation.
• The role of stock exchanges, including how they might promote green finance and create “green finance hubs.”
  sustainable asset management and banking.
• Insurance and climate risk – reducing climate hazards through the insurance industry.
• International developments in the UNFCCC’s climate finance negotiations.

Way Forward:

17 sustainability finance goals and 169 targets have been adopted by additional 193 nations in an effort to create a better world by 2030. The government established NITI Aayog as a special corporate organisation with the express purpose of advancing Prime Minister Narendra Modi’s ambition to develop an economy that “grows for all Indians.” Their goal is to create a “New India” with zero tolerance for corruption and bureaucracy, a blended gender ratio of 25% by 2025, in addition to the several other programmes mentioned above, 100% literacy by 2050, and 0% child malnutrition by 2028.

The SDGs were given to NITI Aayog, the adviser to the Indian government (Sustainable Development Goals). For the purpose of completing this mission, they selected MoSPI (Ministry of Statistics and Programme Implementation) as their collaborative partner. Additionally, they have requested that each state make a similar mapping of their own plans, right down to the targets, in order to help them support the objectives. The NITI Aayog is dedicated to advancing the nation on all fronts. Interest rates differ amongst businesses. Where appropriate, collateral security can be offered.

Frequently Asked Questions on Sustainable Finance Scheme:

Q1. What are the Objectives of the Sustainable Finance Scheme?

• New or existing MSME units would be qualified for assistance under the programme under the definition established under the MSMED Act of 2006.
• Existing units must have a positive performance record, be in good financial standing, and not be in arrears with institutions or banks.
• According to the internal credit rating methodology, the units must have a minimum credit rating of investment grade or its equivalent.
• Renewable energy projects for captive or non-captive use, including solar power plants, wind turbines, small hydroelectric projects, biomass gasifier power plants, etc.
• CP investments that might eventually deal with waste management.
• Suitable support for OEMs that produce energy-efficient, cleaner-producing, or environmentally friendly gear and equipment. Additionally, the OEM must be an MSME or supply a sizable number of MSMEs with its products.

Q2. What is India’s Sustainable Finance?

Ans: For financing sustainable development projects that contribute to energy efficiency and cleaner production but are not covered under the international or bilateral lines of credit, Indian Small Industries Development Bank (SIDBI) has created a new programme called the Sustainable Finance Scheme.

Q3. What benefits does sustainable finance offer? 

Ans: 

• cost reduction and effectiveness.
• risk reduction
• unique prospects for rivalry and profit
• Innovation
• improved retention and staff development

Q4. What are the eligibility requirements of a Sustainable Finance Scheme?

Ans:

• Any investments made by the business in waste management are eligible.
• Miniature hydroelectric projects, solar power plants, biomass gasifier power plants, etc. are examples of renewable energy projects that produce energy without harming the environment.
• Support is given to MSME OEMs who deal with the manufacturing of energy-efficient machinery and cleaner production, as well as supplies to a larger number of other MSME units.
• Other credit lines shouldn’t exist for the project.