Liquidity Moving Towards Low Carbon Footprint Companies

World is transitioning towards a low carbon footprint economy with an objective of meeting the goal of keeping the global temperature below 2°celsius. Environmental and climate risk are the biggest challenge for the world and if unchecked, its impact will have far reaching impact on global financial system. Carbon neutrality is the need of the hour and the Industry transition towards green energy present a great opportunity for the financial sector.

In order to pool global central bank reserves for funding green projects in the Asia Pacific region, the Bank for International Settlements (BIS) has announced the formation of an Asian Green Bond Fund. The fund will enable central banks to invest in high quality bonds issues

In consultation with global central banks, the fund will be designed to provide a pipeline for central banks to invest in high-quality bonds issued by Sovereign Governments, Corporates and Supranational, complying with international green standards. The Green Bond Fund will work closely with Asian Development Bank (ADB), development financial institutions and issuers. 

According to Mr Agustín Carstens, General Manager of the BIS, Asia-Pacific, is one of the key regions vulnerable to climate change and needs largest green infrastructure investments for combat climate change. ADB has committed $100 billion for climate finance initiative and collaboration of ADB-BIS will help in creating confidence for pooling necessary resources.

BIS has already launched two green funds denominated in dollars and euro. Asian Green Bond Fund will be launched by 2022 and will complement the existing funds. BIS is committed to environment friendly finance and is working to deepen the green bond market. Its funds are structured under the swiss law where BIS is headquartered and investment will be managed by BIS Asset Management.

In India RBI has joined the Network for Greening the Financial System and Indian Industry will see a lot of green funding for transitioning towards carbon neutrality. The developments in the Bonds market will are following the line of equity market. ESG funds are receiving greater allocation globally and collectively they are managing Trillions of Dollars of funds in a very short time span. ESG funds. are seeing traction in Indian financial markets. Major players like SBI Magnum Equity Aditya Birla Sun Life, Kotak, ICICI, Axis, Mirae, HSBC, Invesco, etc have launched their ESG funds.

Globally the message is getting clearer that Carbon neutrality is not optional but a compulsion and liquidity will flow towards the companies having low carbon footprint companies

Bureau Galactik Views

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