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(Bloomberg) — India could struggle to meet its green targets without a so-called taxonomy framework, which creates guardrails around what can pass as climate finance, according to Standard Chartered Plc.
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The country needs clarity “around taxonomy as it is still in the works,” said Shobana Chawla, head of sustainable financing for South Asia at the bank, speaking in an interview. “Once finalized, it will give a fillip to the banks,” she said.
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In theory, a taxonomy would help clarify an investment’s green credentials and mitigate greenwashing. India announced a plan to create one nearly a year ago, but details on the plan have been slim and the country has lagged behind its peers in developing the framework, according to analysts at Barclays Plc.
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Backers say a taxonomy could also open the door for more financing. India is among the largest greenhouse gas emitters, and the government estimates it needs $10 trillion to reach its net zero emissions goal by 2070. Current capital sources only account for about two thirds of that, according to ICF International.
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The push for India to develop its taxonomy comes as the European Union, a pioneer in ESG regulation, is working to water down its own. Earlier this year, the European Commission proposed limiting the impact of its taxonomy so that about 80% of the companies originally in scope will no longer need to comply.
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The taxonomy document — which has already been circulated for feedback from key industry groups — is expected to be published in the coming weeks and will be followed by a public consultation period, which typically lasts 45 to 60 days, according to people familiar with the matter, who requested anonymity to discuss private details of the plans. The finance ministry did not immediately respond to a request for comment.
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India is the bank’s largest source of sustainable financing assets. Standard Chartered’s outstanding loan book for sustainable financing totaled $4.7 billion as of September, up 96% from July 2020, Chawla said. The bank has lent to projects in sectors including solar, battery cells, wind energy among others.
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