The Financial Kaleid @} scope The Rise of Sustainable Finance From The Editor’s Desk Dear Reader, Thanks to the efforts of India’s capital Please do like, share & subscribe to our markets regulator SEBI, sustainable NSDL Social Media channels Twitter, finance is something we all may have Linkedin, Instagram, Facebook & YouTube. heard of. India has leapfrogged many nations in adopting and continuing to adopt a push toward sustainable finance. NSDL - Your Depository It is expected to pick up significantly in the coming few years. Investors would do well to understand this way of investing for the larger good. Studies are now showing better returns as well! In this issue, we have a special article from a leader in this space, Amit Bhatia, explaining all that you need to know about sustainable finance, A must read! Regards,The Rise of Sustainable Finance Last year, in FY23, consumers in India bought 1.2 mnillion electric vehicles, including 0.7 million electric ‘two-wheelers, At an average of 35 km per day or 1000 km per month, Indian consumers likely offset at least 2.4 million metric tons (Mmt) of carbon dioxide last year, contributing to a sustainable planet. Naturally, the $1.7 bn investment in e-vehicles in 2021 and $0.66 bn in THY, 2022, as per E&Y, across companies including Hero Electric, Ather Energy, Ola Electric, Greaves Electric, etc. is “Sustainable Investment". The success of sustainable finance is irrefutable. TESLA, the US electric car maker currently has a market valuation of USD 800 billion, sold 1.3 million cars in 2022, offset 13.4 Mmt of carbon dioxide, and eared USD 1.78 billion in carbon credits. Similarly, Beyond Meat, a US-based company that sells plant- based meat substitutes had USD 419 million in 2022 revenues, hadUSD 700 millioninmarket capitalization, and offset 90% of Green House Gases (GHG) which would have been produced, had people consumed real meat! Like TESLA and Beyond Meat, renewable energy companies, micro-finance companies, waste management companies, etc. around the world, are all creating sustainable impact. Therefore, all investments in such areas are “Sustainable Finance”. “Sustainable Finance” has roughly come to mean all investments along the three-step Impact Continuum, althoughthepuristsprefernon-genericclassifications. These three steps are called the ABC of Impact. * A=Avoid Harm or Responsible or ESG (Environment-Social-Governance) Investing. * B=Benefit All or Sustainable Investing also sometimes referred to as Green or Blue Finance. + C=Contribute Solutions or Impact Investing, Collectively, of the total USD 150 trillion of global Assets Under Management (AUM), almost USD 59 trillion investments had moved to the above Impact Continuum by 2020, as per GSIA (Global Sustainable Investment Alliance), It is clear to practitioners, that given UN's 17 Sustainable Development Goals (2015-2030), a significant amount of Global AUM will move to the Impact Continuum, especially since Sustainable Finance has delivered, for a decade, similar returns in developed markets and superior returns in emerging markets, vis-&-vis pure wealth maximization strategies, except since the Russia-Ukraine war when the global arithmetic was upended. According to Reuters, global equities weighted towards sustainability or ESG outperformed non- ESG equities, over a five-year period (2017-2022) by 0.13%; most in Europe (1.59%), followed by APAC or Asia-Pacific (1.02%). Within all ESG parameters, high Governance score outperformed global averages by 1.42% but those with high environment scores outperformed only in APAC, Europe and North America, while portfolios with high social scores outperformed only in APAG and Europe. In India, SBI mutual fund conducted a study to show that ESG funds showed a stock price fall 13% less than their ‘competitors between January and May 2020. As per McKinsey, India's impact investing sector delivered 11% IRR (dollar-adjusted) between 2010-2016. What do we learn from these facts? To put billions in wealth maximisation strategies when we have irrefutable evidence that sustainability drives market value- is simply put- irresponsible. Therefore, sustainable finance is manifesting in many ways: © Singapore-based $24 billion food and global agri-business, Olam International, has raised over US$1.5 billion revolving sustainability- linked credit over the last decade, most recently in June 2020, where its interest cost goes down as it achieves key sustainability metrics linked to Farmer Prosperity, Thriving Communities or Regeneration. © Modern China greatly focuses on sustainable finance. It promotes green bonds, green credit & green funds, According to S&P Global Market Intelligence, China issued the most number ofgreen bonds globally in 2022 at US$76.25 billion, according to data from Climate Bonds Initiative. This year, China is expected to issue between US$90 billion and US$100 billion in green bonds. © Korea impressed with a sovereign sustainable bond of USD 500 million, which was the world's first government-issued sustainability bond, aimed at supporting the green agenda and social development. Fuelled by government policies promoting projects with social welfare benefits, South Korea has now emerged as the leading social bondmarketinthe APACregion. Intheinitial five months of 2023, the issuance volume of its domestic social bonds surged to USD 19 billion. ® Closer home, here in India, as per lIC, the Impact Investments crossed $5.8 billion in 2022 across 411 deals in 377 impact enterprises. All this is sustainable finance - the new paradigm. And it is spreading across all asset classes - private equity, public equity, fixed income, real assets, venture capital, hedge funds, impact bonds, ete. The best way to understand Sustainable Finance is across three categories where it is deployed. Long-Term Capital Investments \ Long-term sustainable finance is imperative for sustainable projects which often require a longer horizon for full realization of their intended benefits. It represents patient capital, allowing investors and organizations to commit resources over a substantial period to support projects or initiatives with the aim of creating enduring positive impacts. Within the realm of traditional financial products, various options have emerged, including sustainable stocks, impact investing funds, green bonds, sustainability-linked bonds, green infrastructure ventures, development finance, and public-private partnerships which offer long-term sustainable investment options. The acceptance and performance of these options hinge on their market performance, which, evidence suggests, has been positive. For instance, from 2012 to 2021, the Nifty 100 ESG Index yielded a return of 15%, surpassing the 12.7% return of the Nifty 50 Index. Consequently, stocks of companies like Tata Power and Borosil Renewables have become attractive investment choices. Impact investing funds such as. Aavishkaar, which target startups and enterprises with strong social or environmental missions, have till date closed 8 funds with close to half a billion dollars in AUM. SBI has also made strides in sustainable finance, issuing green bonds totalling $800 million since 2018-19, along with a green loan of €50 million in 2020-21. Additionally, RBI has taken steps towards mobilizing resources for green infrastructure projects, including solar, wind, and small hydro projects, as well as other public sector endeavours that aim to reduce the nation’s carbon footprint. Recently, RBI also conducted its inaugural auction of sovereign green bonds, raising 8,000 crores. The government, private sector, and investor community are all actively engaged, reflecting a growing awareness of the importance of sustainable finance practices. Short-term & Trade Finance \ Amidst the vast global economy with an estimated GDP of USD 104 trillion in 2022, trade finance with a size of $7.3 Trillion as of 2020, emerges as a crucial catalyst, facilitatingeconomicactivities through SMEs and supply chains. India's Priority Sector Lending (PSL) is a classic example of Sustainable Financing as all sectors in focus (e.g,, Agriculture, Education, Health, etc.) help deliver, social, climate or economic justice. However, recent world events have exposed gapsinthetrade finance ecosystem, posing long-term risks to the global economy. The Asian Development Bank (ADB) reveals that the global trade finance gap reached an unprecedented high of $1.7 trillion in 2020, marking a 15% increase from two years prior. The COVID-19 pandemic exacerbated existing economic and financial uncertainties, severely impacting global trade activities. As of 2020, according to McKinsey & Company, the global trade finance (GTF) market was estimated to be worth USD 7.3 trillion including supply chain finance (SCF). Moreover, projections suggest that the market will continue to grow at a compound annual growth rate (CAGR) of 5.5% from. 2022 to 2027. With the projected market size of $8.7 trillion by 2024 as per McKinsey & Company, GTF and SCF present significant potential for mobilizing finance towards climate+riendly initiatives and advancing the transition to a sustainable future.Sustainability in Retail Finance \ Examples of Sustainable Finance in India's retail sector are still rare. Earlier this year, HDFC Mutual Fund launched its fourth HDFC Charity Fund for Cancer Cure, which was a great example of how to introduce social or climate impact at retail level. The mutual fund allows investors to donate part of their income for treatment of underprivileged cancer patients. To date, HDFC has been able to contribute INR 190 crores for cancer treatment. In US, retail investors are considered the next frontier for impact investing. This retail market is expected to cross $8 billion as per CIRCASO0O, a retail impact investing actor, with 170,000 retail investors in UK, each investing around GBP 2000 a year, CIRCA starts investments at as little as GBP 5 per month and currently has over GBP 10 million under management. Another Rockefeller Foundation survey in 2019 across 200 retail investors and 300 advisory firms found that 78% retail investors in US, aware about Impact/Sustainable Investing, were making active investments and 55% expected their impact portfolios to grow 6-20% over the next two years. India, as one of the world's fastest-growing large economies, is increasingly recognizing the importance of sustainable finance in driving long- term economic growth and mitigating environmental and social risks. In the recently concluded G20, the sustainable finance working group focused on closing the climate financing gap and meeting SDG investment goals. India alone needs $10 trillion between 2020-2070, as pre CEEW, for renewable power, green hydrogen and electric vehicles, to meet our Net Zero goal by 2070. Overall, sustainable finance in India is gaining momentum- a robust regulatory framework, capacity-building for ESG risk assessment, and the creation of innovative financial products, collaboration between government, and private sector will all play a pivotal role, The era of Sustainable Finance has indeed dawned in India. The article is written by Mr. Amit Bhatia - Founder & CEO Aspire Circle & Aspire Impact Independent Board Member - WhiteOak Capital MF Governing Council Member - NSE Social Stock Exchange ‘Amit Bhatia is Founder of Aspire Circle & Aspire Impact, was Inaugural CEO of The Global Steering Group for Impact Investment (2017-20) and Founding CEO of India's Impact Investors Council (2014-2017). He was part of WINS Leadership listing India's first outsourcing company ‘on NYSE in 2006 and Founded McKinsey Knowledge Centre in 1998 which created India's KPO sector. Key Information for Investors Investor Grievance Redressal Mechanism, 1. SEBI Master Circular on the redressal of investor grievances through the SEB! Complaints Redress System (SCORES) platform dated November 7, 2022. Investors can access the master circular with the below link. (SCORES) platform 2. We encourage investors to Read ‘Investor Charter’ at hittps://nsdl.co.in/publications/investor_charter. php 3. Online web-based complaints _redressal system of NSDL can be accessed via link https://nsdl.co.in/nsdinews/investors.php (Post your complaints/queries to NSDL)4. Lodge your complaint with SEBI at https://scores.gov.in/scores/Welcome.html or SEB! Mobile App. - SCORES + SEBI Toll free helpline - 18002667575 / 1800227575 * NSDL email for grievance - [email protected] * NSDL helpline - 022-48867000 / 022-24997000 + NSDL email for other information - [email protected] 5. SEBI Master Circular on Online Resolution of Disputes in the Indian Securities Market SEBI has issued Master Circular on Online Resolution of Disputes in the Indian Securities Market vide its Circular No, SEBI/HO/OIAE/OIAE_IAD-1/P/CIR/2023/145 dated July 31, 2023. For more information, Investors may refer the SEBI Circular securities-market_75220.html Visit SMART ODR website https://smartodr.in/login 6. SEBI Circular on Comprehensive guidelines for Investor Protection Fund and Investor Services Fund SEBI has issued revised Comprehensive guidelines for Investor Protection Fund and Investor Services Fund at Stock Exchanges and —Depositories vide its —Circular_—_—No. ‘SEBI/HO/MRD/MRD-PoD-3/P/CIR/2023/81 dated May 30, 2023, For more information, Investors may refer the SEBI Circular in the following link fund-and-investor-services-fund-at-stock-exchanges-and-depositories 71925.html 7. 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