Role of PSBs in Fulfilling SDGs

Since India is elected to the presidency for the Group of 20 (G20) summit in 2023, several global macroeconomic concerns have risen to our attention. The Sustainable Development Goals (SDGs), accepted by all the United Nations (UN) states, established a joint road map for sustainable development. The 2030 Agenda of the UN calls for considerable investment in sustainable business. The years “2020–30” have been tagged as a “decade of action” by the UN to strive for the SDG’s accomplishment. According to a recent investment report by the UN, investment needs in emerging countries alone might total $3.9 trillion every year. Likewise, the European Union has projected a sustainable investment expenditure of $90 trillion over the coming 15 years. However, current funding levels reveal a $2.5 trillion shortfall. In general, current investment growth rates are not making a meaningful dent in the expected financial gaps to meet these objectives. Massive government packages to mitigate the economic harm of the COVID-19 problems have made securing the necessary public financing even more difficult. In response to this, the UN has resolved to encounter difficulties in encouraging investments for sustainable development and specific proposals for the promotion of investment in developing countries for the implementation of the 2030 agenda.

India is no different. The Government of India has enacted several measures to fulfil the SDGs. Numerous activities are underway to promote the financing of green projects worldwide and raise awareness about them. These programmes encourage financial and non-financial institutions to include environmental factors in their funding. Although aggregate financing in SDG sectors has reached pre-pandemic levels after plummeting by 41% due to COVID-19, much of the rebound can be attributed to global project financing and investments with 108 new foreign projects in India, compared to an average of 20 projects over the previous 10 years. According to a recent Reserve Bank of India bulletin, in two years since January 2022, India has issued just 22 green bonds whose proceeds are utilised for sustainable projects primarily by public sectors, contributing 0.3% compared to over 1% by wealthy nations. Bank lending to alternative energy and sustainable infrastructures is pitiful, accounting for less than 0.5% as of November 2022. Most public sector banks (PSBs) do not even have a policy on sustainable finance to evidence their sincerity on the matter, even though owners and regulators are continuously revamping their strategy and including various efforts under sustainable measures to boost sustainability pace. In sum, India’s practice of environmentally responsible financing is still nascent. Thus, the question of whether Indian PSBs being lenders of two-thirds of commercial credits are doing enough to promote the agenda of the government to achieve SDGs, remains unanswered.