The IFSCA has announced new incentives in order to make FMEs invest in ESG funds at the GIFT IFSC, Gandhinagar. This step will further fuel India’s pursuit to become net-zero by 2070, with investments to the tune of $10 trillion in sustainable projects.
Waiver of Fund Filing Fees for ESG Funds
IFSCA would like to invite the launch of ESG funds and, thus, is offering a one-time waiver of fund filing fees for the first 10 ESG funds launched at GIFT IFSC. In this move, already one fund has availed itself of the incentive, signaling early interest in the program. The timely fee waivers, the upfront cost of which will be mitigated to help establish ESG funds into sustainability and responsible investment, increasingly becoming a priority for investors both in the U.S. and abroad, reflects the realization of the world finance industry towards more value from sustainable and responsible investment strategies.
The fee waivers must lower the upfront costs for fund managers looking to establish ESG funds into sustainability and responsible investment, increasingly becoming a priority for investors both in the United States and abroad. It will focus on ESG funds by bringing Indian financial services in line with international trends on sustainability, governance, and social responsibility. This is poised to have a wide range of global investments flow into the green and sustainable sectors in India, thereby filling the funding gap required to achieve long-term climate and sustainability goals.
The Sustainable Finance Market upsurge at GIFT IFSC
GIFT IFSC is rapidly emerging as a major hub for sustainable finance and has registered significant growth in the distribution of green and sustainable loans. During 2023-24, IBUs located in GIFT IFSC have issued over $1.5 billion green and sustainable loans. A substantial portion of it was focused on social and sustainability-linked projects, demonstrating the commitment of the IFSC towards financing initiatives that could help to better the most urgent social and environmental causes in the world.
This rapid growth in sustainable lending reflects the increasing demand for financial products that contribute to environmental and social goals, such as renewable energy, climate resilience projects, and community development programs. Loans issued at GIFT IFSC are considered critical contributions toward India’s overall sustainability objectives, ensuring that funds are directed toward projects that will concurrently generate positive financial returns with long-term environmental and societal benefits.
Increase in ESG-Labelled Debt Securities End
The GIFT IFSC exchanges also have seen high growth in ESG-labelled debt securities, such as Green Bonds, Social Bonds, and Sustainability-Linked Bonds. By 2023, of the total $59.5 billion in debt listings at the IFSC exchanges, $13.07 billion is for ESG-labelled debt securities. This is a growth trend where issuers are focused on getting investor demand for financial products that are aligned with environmental, social, and governance standards.
Green Bonds and other ESG-labelled securities are being used as the backbone by companies and governments while raising capital for green projects, such as renewable energy infrastructure and clean transportation, besides modern water management systems. The enabling of these financial instruments helps investors ensure their investments are aligned with sustainable development goals, while allowing companies to fund projects positively impacting the planet and society.
Supporting ESG Investment at GIFT IFSC
The IFSCA decision to introduce the above incentives will be another step toward making GIFT IFSC a global destination for ESG funds and sustainable finance. Waiving filling fees, in addition to promoting the development of ESG-labelled financial instruments with the aim of positioning the IFSC as a green finance hub, further drives investments into projects supporting the cause of environmental sustainability and social good.
The urge for ESG investment is only a spin-off of the overall move towards a low-carbon economy. Since the government is committed to achieving net-zero emissions by 2070, it would require drawing international investments into green projects. ESG funds assume a very important role in this regard, as they specialize in funding projects that cohere with sustainable development goals and, by consequence, cohere with long-term climate objectives of India.
Aligning with global sustainability trends
The growth of ESG investments in India reflects global trends where investors look forward to opportunities to fund projects that not only yield returns but also have a positive impact on the environment and society. As demand for sustainable financial products rises, companies and governments have increased the issuance of such ESG-labelled securities, a trend which is expected to rise further with increasing investors, mainly institutional, prioritizing ESG considerations in their portfolios.
Such a transformational shift the country’s financial sector is adapting to at least with the new entrants offering green bonds and sustainability-linked financial products, and the incentives announced for ESG funds by IFSCA at GIFT IFSC would give a further fillip to this, and the country would then be an attractive destination for ESG-focused investments.
Roadmap for India’s Net-Zero
The challenge and opportunity, therefore, lies ahead of India in its pursuit toward the final goal of reaching net-zero emissions by 2070. Such a quest for an eco-friendly economy, certainly, would pose gigantic investments, not only in green infrastructure energizing it but also in sustainable industries. The estimate of $10 trillion required is an indicator of how much financing is required to meet the commitment placed before it.
International investment is going to play a crucial factor in achieving these results, and IFSCA’s thrust on ESG funds will abide by this requirement. By promoting an environment conductive to ESG investments, GIFT IFSC is perfectly placed to play a leadership role in mobilizing the capital to make India’s net-zero journey a reality.
Conclusion
The incentives IFSCA offers for the establishment of ESG funds at GIFT IFSC are a very crucial step in all the steps India has taken towards improving the sustainable finance ecosystem in the country. And with more demand for securities labeled as ESG and the distribution of green loans, GIFT IFSC is turning out to be a battleground for sustainable investments. The new framework benefits fund managers and investors while contributing to India’s long-term climate goals by directing much-needed capital towards sustainable projects.
Source: IFSCA