Future a lot of progress being made towards

Future of Sustainable Development:

The Concept:

Sustainable
development is termed as development that meets the needs of the present
without compromising the ability of future generations to meet their own needs.1 There
are three core fundamentals we have to consider when we are trying to achieve
Sustainable development: Economic growth, Social inclusion and Environmental
protection. They stay interweaved into the social structure of the community we
live in and are crucial for the well-being of each individual stake holder.

Sustainable
development comprises of two main concepts:

1.      The
concept of ‘needs’ which talks about the basic needs of the world’s population
and the focal priority given particularly to the essential needs of the world’s
poor.

2.      the
idea of limitations imposed by the current state of technology and social
organization on the environment’s ability to meet present and future needs.2

Why Sustainable development is
important?

Even
though the Earth is a single entity we live in clusters of multiple
closely-knit communities where everyone is dependent on each other and the
limited resources our Earth motherland has to offer. Each community, each
country is invested in its own struggle to survive and prosper with more or
less no regard for its impact on others. Some among us consume the resources at
an exuberant rate leaving very little for the future generations and the rest
of us, much larger in size, do it a slow pace and have to subject themselves to
conditions of hunger, squalor,           disease,
and even early death.

Fortunately,
we can see a lot of progress being made towards minimizing the gap and
normalizing the pattern of consumption of resources in the recent years.
Children being born today expect to live longer than their predecessors and be
better educated. In many parts of the world, a new-born expects to attain a higher
standard of living in a wider sense. Any measures taken towards such a progress
provides us with hope as we contemplate the improvements still needed to make our
biosphere a safer and sounder home for us and for those who are to come.

The
increasing population and production has put pressure on the system to demand
an increase in the scale and complexity of our requirements for natural. There
are thresholds to our rewarding yet finely balanced Nature that cannot be
crossed without pushing the boundaries which challenge the basic integrity of
the system. Today as we are closing on many of these thresholds, we must be
ever more careful about not risking endangering the survival of our and other
species on the planet. Moreover, the rate at which the resources are being
depleted due to varied consumption gives us little time to respond to
unexpected changes and effects in the environment.

Impact of environmental pressures on
the world economy:

The
environmental difficulties we know and that confront us are not new, but we
have only recently begun to understand their complexity. Previously, our main
concerns always used to hover around the effects of development on the
environment. Today, we need to be equally concerned about how environmental
degradation can be detrimental to economic development. Environmental
degradation further leads to the erosion of the potential of development. This
can be connected together if we refer back to the environmental and development
crises of the 1980’s.

New approach to Environment and
Sustainable Development:

There
has been precedence which showcases the inability of development assistance to contribute
to sustainable development and in some cases even detracted from it. The narrow
economic criteria basis which lending to promote agriculture, forestry,
fishing, and energy has usually been made take little account of environmental
effects. For instance, the case of chemical-dependent agriculture versus
regenerative agriculture. It is important therefore that there should be a
qualitative as well as a quantitative improvement in selecting criteria for
financing and lending towards development.

It
has been identified that the financial sector plays an important part in
promoting sustainable development. Momentum around the role of the financial
sector in supporting sustainable development and addressing climate change has
been generated by the various agencies around the world namely G20, and further
strengthened by the Financial Stability Board and the Paris Agreement and the
associated NDCs. The investment decisions by the market makers in the Financial
markets can heavily influence shift in developments in the real economy. As we
know how crucial the global need for a low-carbon economy is to avoid and avert
disastrous consequences of climate change and as we have identified the urgency
for economic development to be sustainable, it is clear and evident that financial
markets play an integral role to drive investments to climate-friendly and
green projects which supports the move towards a more sustainable future.

As
private financial institutions are majorly influenced by the economic sectors
through their lending and investment practices, it suffices them to work profusely
on their mutual impactful relationship with sustainability: investments are
directly or indirectly affected by climate change and other negative environmental
externalities. By investing in energy efficiency, renewable energy, clean
technology, and smart solutions for waste and water treatment, in the transport
and infrastructure sectors financial
instruments can leverage sustainable growth. A positive correlation between
investments managed according to sustainability criteria and their financial
performance can be found according to some studies.3

Green Financing and Green Bonds:

Green
finance refers to any financial instrument or investments issued under contract
to a firm, facility, person, project or agency, public or private, in exchange
for the delivery of positive environmental externalities that are real,
verified and additional to business as usual.4Green
bonds are regular bonds with one distinguishing feature: proceeds are earmarked
for projects with environmental benefits, primarily climate change mitigation
and adaptation.

The
green bond market emerged in 2007- 2008 with bonds issued by the World Bank and
European Investment Bank. From 2007-2012, the market mainly featured
development banks such as the EIB, IFC and World Bank. 2013 saw the first bond
issued by a corporate entity which spurred more active participation from
private sector issuers including corporates and commercial banks.

Climate
change is an overarching challenge consistently facing sustainable development.
Climate change mitigation and adaptation is a huge challenge for infrastructure
projects. Even if we underestimate climate change predictions, improving
infrastructure to adapt to more extreme weather could cost an extra USD150bn
per year by 2025. If temperatures continue to rise beyond the 2 degrees
Celsius trajectory previously predicted, the adaptation costs rise dramatically
to the tune of USD6.2tn. The period to 2020 is crucial for investing in green
infrastructure.

In
the post financial crisis environment, the financial challenge of building
green infrastructure cannot be met with public sector funds and bank finance
alone. This is where green bond initiatives undertaken by many countries
worldwide come into play. Institutional investors have the capital (USD43tn) and
are ready to invest in green and bonds are well suited to tap into such institutional
investors for infrastructure. This perfect synergy presents a golden
opportunity for the countries to focus its efforts of raising funds for green
field projects by raising funds through Green bonds. Example: Insurance
Industry commits to increasing the amount invested in climate-smart investments
to ten times the current amount by 2020.5

 

 

 

 

 

The role of Green bonds in solving
environmental challenges in China:

While
emissions need to decrease, global infrastructure investment is expected to amount
to RMB624tn (USD90tn) over the next 15 years – more than the entire current
infrastructure stock. To facilitate the global transition to a low-carbon economy,
an estimated RMB42- 9tn (USD6-7tn) in annual investment will be needed globally
over the next 15 years.6

The
green bond market has shown strong growth over the last 3 years, driven by strong
investor demand which continues to outweigh supply. Globally
green bond issuance for 2016 reached RMB552bn (USD80bn), with much of this
growth coming from Chinese issuers in the market. Green bond issuance from
China increased in 2016 from almost zero to RMB238bn (USD36.2bn), accounting
for 39% of global issuance in 2016.

 

 

 

 

 

 

Economic
and financial reforms provide potential to develop green bonds. The Chinese
bond market has undergone major reform around market architecture when compared
to its inception stages, which has opened the opportunity to introduce green
bond issuance as a market innovation. The planned growth of the securitization
market provides another opportunity for green bonds.

Way Forward:

Financial
flows will need to be redirected from brown investments to scale up green
investments that will not only mitigate climate change, but also to foster
economic growth and job creation. Most of the investments must come from the
private sector as public spending is not sufficient, and is therefore important
to align the financial system with sustainable development. There is no doubt
that a high level of uncertainty clouds the future ahead. But one thing is
clear – the shift to climate-consistent, green and, ultimately, more sustainable
finance now looks unstoppable.