Aligning Climate Action with Social Equity: Strategies for India's Financial Regulators
India is currently undergoing an energy transition aimed at decarbonisation, a shift that holds great promise for a more sustainable future. However, this transition must be approached with a keen awareness of its social impacts, ensuring a just transition for all.
The Securities and Exchange Board of India (Sebi) and the Reserve Bank of India (RBI) are leading the charge, advancing Environmental, Social, and Governance (ESG) principles, green finance, and disclosure norms to support this decarbonisation effort.
Sebi, through regulatory instruments such as the Business Responsibility and Sustainability Report (BRSR), green debt securities, ESG funds, and the Social Stock Exchange, has created a sustainable finance ecosystem. Yet, the BRSR framework, while mandating the top 1,000 listed companies to disclose on ESG metrics, lacks explicit just transition indicators.
The RBI, on the other hand, has recognised sovereign green bonds as eligible for the statutory liquidity ratio, thereby increasing their uptake. The next step is to issue targeted sovereign green bonds dedicated to just transition goals. The RBI's green deposits programme could also be fine-tuned to include projects that deliver social co-benefits, such as clean energy projects focusing on retraining fossil fuel workers or investing in rural livelihoods.
However, social risks from the energy transition are not yet fully integrated into India's financial risk frameworks. The RBI can lead by recognising just transition as a financial risk category and conducting sector-specific impact studies. Aligning BRSR with global just transition frameworks, such as the International Labour Organizationβs guidelines, would enable investors to assess companies' support for workers and communities during decarbonisation.
International collaboration through platforms like the Network for Greening the Financial System can help the RBI adopt global best practices for embedding just transition principles into financial supervision. The coordinator of the Network for Green Financing who can contribute to cooperation between SEBI and the RBI in integrating Just Transition principles into financial supervision is not explicitly named in the provided search results.
The Social Stock Exchange can finance non-profit and social enterprises working on just transition-aligned initiatives. The priority sector lending mechanism can be expanded to support projects in transitioning coal-dependent regions, promote green entrepreneurship, and provide funding for retraining initiatives and social protection programmes.
By embedding just transition principles into their mandates, disclosures, instruments, and partnerships, financial regulators can lay the groundwork for an inclusive, equitable, and resilient future. Future editions of the survey could track how banks are developing policies to finance sectors aligned with just transition objectives.
India's financial regulators have an opportunity to ensure that climate action is not only green but also just, by shaping a new development paradigm that leaves no one behind. Coordination between stakeholders, including regulators, financial institutions, and public agencies, is essential to build a financing ecosystem that supports workers, strengthens community resilience, and drives equitable economic transformation.
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