IFSCA Establishes Expert Committee for Transition Finance Framework

Introduction: The International Financial Services Centres Authority (IFSCA) has taken a monumental step in aligning with the global push for Sustainable Finance. The establishment of an Expert Committee on Transition Finance, as announced during Infinity Forum 2.0 by the Hon’ble Prime Minister, aims to position the IFSC as a global hub for sustainable financial activities. This article delves into the key objectives, committee members, and terms of reference set by IFSCA for this crucial initiative.

Committee Formation and Objectives: The IFSCA Expert Committee on Transition Finance comprises esteemed representatives from various sectors, including industry, standard setters, consultants, and think tanks. Mr. Dhruba Purkayastha, India Director of CPI, leads the committee as the Chairperson. The committee’s primary goal is to recommend a regulatory framework for transition finance instruments and devise measures to promote transition finance through the GIFT IFSC.

Terms of Reference: The committee’s Terms of Reference (ToR) outline a comprehensive agenda aimed at addressing the critical aspects of transition finance. Some key areas include assessing global trends, identifying best practices, and determining the requirements of transition finance in India by 2047. Additionally, the committee will recommend a regulatory framework, advise on policy measures by the Government of India, and guide IFSCA in developing a robust ecosystem for transition finance at GIFT IFSC.

Objectives in Detail:

1. Global Assessment: The committee will assess global trends in transition finance, identify best practices, and evaluate the specific needs of transition finance in India by 2047.
2. Regulatory Framework: Recommendations will be made for a regulatory framework for transition finance instruments, leveraging the existing IFSCA draft framework as a starting point.
3. Policy Measures: The committee will advise on policy measures by the Government of India to foster transition finance from GIFT IFSC, covering legal, taxation, regulatory, and other aspects.
4. IFSCA Guidance: Providing strategic counsel to IFSCA, the committee will guide the development of a reliable and cost-effective ecosystem for transition finance, meeting the unique needs of the Indian industry.
5. Roadmap and Timelines: The committee is tasked with outlining a roadmap and defining timelines for IFSCA to establish a comprehensive transition finance ecosystem and instruments at GIFT IFSC.
6. Additional Matters: The committee holds the authority to address any other relevant matters related to Transition Finance that are deemed fit.

Conclusion: IFSCA’s initiative to establish an Expert Committee on Transition Finance underscores its commitment to fostering sustainable finance and supporting the transition journey of diverse sectors. As the committee embarks on its crucial tasks, the financial landscape at GIFT IFSC is poised for significant advancements in aligning with global sustainability goals.

In conclusion, the Expert Committee on Transition Finance is a testament to IFSCA’s dedication to steering the financial sector towards a sustainable and inclusive future, emphasizing the importance of transition finance in achieving broader environmental and developmental objectives.

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INTERENATIONAL FINANCIAL SERVICES CENTRES AUTHORITY

Press Release

Constitution of an Expert Committee on Transition Finance

The Hon’ble Prime Minister, in his speech, during Infinity Forum 2.0, emphasized making IFSC a global hub of Sustainable Finance. IFSCA has undertaken numerous regulatory initiatives for development of financial instruments at IFSC to facilitate capital flows towards climate action in India and other developing countries. These initiatives have led to listing of USD 10.1 Bn ESG-labelled debt securities, issuance of more than USD 700 Mn green/sustainable loans, and set-up of an ESG Engagement Fund at IFSC.

Despite the significant global growth in instruments for financing environmentally friendly activities, in the past few years, the mobilization of funds has been more inclined to certain sectors of the economy, whose activities are related to near-zero carbon emissions. The need of the hour is to fund the transition journey of all sectors, especially hard-to-abate sectors, in order to achieve Paris agreement goals and SDGs. In this context, transition finance instruments such as transition bonds, transition loans etc. have emerged as an alternative to address the financing gap needed to achieve Paris agreement goals and which is inclusive of sectors and geographies across industries.

Taking into consideration the critical need for transition finance, the development of such financing instruments being at a nascent stage, and lack of globally recognized framework as in the case of green/sustainable labelled debt securities, IFSCA has formed an expert committee on Transition Finance consisting of representation from industry, standard setters, consultants, think tanks etc. to recommend a regulatory framework for transition finance instruments and measures to promote transition finance through GIFT IFSC.

The constitution of the committee and Terms of Reference (ToR) can be accessed through  https://ifsca.gov.in/IFSCACommittees

Gandhinagar
December 22, 2023

Expert Committee on Transition Finance