Aneetha rani.R MBA- II year Parks College Chinnakarai Tripur e-mail.anee.jevi787@gmail.

com

Neethu nadhan MBA - II year Parks College Chinnakarai Tripur Email.neethunandan92@gmail.com

GREEN FINANCIAL MODELS IN INDIA

INTRODUCTION
The term Green Finance is describes a broad range of funding for environment-oriented technologies, projects, industries or businesses. A more narrow definition of green finance refers to environment-oriented financial products or services, such as loans, credit cards, insurances or bonds. Green investing recognizes the value of the environment and its natural capital and seeks to improve human well-being and social equity while reducing environmental risks and improving ecological integrity. Other terms used to describe green finance include environmentally responsible investment and climate change investment. Many national and international strategies focused on sustainable development, green growth, sustainable production and consumption on the one hand, and innovation and knowledge-based development on the other hand, have emerged in recent years, and there is an increasing recognition of the role of eco-innovation as a tool to combine green and growth. The OECD Green Growth Strategy (OECD,2011a) recommends that green growth policies should encourage innovation, which can produce economic gains, by eliminating sources of inefficiency in the use of natural capital. This can also foster new economic opportunities through the emergence of new green markets and related activities. Green Economy

The green economy is one that results in improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities. Green economy is an economy or economic development model based on sustainable development and a

knowledge of ecological economics.[1]This growth will create billions of new consumers with needs for housing, food, water, clothing and transport. However, the shrinking availability of natural resources, deteriorating environmental conditions and changing climate will imply that the world can no longer pursue its current growth path.

WHY NEW BUSINESS MODELS MATTER FOR GREEN GROWTH The role of innovation in the transition to green growth Green growth (OECD 2011a, EC 2011) continues to be an important element in national and international debates on the economic crisis and recovery. The ongoing economic crisis continues to provide a unique opportunity to improve energy and materials efficiency and to implement structural reforms (OECD, 2010a). At the same time, there is a growing concern about the sustainability of economic growth, which underpins a demand for a greener model of growth (OECD, 2011a). While in OECD countries this transition mainly entails a structural change towards a resource efficient, knowledge-based economy, in many developing countries, green growth requires strategies that contribute significantly to the objectives of development and poverty reduction. The transition to a greener economy is both a challenging and a long process, as there are many structural, political, technological and cultural obstacles that need to be overcome. So far, there has been rather limited evidence about how the two-fold objective of economic growth and

decreased emissions and resource consumption can be achieved, and much larger, systemic changes may be required to transform the economy. Radical and systemic eco-innovations Solutions such as pollution control, cleaner production, eco-efficiency measures, and ecodesign and green products are often applied by business. They are powerful tools to improve efficiency, as they can be introduced within existing production, process or business systems, without changing the underlying "technological regime".

A. How it works: Green industries and technologies are all at different levels of maturity, thus, requiring different levels of funding from different sources of capital. There are generally three sources:

Domestic public finance International public finance and Private sector finance. Domestic public finance refers to the direct funding by a government while international public finance refers to funding from international organizations and multilateral development banks; private sector finance consists of both domestic and international funding sources. Green financing can be packaged in different ways through various investment structures. Green finance is a core part of low carbon green growth because it connects the financial industry, environmental improvement and economic green industry business models are more often than not untested oren conventional. Therefore, traditional finance may find it difficult or commercially unattractive to finance these green industrial propositions.

Integration of three constituents is necessary to make this concept nearer to realism which is explained as under: Financial industry Needs to develop new financial products (green financial products) with focus on investing in green industries and technologies. Environmental improvement Can be achieved through strong legislation for better environment and actively trading carbon market. Economic Growth With special attention to Eco-friendly industries and development of renewable energy technologies.

The green financial products that is essential to be studied and created is divided into four major headings-

1. Retail Finance 2. Asset Management 3. Corporate Finance 4. Insurance

Retail Finance Green Mortgage Green Mortgage Green Home Loan Green Commercial
Building Loan Green Car Loan, Green credit cardGreen Home Loan Green Commercial Building Loan Green Car Loan, Green credit card

Corporate Finance Green project finance Green securitization Green technology leasing Carbon finance

Green product

Asset Management Eco fund Carbon fund Eco ETF

Insurance Auto Insurance Carbon Insurance Green Insurance

According to United Nations Environment Program Finance Initiative many of the above products have been designed and implemented in countries like U.S, Canada, Australia and some European countries. Innovations are still in the process to cater the needs of green finance concept and making it feel around the world.

B. Strengths of Green finance: It promotes technology diffusion and eco- efficient infrastructureInvestment in environmentally sound technologies, such as clean energy, may help bring down their costs and expedite wider technology diffusion. Developing countries can avoid the development model of grow first, clean up later because a great part of the green investment flows into infrastructure. This situation provides the opportunity for a country to leap ahead to eco-efficient infrastructure. The responsibility then falls on governments to develop infrastructure that will result in better long-term management of resources, which will in turn increase a countrys competitiveness and channel private-sector capital into domestic

 It creates comparative advantageLow carbon green growth may inevitably change from the current voluntary nature to a mandatory strategy in response to the rising pressures emanating from climate change and other environmental and economic crises. Expanding green finance today will mean a comparative advantage once environmental standards become stricter. Adds valueBusinesses, organizations and corporations can add value to their portfolio by enhancing and publicizing their engagement in green finance. Thus they can give their business a green edge and thereby attract more environmentally conscious investors and clients alike. Increases economic prospectsGovernments promoting green finance help buffer their societies against the time when resources become scarce by establishing and promoting domestic markets for alternative resources and technologies. They increase their economic prospects further by dipping into the new markets that possess great potential for employment generation.

GREEN BUSINESS MODELS Methodological approach An analysis of real-life examples can be helpful in understanding how green business models, especially those of the more radical type, contribute to introducing and diffusing ecoinnovations. Case studies can provide deeper insights into how and why eco-innovations have succeeded or failed and the nature of factors and policies that have facilitated or hindered the innovation process. The methodology for business case studies follows the approach adopted in earlier studies on open innovation and nanotechnology (OECD, 2008a; OECD, 2010b).

Classification of green business models i. Greener products/processes based business models This group contains a very diverse set of innovative products and processes applied in companies that achieve better environmental performance by, for example, saving resources and minimizing emissions and waste. ii. Waste regeneration systems, Which are based on the re-use or recycling of waste as new products. This business model is focused on valuing waste, or using it as an input for a new product to be sold on the market. iii. Innovative financing schemes Represent long- and medium-term investment arrangements often focused on the improvement of environmental performance, which is also linked to economic performance. The Compensation and profits for the service providers are tied to energy efficiency improvements and savings in energy costs. The DBFO (Design Build Finance Operate) model is a similar31contractual relationship between a customer and a private contractor. It is often used in construction projects that require long-term investments. iv. New sustainable mobility systems Are alternative transportation schemes with a reduced environmental impact. Examples include more efficient and cleaner public transport systems, carol bike-sharing/renting models and schemes for increasing the application of electric or bio-gas based vehicles.

PRIVATE FINANCE AND GREEN URBAN INFRASTRUCTURE Private financing could fill the funding gap for many urban green infrastructure projects. For private finance to be a solution, three conditions would have to be met: a market for green urban investment projects, good return on investment and limited risk. Several instruments have been applied to attract private finance for urban green infrastructure. Private sector involvement in urban green infrastructure can take the form of public-private partnerships (PPPs), whereby the long-term risk is transferred to the private sector. Another instrument, tax increment financing, uses tax revenues to attract private finance. Finally, loans, bonds and carbon finance are instruments used (and that could be used more) to attract private finance. Conditions for private finance It is not possible to engage the private sector if there is no market for urban green projects; and if there is a lack of appropriate projects, the size of the market might be too small. In deciding on their investment portfolio, each private investor considers the trade-off between projected return on investment and risk. To gain the interest of private investors, urban green infrastructure projects need to be marketable and promising with regard to returns and risk: high potential yields or limited risk, or both. Financing methods also depend on the project phase. Maturity of technologies and types of financing available are reflected in risk-return profiles of urban green investment opportunities. Thus, urban green projects with high capital intensity and high technology risk will be most difficult to finance.

Involving the private sector through public-private partnerships The notion of public-private partnerships is multifaceted and covers a wide diversity of contractual agreements characterised by different risk-sharing and financing schemes, as well as different organisational forms from management contracts to the Private Finance Initiative (OECD, 2008). PPPs are broadly defined as long-term contractual agreements between a private operator/company (or a consortium) and a public entity, under which a service is provided, generally with related investments . Unlike traditional public sector procurement, where the private contractor simply designs and/or builds what the public sector orders, PPPs involve a process in which private operators bid for a contract to design, finance and manage the risks involved in delivering public services or assets. In return, the private contractor receives fees from the public body and/or user tolls for the longterm operation and maintenance of the asset. Conditions for success PPPs may help increase public awareness and expand the diversity of stakeholders in green city development. Creating a favourable environment for private sector participation by strengthening cash flow from concessional loans and grants may contribute directly to the establishment of new green projects, resulting in the realisation of projects that could not be pursued with traditional government procurement alone. Private firms not only can foster corporate social responsibility by participating in green projects, but also can create markets for green products by facilitating a better investment environment. Although most green projects are highly uncertain, PPP diversifies business risks and stakeholders by promoting joint public-private activities.

CONCLUSION The financial benefits of green models include lower energy, waste disposal, and water costs, lower environmental and emissions costs, lower operations and maintenance costs, and savings from increased productivity and health. These benefits range from being fairly predictable (energy, waste, and water savings) to relatively uncertain (productivity/health benefits).. The main emphasis here is on MSMEs, because of their great importance for the Indian economy and in light of their huge potential for increases in efficiency. Energy efficiency in particular is often neglected by MSMEs due to limited access to technical know-how and appropriate financial products. On behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ) GIZ is tapping into these potentials by providing industrial MSMEs in selected regions of India with access to advisory services, training and financing schemes that enable them to implement energy efficiency measures. BIBLIOGRAPHY

1. Deloitte & touch , 2001.Sustainable banking-The green finance, Greenleaf Publishing. 2. Zongwel Luo ,2011.Green finance and Sustainability, Business science reference(IGI global). 3. Allen & Overy LLP (2010), Global Guide to Public-Private Partnerships, Allen & Overy, London. 4. Anderson, J. (1990), Tax Increment Financing: Municipal Adoption and Growth, National Tax Journal, Vol. 43, No. 2, pp. 155-64.