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Reserve Bank of India (RBI) Deputy Governor M Rajeshwar Rao has said that central banks need to incorporate climate-related risks into their supervisory frameworks in order to contribute to the development of frameworks and standards for green finance. He said these frameworks can help promote transparency, standardization, and integrity in the green finance market. He stressed that financing the new green ventures alone will not be enough and there is a need for credible transition plans for existing emitting firms without compromising their output or growth. 

The deputy governor further said over the years, RBI has been taking various policy measures to promote and support green finance initiatives. He said earlier this year the Reserve Bank supported Government of India in successfully issuing sovereign green bonds (SGrBs). The proceeds of the SGrBs are intended to be deployed in public sector projects which will help in reducing the carbon intensity of the economy. He noted that the issuance of SGrBs would also help in price discovery for other financial instruments and give a fillip to development of a market for green financing ecosystem in the country.

Rao  further stressed on the need to undertake a large-scale capacity building effort to equip central banks, financial firms, real economy players to understand, assess and plan for the climate issues and related financial risks. He said only then would they be able to innovate, make strategic decisions, mobilise capital and build effective transition plans for achieving sustainability targets and a very important aspect of this capacity building is going to be the handholding of the smaller firms and MSMEs to make it easier for them to navigate the transition.