Green Finance - Relevancy of the Term, Role of Green Finance. Read more on Green Finance for UPSC exam (2024)

Green Finance is a term which refers to financial investments for those projects that support sustainable development. Green investments include investments in biodiversity protection, water sanitation, industrial pollution control, energy efficiency, climate change adaptation, renewable energies, etc. Green finance comprises of financing of public green policies, etc.

The terms ‘green finance’, ‘sustainable finance’, ‘climate finance’ is implicitly known as an eclipsing territory of matters on environmental, social, economic and governance.

Green Finance is an important topic for theIAS Examand is included under the GS-II section of theUPSC Syllabus.

What is Climate Finance?

Climate Finance can be defined as the emerging form of green finance which is available for various projects in the developing countries. It is one of the growing sectors in the field of international development and environmental finance. Climate Finance also helps in reducing emissions or for adapting to climate changes. This can be achieved either by increasing the revenues that are available to both public and private development projects namely: tariff support, carbon finance. It can also be achieved through the improvement of project capital structure, for example by reducing the costs of debt and equity.

The Governments of the world have taken an initiative for Climate Finance underthe Paris Agreement on climate change. The initiative is to raise an amount of $100 billion per year by the end of 2020 from both the public and private sources.

Aspirants can check out the relevant links for preparation of IAS exam even better-

Global Environment Facility (GEF)Sustainable Development GoalsGreen Climate Fund (GCF)
Micro Finance in IndiaGreen India Mission (GIM)Global Environment Outlook
Green Skill Development Programme (GSDP)List of Environment Conventions and ProtocolsNational Mission on Sustainable Habitat (NMSH)

Role of Green Finance

Green finance is responsible for the financing of both public and private green investments along with the preparatory and capital costs. Some of the major roles of Green Finance are as follows:

  1. To provide financing for environmental goods and services such aswater management or protection of biodiversity and landscapes.
  2. To prevent, minimize and compensate the damages to the environment and to the climate.
  3. To provide financing of public policies which will encourage the implementation of environmental and environmental-damage mitigation or adaptation projects and initiatives.

Green Investments majorly includes the following areas:

  1. waste processing and recycling
  2. biodiversity protection
  3. climate change adaptation
  4. renewable energies
  5. energy efficiency
  6. water sanitation
  7. industrial pollution control
  8. other climate change mitigation

Green Finance is an important topic in the General Studies Paper-II of the UPSC exam. Questions can be asked from this topic in both the IAS prelims as well as the IAS mains exams. Candidates preparing for theUPSC 2022 should keep a track of the latestcurrent affairstopics related to any economic development in the country.

Green Finance (UPSC Notes):- Download PDF Here

FAQ about Green Finance


What is the difference between climate finance and green finance?

Climate finance provides funds for addressing climate change adaptation and mitigation and can be considered as a part of green finance, whereas green finance has a broader scope as it also covers other environmental goals (e.g. biodiversity protection/restoration).


Who are the top three green bond issuers?

The top three green bond issuers are the US, China and France. A green bond is a type of fixed-income instrument that is specifically earmarked to raise money to invest in climate solutions.

The above details would help candidates prepare forUPSC 2022.

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Green Finance - Relevancy of the Term, Role of Green Finance. Read more on Green Finance for UPSC exam (1)

Green Finance - Relevancy of the Term, Role of Green Finance. Read more on Green Finance for UPSC exam (2024)
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