Sustainable finance emerged as a key issue to tackle climate change at the 2021 United Nations Climate Change Conference and is spurring a global transition to net zero. A peculiar feature of the race to net zero is that it cannot be achieved unless all countries can meet their targets, and any positive step towards it will benefit all countries. The drive to achieve carbon neutrality and net-zero emissions needs to be targeted through a range of fiscal, monetary, and regulatory policy actions on a national and collective basis by the G20. The 2022 Sustainable Finance Roadmap highlights the importance of taking action to ensure a just, orderly, affordable, and balanced transition to a carbon-neutral economy that systemically reduces its dependence on fossil fuel-backed growth. India is a central emerging market player in achieving sustainable growth, and its G20 presidency in 2023 is key to unlocking sustainable policies in developing countries that are growing faster than advanced economies but face several issues in attracting private finance. Countries will need to balance climate and energy policy with monetary and fiscal policies to ensure sustainable growth by supporting public-private partnerships, and efforts by the central bank, international financial institutions, and multilateral development banks. Harmonising taxonomies and the use of green bonds and green labels can help attract private climate finance to support government programs and efforts.Introduction Sustainable finance emerged as a key issue at the 2021 United Nations Climate Change Conference (COP26) held in Glasgow, Scotland. The United Nations Framework Convention on Climate Change and commitments made under the Paris Agreement have already stressed the importance of mobilising public and private funds to counter climate change risks and threats.[1] The drive to achieve carbon neutrality and net-zero emissions needs to be targeted through a range of fiscal, monetary, and regulatory policy actions on a national and collective basis by the G20. Indeed, the G20 finance track recognises the mobilisation of sustainable and green finance as a top priority to tackle climate change’s macroeconomic and fiscal impact. The 2022 Sustainable Finance Roadmap[2] highlights the importance of taking action to ensure a just, orderly, affordable, and balanced transition to a carbon-neutral economy that systemically reduces its dependence on fossil fuel-backed growth. However, particular emphasis is needed for emerging markets that remain reliant on fossil fuels through government subsidies and face a burgeoning import bill. On a granular level, firms, especially small and medium enterprises (SMEs), need affordable options to make this transition through public finance, with assistance from multilateral development banks (MDBs) and international financial institutions (IFIs). The G20, therefore, aims to incentivise private finance to help reduce the cost of low-emission technology and promote an economy-wide green transition.
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