A study of investment practices with respect to social and environment risks in selected industrial sector
Student name: Mr Aakash Bhatnagar
Guide: Dr Sapna Narula
Year of completion: 2013
Host Organisation: Centre for Science and Environment, New Delhi
Supervisor (Host Organisation): Mr Sujit Kumar Singh
Abstract: With an increasing awareness around the globe about the environmental and social risks
associated with the financial sector, banks are being held accountable for project lending in the
polluting sector. To counter it, Equator Principles were formed in 2003, of which the banks
which were formed had in between them 85% of the global project finance transactions. Banks in
India are still at a nascent stage when we talk about environmental and social risks
consideration by them before lending in an industry or a polluting sector. The methodology used
is a mixture of secondary and primary research. We come across many polluting sectors like
infrastructure-roads, power, ports, etc, construction, cement, paper, coal, wood and wooden
products, mining sectors being given loans without proper consideration in India, the question
of accountability arises that an organization or a corporate sector is accountable or the banks
which passed loans. We also come to know about the role played by environmental clearances in
India and how it is lagging behind the Equator principles. Financial Institutions have also
started new initiatives as a result of Corporate Social Responsibility.
The banks in India should learn from Equator Principles guidelines by creating or devising a
plan to counter environmental and social risks in the industry segment. The new mechanisms as
a result are being laid out in the form of carbon markets, clean development mechanisms and a
foray in renewable sector. India is a growing economy, and there is pressure on resources,
renewable sector will play an important role in coming years. In order to survive and bring back
the lost reputation, Indian banks will need to adapt. They can only become a global corporate
entity if they soon embrace and integrate strict position on environmental and social lending.
