By Naba Bhattacharjee
Nature is breathing free throughout the planet with marked improvement in the general environment, including that of our country, following the COVID 19 pandemic and consequent lock down. Green finance has the ability to become the “immunity booster” for rural economy in post COVID stage. Such wide ranging amelioration in about two months, mainly reduction in emission of greenhouse gases and effluents from industrial waste et al, under normal circumstances would not have been possible in decades, even by investing thousands of crores of rupees. Unfortunately this process will reverse once the pandemic takes a downturn and human greed overtakes all other considerations. A benign environment together with improved biodiversity element provides an opportunity of a life time to harness nature and build a solid foundation for activating environment-oriented economic growth modules. The pandemic and its aftermath are poised to trigger one of the biggest and far reaching economic holocausts and recession of all times.
It is time now to invest in environment benign economic activities through green finance or investments including micro-credit finance that contribute towards nourishing the present low-carbon and climate friendly economy to achieve sustainable development. Green finance essentially means financing of investments that will leverage on the available environmental benefits as part of the broader strategy to achieve inclusive, resilient and sustainable development. Hence governments need to be clearer about the policy signals they send to financiers on environment-based sustainable development.
The transition to a Green Economy requires long-term investment and sustained financing. Public budgets have traditionally been an important source of green infrastructure financing. But given the strains on public finances, large-scale private investment will be needed for the transition towards a green economy. Governments have a key role to play in strengthening domestic policy frameworks to catalyze and mobilize private finance and investment in support of green growth. It is necessary to better align and reform policies across the regulatory spectrum to overcome barriers to green investment, and to provide an enabling environment that can attract both domestic and foreign investment. Understanding that Agriculture, Horticulture and Tourism form a strong basis of the economy of Meghalaya, it would be more fruitful to tap the prospect of implementing the Green Economy in these sectors.
Green Agriculture
There is no doubt that food production, in general, must grow significantly in the next decades. Although agricultural production has always been able to grow along with exponential demographic growth the success story called “the green revolution” has exacted a heavy price. The negative trends can be compensated if the present salubrious environment is harnessed. The importance of the agricultural sector to achieving sustainable development and keeping afloat the economy of Meghalaya is clear. Agriculture is critical in checking the slide to below poverty line in the next one year, due to the adverse impact of COVID 19. Hence achieving food security and improving green economic growth has to be the overriding priority of planners. The movement to “green” agriculture could usher in better agricultural practices, energy-efficient technology, institutional innovations to improve sustainable food systems, and access to energy in our state. Sustainable agriculture will attend to the triple bottom line of sustainability i.e. people, profit, and biodiversity; ensuring higher supply of sustainable and organic food along the value chain, reaching the end client. The socially-oriented financial institutions will have to engage in exploiting the positive benefits of sustainable agriculture although challenges initially are laden with risks.
Preparing institutions for agricultural finance:
Institutional sustainability: Scaling up of green agricultural finance requires a strong institutional basis of product and agriculture knowledge at management and staff levels including strategy development, process design, product development and staff training. Hence, technical assistance focused on strengthening the institutional base shall ensure financial and environmental sustainability in the long term.
Environmental sustainability: Products that are appropriately tailored to the agricultural target group enhance environmental sustainability. In addition to matching agricultural cash flows, a loan product with seasonal loan repayment instead of monthly payment offers farmers more financial opportunities to utilize their land flexibly, rotate crops to protect soil ecosystems and minimise pest infestation, and implement sustainable land use practices. To encourage sustainable agriculture among clients, the participating financial institutions will have to promote good agricultural practices to their clients.
Financial sustainability: The development of new products is a strong basis for growth and diversification for participating financial institutions while improving their financial sustainability. The improvement of processes and procedures reduce costs and enhance their performance. Notably there is need for regulatory clarity, a comprehensive diagnostic of institutional capabilities, alignment of products and technical assistance with overall business strategy. A technical assistance intervention should not be an isolated operation and should be embedded in a wider institutional perspective or strategic plan and willingness to invest in learning.
Product design is a slow but crucial process, which is why timing for development and implementation cannot be taken lightly. A customer-centric design approach with a deep understanding of the value chains can ensure that products are appropriate to local context and farming realities. The use of digital financial services and data can be an integral part of the design phase.
Significant investments in infrastructure, technology, and business bail-out, should be streamlined to stabilise and secure the present climate system and biodiversity. Further, the post Covid scenario shall witness job losses in the business sector leading to reverse migration from urban to rural locales with focus on agriculture and allied sectors for livelihood. A concrete approach to harness environment related activities like organic farming, pisciculture, animal husbandry, bee keeping, and plantation of medicinal and aromatic plants must be accorded priority. Simultaneously, jobs have to be created in the rural areas around these sectors ensuring an entire value chain from marketing of the produce, operating of cold storages etc., to eliminate the middle-man from the system. It is a call to return to the basics and tradition while also using modern equipments and tools to rejuvenate this vital sector to generate maximum returns.
Green finance also has a substantial role to play in the eco-tourism sector in Meghalaya. Tourists are increasingly demanding more attention on sustainability—cultural, social, environmental and economic—from destinations and attractions. The quality of tourist experiences is often in direct proportion to the degree of attention to sustainability, particularly cultural authenticity, protection of natural resource, contribution to local economy and mitigating carbon emission. The scope of sustainable bonds like Green Bonds for tourism development and establishing a sustainable tourism development fund is also imperative for growth of this sector. Tourism sector in Meghalaya is bearing the brunt of COVID 19 pandemic which it may sustain for several years. The Green Bond finance can encompass employment and poverty reduction, resource efficiency, environmental protection and climate change, cultural values, diversity and heritage, peace and security et al to attract investors.