Chapter 24: Green and Sustainable Financing (CAIIB – Paper 3)
1. Which of the following is the primary purpose of ISO standards in green finance?
A. To regulate interest rates in green loans
B. To certify banks for international trade compliance
C. To provide guidelines and best practices for sustainable finance
D. To ensure liquidity in short-term financing
ISO standards in green finance, such as ISO 14097, provide guidelines for environmental impact assessment and reporting, promoting sustainable financing practices.
2. What is a key component of building green finance in banks?
A. Integrating environmental risk assessment into lending decisions
B. Increasing short-term credit exposure
C. Offering only conventional loans to industrial sectors
D. Reducing compliance with international sustainability reporting
Building green finance requires banks to integrate environmental, social, and governance (ESG) risks into their lending processes to support sustainable projects.
3. Which of the following is considered a green finance instrument?
A. Corporate fixed deposits without ESG assessment
B. Green bonds issued to fund renewable energy projects
C. Regular personal loans for consumption
D. Short-term treasury bills
Green bonds are financial instruments specifically raised to fund projects with environmental benefits, such as renewable energy, clean transportation, and energy efficiency.
4. Which ISO standard is specifically relevant for assessing environmental performance in green finance projects?
A. ISO 9001
B. ISO 27001
C. ISO 50001
D. ISO 14097
ISO 14097 provides guidance on assessing and reporting the environmental performance of financial institutions, promoting sustainable investment and financing practices.
5. What is a major benefit for banks implementing green finance initiatives?
A. Enhancing reputation and attracting environmentally conscious investors
B. Reducing capital adequacy requirements directly
C. Eliminating the need for credit risk assessment
D. Guaranteeing higher interest income on all loans
By implementing green finance, banks improve their brand image, meet ESG requirements, and attract investors interested in sustainable projects, while contributing to environmental goals.
6. Which international framework provides guidance for sustainable finance and green investment globally?
A. Basel III Accord
B. IFRS 17
C. UN Principles for Responsible Investment (PRI)
D. OECD Transfer Pricing Guidelines
The UN Principles for Responsible Investment (PRI) provide global guidance on integrating environmental, social, and governance (ESG) factors into investment and financing decisions.
7. Which of the following is an example of a public policy initiative in India promoting green finance?
A. Introduction of Goods and Services Tax (GST)
B. RBI guidelines on priority sector lending to renewable energy projects
C. Establishment of SEBI Mutual Fund Regulations
D. Implementation of Insolvency and Bankruptcy Code (IBC)
RBI has issued guidelines encouraging banks to finance renewable energy and other environmentally sustainable projects under priority sector lending, supporting India’s green finance agenda.
8. Which of the following international organizations publishes green finance taxonomies to guide investments?
A. IMF
B. WTO
C. Basel Committee on Banking Supervision
D. European Union (EU) through EU Taxonomy for Sustainable Activities
The EU Taxonomy for Sustainable Activities provides a classification system to determine which economic activities are environmentally sustainable and guides green investments.
9. What is the main objective of India’s National Action Plan on Climate Change (NAPCC) related to finance?
A. To promote investment in clean energy, energy efficiency, and low-carbon technologies
B. To reduce government borrowing in fiscal deficit financing
C. To encourage foreign banks to reduce lending in India
D. To provide direct subsidies for all industries irrespective of environmental impact
NAPCC aims to encourage investment in renewable energy, energy efficiency, and sustainable projects, thereby integrating environmental considerations into India’s financial system.
10. Which of the following best describes the Green Climate Fund (GCF) at the international level?
A. A fund to support traditional banking operations
B. A fund exclusively for disaster management in India
C. A global fund to support developing countries in climate mitigation and adaptation projects
D. A fund to provide subsidies to fossil fuel projects
The Green Climate Fund (GCF) is a UN-backed fund that mobilizes finance to assist developing countries in reducing greenhouse gas emissions and adapting to climate change impacts.
11. Which of the following indicates the progress of green finance in India in recent years?
A. Decline in renewable energy financing
B. Increase in issuance of green bonds and renewable energy loans
C. Complete elimination of non-performing assets in green projects
D. Exclusive focus on fossil fuel-based financing
India has witnessed an increase in green bond issuances, renewable energy financing, and ESG-compliant lending, reflecting the steady progress of green finance.
12. Which of the following is a major challenge faced by green finance in India?
A. Excessive investor interest in green projects
B. Over-regulation by international institutions
C. Lack of standardized ESG reporting and awareness
D. Complete government funding for all projects
The main challenges include lack of standardized ESG reporting, limited awareness among banks and investors, and underdeveloped risk assessment frameworks for sustainable projects.
13. Which policy initiative can help overcome challenges in green finance in India?
A. Developing clear regulatory guidelines and tax incentives for green projects
B. Reducing all lending to renewable energy
C. Limiting international collaboration in sustainable projects
D. Focusing exclusively on fossil fuel-based financing
Clear regulatory guidelines, tax incentives, and capacity-building programs can encourage banks and investors to participate in green finance, addressing key challenges.
14. What is considered a key factor for the way forward in promoting green finance in India?
A. Reducing renewable energy targets
B. Discouraging private sector participation
C. Limiting international best practice adoption
D. Strengthening ESG frameworks, investor awareness, and risk assessment mechanisms
Strengthening ESG reporting, enhancing investor awareness, and improving risk assessment frameworks are essential for scaling up green finance in India sustainably.
15. Which of the following reflects a successful green finance strategy in India?
A. Increased funding for renewable energy, energy efficiency, and climate adaptation projects
B. Complete withdrawal of banks from sustainable financing
C. Exclusive focus on short-term high-profit projects
D. Ignoring ESG compliance in project appraisal
A successful green finance strategy includes promoting renewable energy, energy efficiency, and climate-resilient projects while ensuring ESG compliance in lending.
16. Which of the following reflects India’s growth in the regulatory framework for green finance?
A. No guidelines for renewable energy lending
B. Only voluntary corporate reporting without any RBI guidance
C. RBI and SEBI issuing guidelines for sustainable financing and green bonds
D. Exclusive focus on traditional banking regulations
India’s regulatory framework for green finance has evolved with RBI guidelines on green lending, SEBI regulations for green bonds, and ESG reporting requirements for listed companies.
17. Which of the following is a key national effort towards promoting green and sustainable finance in India?
A. Launch of National Guidelines on Responsible Financing by RBI
B. Only international initiatives without domestic policy
C. Limiting private sector participation in green projects
D. Removal of all incentives for renewable energy projects
The RBI has issued National Guidelines on Responsible Financing to encourage banks and financial institutions to integrate environmental and social considerations into lending decisions.
18. Which of the following institutions plays a critical role in promoting green bonds in India?
A. Ministry of Commerce
B. IRDAI
C. Ministry of Labour
D. Securities and Exchange Board of India (SEBI)
SEBI regulates the issuance of green bonds in India and provides disclosure requirements to ensure transparency and promote sustainable investment.
19. Which government initiative supports renewable energy financing as part of India’s national efforts?
A. Make in India initiative
B. National Solar Mission under the National Action Plan on Climate Change (NAPCC)
C. Smart Cities Mission only
D. Pradhan Mantri Jan Dhan Yojana
The National Solar Mission promotes solar energy generation and provides incentives for financing renewable energy projects, supporting India’s sustainable finance goals.
20. What is considered a major outcome of India’s national efforts towards green and sustainable finance?
A. Growth in ESG-compliant lending, issuance of green bonds, and increased investment in renewable energy
B. Complete replacement of traditional banking by microfinance only
C. Withdrawal of foreign investment in sustainable projects
D. Exclusive focus on non-renewable energy financing
National initiatives have led to ESG-compliant lending practices, promotion of green bonds, and increased investments in renewable and climate-resilient projects across India.
21. What is the primary concern of RBI regarding climate risk in the banking sector?
A. Limiting bank lending to agriculture only
B. Encouraging banks to ignore environmental risks
C. Assessing and mitigating financial risks arising from climate change
D. Promoting only foreign investment in fossil fuels
RBI emphasizes that climate change poses financial risks, and banks need to integrate climate risk assessment into lending, investment, and risk management practices.
22. Which of the following steps has RBI suggested to promote sustainable finance?
A. Issuing guidelines for responsible financing and ESG risk integration
B. Restricting all lending to renewable energy projects
C. Encouraging banks to ignore climate-related disclosures
D. Eliminating priority sector lending norms
RBI promotes responsible financing by encouraging banks to assess environmental, social, and governance (ESG) risks and to disclose climate-related exposures.
23. According to RBI, which of the following is a potential impact of climate risk on banks?
A. Guaranteed profits from all lending
B. Reduction in regulatory compliance requirements
C. Automatic reduction of NPAs
D. Increased credit and operational risk due to environmental events
Climate change can lead to physical risks (natural disasters) and transition risks (policy changes), which increase credit and operational risks for banks.
24. What is the key recommendation of RBI for integrating climate risk in financial institutions?
A. Focusing solely on short-term profits
B. Incorporating climate risk assessment into credit appraisal and investment decisions
C. Eliminating green financing projects
D. Ignoring ESG disclosures in annual reports
RBI recommends that banks assess environmental and climate-related risks during credit appraisal, portfolio management, and investment planning to mitigate financial exposure.
25. Which initiative by RBI reflects its commitment to sustainable finance?
A. Release of “Guidelines on Responsible Financing” for banks and financial institutions
B. Eliminating priority sector lending requirements
C. Promoting only fossil fuel-based lending
D. Reducing regulatory oversight on ESG disclosure
RBI’s Guidelines on Responsible Financing encourage banks to adopt sustainable financing practices, integrate climate risk assessment, and promote ESG-compliant projects.
