Don’t Blame Green Finance for Promoters’ Greed

The recent article warning against the seductive charm of the so-called ‘green halo’ claims that banks and bondholders are now paying the price for feel-good funding gone wrong. This sweeping generalisation misrepresents both the purpose and promise of green finance, and distracts from the real issue — a failure of ethical conduct by specific individuals, promoters in this case.

To suggest that the financial troubles surrounding Gensol and its affiliate BluSmart represent the inherent risk of green investing is to conflate targeted misgovernance with the legitimacy of an entire financing framework. What unfolded in this case is not the fallout of an idealistic push towards sustainability. It is the fallout of what appears to be intended misconduct by promoters, who allegedly diverted investor and lender funds towards personal luxuries while providing misleading documents to rating agencies and other stakeholders.

This behaviour should not be dressed up as a cautionary tale against green finance. It is not ‘feel-good funding’ that failed. It is trust that was broken by individuals who, if allegations hold, knowingly undermined governance standards. These events say more about moral hazard and the fragility of accountability mechanisms than about the colour of the funding label.

Promoters’ misconduct is too often mischaracterised as a sectoral or thematic failure. The burden of blame is swiftly shifted to the domain — whether it be renewable energy, start-up ecosystems or any others as we have seen in the past — while the specific actors responsible are allowed to disappear into a larger, muddied narrative. In doing so, we inadvertently sabotage the credibility of emerging sectors that are critical to national and global priorities.

Equally concerning is how signals of deterioration are ignored or conveniently missed by those whose job it is to protect the financial system. Auditors who sign off on financial statements. Merchant bankers who vouch for companies in the market. Rating agencies that assign favourable outlooks. Banking consortiums that extend generous lending without demanding tight oversight. Online platforms and wealth management entities that dress high-risk products in the clothing of safe returns. Every other financial intermediary who makes a profit for passing every transaction, without doing the duty of verification well. Each has a role in shaping market trust. Each has a responsibility not just to assess risk but to speak truth to it. If those entrusted with financial hygiene ignored the red flags, what will prevent recurrence? And if one errant promoter can discredit an entire sector, what message does that send to those sincerely building our sustainable future?

In the rush for additional yield in a low-return environment, even investors often fall prey to the fear of missing out. FOMO-driven optimism can make them suspend judgment and buy into clean narratives and glossy pitch decks without adequately questioning the fundamentals. When red flags are overlooked by both institutions and individuals in the capital chain, it is disingenuous to place blame solely on the premise of green investing.

Amidst this, it is important to recognise the commendable role played by SEBI, the markets regulator. It was SEBI’s investigation — not any internal or institutional mechanism — that brought the alleged misconduct to light. Despite much criticism about its functioning in general, SEBI acted decisively in this issue, banning the promoters from capital markets. Only now are the other players in the financial ecosystem beginning to wake up. That is both a credit to SEBI’s vigilance and an indictment of the rest of the capital market value chain.

Green finance, by its very design, is not ‘feel-good’ funding. It is capital with a purpose. It is an instrument of transition for economies like ours that must grow while remaining environmentally responsible. If anything, cases like Gensol demonstrate the urgent need for stronger guardrails around how we steward this capital — not a retreat from its ambition.

Green finance is not a gesture of virtue signalling. It is the most rational response to the existential risks facing capital, climate and communities alike. To undermine it due to individual wrongdoing is like blaming fireproofing because someone misused a matchstick.

What this case demands is not doubt about green financing but urgency to tighten its regulatory spine. From independent audits of use-of-proceeds to rigorous post-issuance disclosures, the architecture of green finance in India must now mature to match its intent.

In Europe, North America and parts of Asia, green instruments are governed by strict taxonomies and third-party validations. If India wishes to lead the green capital era, it must show that it can discipline bad actors without discarding the discipline of green finance itself. Let us not forget that India does not have an official unified green taxonomy, yet.