Economics · Sustainable Finance
An AD Category-I Bank is evaluating a 1,000 Crore INR project loan for a green residential complex adhering to GRIHA standards. However, the complex requires high water volume from an aquifer designated as 'over-exploited' by the Central Ground Water Board (CGWB) and is located in a known flood-prone area. The bank is committed to SDG 11 and SDG 6. Which course of action best aligns with sustainable finance principles?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Approve the loan immediately because the project satisfies the GRIHA green building standard, and the flood risk can be covered by insurance.
- 2Reject the loan outright, as the water usage directly violates the bank's commitment to SDG 6, making the project's Social License to Operate too high a risk.
- 3Approve the loan on the condition that the company sources 100% of its water from a government-run, non-aquifer source and raises the plinth height by two feet to mitigate the Physical Risk of flooding.✓
- 4Convert the project loan to a Social Bond issuance, thereby shifting the risk to external investors while fulfilling internal lending targets.
Correct answer
Approve the loan on the condition that the company sources 100% of its water from a government-run, non-aquifer source and raises the plinth height by two feet to mitigate the Physical Risk of flooding.
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