IUKFP - Developing India’s Green Finance Market

Meeting global targets for action on climate change requires an unprecedented programme of investment in new infrastructure and a managed transition to a low carbon economy. Mobilising the required funding, a great proportion of which is expected from the private sector, calls for re-tooling of key parts of the financial system and identifying and setting new international standards for investment.

Growing environmental concerns and action on climate change needs to be combined with sustainable economic returns to attract capital. Green finance is therefore gaining global prominence as a focused financing alternative to create targeted pools of capital and innovative financing products to raise funds for environmentally friendly, low carbon, climate-resilient projects.

In India, the capital required for this is enormous and a significant proportion is expected to be from the private sector. India is bound by the Intended Nationally Determined Contributions (INDCs) agreed as part of COP21, which require a targeted reduction of the ‘emissions intensity’ of its GDP by 33-35% from the 2005 level by 2030. The Indian Government also plans to develop 175GW of operational power capacity from renewable fuel sources by 2022 that will require an estimated USD 120 billion of capital investment. Furthermore, in the next three years, the Indian Government is targeting investment of USD 370 billion in the infrastructure sector including roads, ports, highways, waterways and Smart Cities.

This paper evaluates measures to develop the green financial system in India to attract both international and domestic capital to support the vital investment required. We hope that as a next stage both governments, regulators and the private sector will look to discuss the recommendations contained in the paper in detail with a view to identifying specific actions and assigning roles for implementation. The private sector is committed to playing its part in this process. The IUKFP Working Group that helped produce this paper will continue to support and provide input and will be available for specific discussions with practitioners and policymakers.

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