COP26. Credit: Reuters photo
At COP26, India pledged to achieve net-zero emissions by 2070 and to source 50% of its energy needs from renewables by 2030. It has been three years since this commitment was made; yet the conversations in policy circles continue to revolve around high ambitions alarmingly underfunded in practice. It is, therefore, safe to say that India’s climate transition does not suffer from a lack of intent – it suffers from a lack of capital.
The evidence of a financing gap in this sphere is both visible and severe. According to estimates of the Council on Energy, Environment and Water (CEEW), India needs $10 trillion in investment to meet its net-zero goals by 2070. The current domestic climate finance stands at just Rs 3.5 lakh crore a year, which is less than a fifth of what is required. Additionally, the current green funding flows excessively towards renewables while adaptive sectors such as transport, urban planning, or sustainable agriculture are often ignored. The climate finance in India
is heavily tilted toward mitigation, not adaptation, resulting in a misalignment in policy discourse for a country
that is deeply vulnerable to floods, heatwaves, and agricultural shocks.
We can typically identify the sources of green financing from the four main pillars that are domestic public finance through budgetary allocations, private sector investments, international climate finance, and philanthropy or blended finance. Each, however, faces persistent roadblocks. While states have low fiscal room left to fund climate resilience, even in ESG investing, Indian firms lag global standards, with limited disclosure and greenwashing concerns. Green bonds in India remain underutilised, despite SEBI’s regulatory push. With slow bureaucratic processes and inadequate funding through multilateral organisations, developing countries are left stranded with no accountability from the developed nations for historical emissions.
Despite such challenges and setbacks, there is some hope left. With better climate finance mobilisation through the introduction of a unified taxonomy for green projects and investments, better credit-worthiness of state-level utilities such as DISCOMs, and regulations against greenwashing, which allows companies to rebrand CSR as ESG without any real climate alignment, could go a long way.
However, easing the mobilisation of such funds only solves half of the problem. The core issue of the absence of funds continues to haunt India’s climate financing ambitions. India’s climate future is not just a matter of policy; it is a matter of money. Green intent must now be matched by green capital. The first step towards realising this goal is to create a National Climate Finance Authority, designed to coordinate, channel, and regulate green funding in the country. A National Climate Finance Authority could act as the nodal body to integrate and streamline India’s fragmented climate financing efforts under different ministries.
Ensuring optimal impact
Housed under the Ministry of Finance but with statutory independence, the authority could coordinate with the RBI on climate-related financial disclosures and green bond regulation, while also working with sectoral ministries that handle power, environment, agriculture, and urban development to ensure that funds are directed towards both mitigation and adaptation needs. Such an institution could pool both domestic and international resources, set up transparent and all-inclusive criteria for project eligibility, and reduce duplication across schemes, thereby improving accountability and efficiency in mobilising green capital.
Secondly, the introduction of green budget statements, on the same lines as gender budgeting, can go a long way in tracking expenditure. While SEBI has taken multiple efforts towards impact reporting and promoting green bonds, expanding sovereign green bonds, incentivising state governments with climate-linked grants via the Finance Commission, and pushing for standardised ESG norms and climate stress testing in banks can provide a multi-institutional and multi-stakeholder approach to green financing.
Strengthening climate finance is not just about raising more funds, but also about creating systems that allow data-driven tracking and transparent allocation. This can enable fact-based policymaking and ensure that every rupee of green capital delivers a measurable impact.
Without a radical rethinking of how green capital is raised and deployed across both mitigation and adaptation sectors, the country risks falling into a credibility trap where ambition consistently outruns the capacity to fund and transition to greener alternatives. India must treat climate finance not as a peripheral concern but as its own development strategy. In the end, true climate leadership is about ensuring that promises made on the global stage are backed by adequate resources and institutions that are needed to deliver them domestically.
(The writer is a postgraduate in Economics and has worked across parliamentary offices, think tanks, and development organisations on issues of trade policy, environmental economics, gender,
and governance)
Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.