Latest news with #FrameworkforIndia'sClimateFinanceTaxonomy
Hindustan Times
11-06-2025
- Business
- Hindustan Times
Financing the green growth transition
It is an accepted fact that our financial system does not account for non-financial metrics. Short-term value creation is allowing capital to go towards where it will drive the maximum return – and in many cases it is towards sectors and value chains that don't price in physical risks, externalities and adverse social impacts. Which is why, the world is awash with fast fashion, plastic packaging, polluted cities and mile high waste dumps. But it isn't all grim. Despite headwinds, the energy transition is well underway and corporate intent for change is also clearly visible in ESG reports. But all this is not making significant impact, or the impact is small and in pockets or not scaling fast enough. The reason is simple, markets enable transition at scale and unless the markets incentivise the green transition and price in ESG metrics--positive intent, corporate purpose, aggressive net zero targets and great ESG scores won't make the cut. Because the challenge is systemic, the solutions must be too. To make India a nation that incentivises green growth we need to change markets by changing incentives. Finance, therefore, needs to be channelled to support the sustainability transition. We need to move beyond ESG reporting and push for structures that shift capital to where it will matter the most. A consistent regulatory focus on scaling up sustainable finance will be key to this shift. Last year the Reserve Bank of India has launched the draft guidelines for climate risk and opportunities assessment for banks. This represents a significant milestone in India's journey towards climate resilience in the financial sector. However, enabling finance for sustainability requires creating robust mechanisms that align capital with climate priorities. Climate finance is emerging as a critical enabler of global climate action, with developing nations needing at least $5 trillion in cumulative financing by 2030 to meet their climate goals. Tools such as green taxonomies have been instrumental in directing investments to areas where they can make the most impactful difference, while avoiding the hazards of greenwashing. These taxonomies provide clarity for investors and stakeholders, offering standardized frameworks to identify sustainable investments. The Union ministry of finance's department of economic affairs recently unveiled the draft Framework for India's Climate Finance Taxonomy. The taxonomy is a critical tool, but its just one of the many things that need to be done to enable transition at scale. India's sustainable finance framework should rest upon two areas critical to driving systemic change. The first entails a sector-specific and holistic green industrial strategy. Over the last year or so the Indian government has accelerated the pace towards making a lot of this happen. Finalisation of the greenwashing guidelines, draft guidelines on climate risk for banks, emission reduction targets for aluminium, cement, Chlor-Alkali, and pulp and paper and ongoing work on the carbon markets has been initiated. These shifts are indications of a larger strategy that blends sustainability into core business structures. However, more action and deeper commitment is needed. Such forward-looking policies will signal clarity and confidence to the financial system, encouraging investments in sustainability transitions. The second area focuses on a financial regulatory framework that leverages the full spectrum of tools available to central banks and financial regulators. This includes taxation, subsidies, financial regulations, and corporate governance mechanisms. Shifting markets requires synergistic moves in both financial regulation and wider policy targeting the real economy. At the same time safeguards are needed so that sustainability challenges do not undermine the stability of the financial system. This article is authored by Namrata Rana, national head, ESG, KPMG, India.
Hindustan Times
31-05-2025
- Business
- Hindustan Times
India's climate finance taxonomy: Green compass for Viksit Bharat
India has taken a decisive and future-ready step in its climate journey. With the release of the draft Framework for India's Climate Finance Taxonomy by the department of economic affairs under the Union ministry of finance, the country has moved to build a transparent, accountable, and investment-friendly ecosystem for green finance. This move not only fulfils finance minister Nirmala Sitharaman's Union Budget 2024 promise but also signals India's readiness to lead in defining what climate-aligned development looks like in the Global South. In a world facing cascading climate and economic shocks, this taxonomy is not just a bureaucratic tool—it is a strategic lever for systemic transformation. A climate finance taxonomy serves as a standardised classification system to help policymakers, investors, and businesses identify and support economic activities that contribute to climate goals. It brings coherence, trust, and comparability into the highly fragmented world of green finance. For a country like India--poised to become a $5 trillion economy and simultaneously facing the world's most complex climate risks—such a taxonomy is both timely and necessary. Although climate finance has expanded at an unprecedented pace in recent years—reaching $ 1.46 trillion in 2022—it remains significantly below what is required to meet global climate goals. According to one of the reports titled Global Landscape of Climate Finance, an estimated $ 7.4 trillion in annual investment is needed worldwide through 2030. Of this, at least $ 2.4 trillion must be directed to emerging markets and developing economies (EMDEs), excluding China. Notably, EMDEs are among the most vulnerable to the adverse effects of climate change, despite contributing relatively little to global greenhouse gas emissions. The document's release also aligns with long-standing global expectations that emerging economies must improve domestic enabling environments to better absorb international climate finance. India's taxonomy does exactly that--without compromising on national priorities. Designed as a living document, the Indian taxonomy is built to evolve with changing climate needs, technological innovations, and market shifts. The initial draft lays out a comprehensive approach across three key climate pillars: mitigation, adaptation, and transition of hard-to-abate sectors. From power and transport to agriculture and water security, the taxonomy identifies critical sectors for decarbonisation and climate resilience. Particularly significant is its treatment of hard-to-abate sectors such as cement, iron, and steel--often ignored in green finance discussions due to their complexity. The classification mechanism is equally forward-looking. Activities will fall under climate-supportive or transition-supportive categories, with further tiering to accommodate the realities of Indian industry and infrastructure. This allows the taxonomy to remain ambitious without being exclusionary--a fine balance that many global taxonomies fail to achieve. The strategic timing of this release cannot be overstated. As the world navigates the Baku to Belem roadmap under Brazil's COP30 presidency--tasked with delivering $1.3 trillion in annual climate finance—the onus is on developing nations to demonstrate domestic readiness. India's taxonomy sends a strong, confident message to global stakeholders: We are ready, we are credible, and we are investing in our own transformation. Moreover, India's alignment with Association of South East Asian Nations (Asean) principles in the taxonomy is both politically and economically significant. It reinforces regional cooperation while setting a new benchmark for emerging economies seeking to build their own sustainable finance pathways. Notably, as of April 2024, only 10% of developing and emerging economies had published green finance taxonomies. India's move positions it as a trailblazer, opening the door to more bilateral climate finance agreements, blended finance models, and responsible private investment. The taxonomy is not just about mobilising global capital--it's about structuring India's transition to a Viksit Bharat by 2047. It operationalises the vision of climate-smart growth, making sure that every rupee spent in the name of sustainability delivers long-term climate, social, and economic value. Through this taxonomy, India is sending a message that green finance is not a luxury--it is core to our development planning, to our food and water security, to job creation, and to building resilient infrastructure. It strengthens the Atmanirbhar Bharat agenda by enabling industries to attract climate-aligned investment and innovate towards clean technologies. In short, the taxonomy is a bridge between India's climate commitments and its economic aspirations. While the draft framework is ambitious and thoughtfully constructed, its real success will depend on implementation, governance, and stakeholder uptake. Future iterations must provide more detailed sectoral annexures, lay out performance thresholds, and develop mechanisms for transparency, reporting, and verification. Moreover, capacity-building across state governments, financial institutions, and industries will be crucial to making the taxonomy not just a compliance tool, but a strategic enabler of green growth. The public consultation process opens until June 25, 2025, is a valuable opportunity to shape a more inclusive, effective taxonomy that works for all stakeholders—from large corporates to grassroots entrepreneurs. India's draft climate finance taxonomy marks a pivotal shift in our climate narrative. It offers a roadmap that's not only aligned with the Paris Agreement but deeply rooted in Indian realities. In a world divided by climate finance promises and delivery gaps, India is showing what domestic leadership looks like. This is what leadership for a Viksit Bharat looks like: Bold, thoughtful, and grounded in both science and sovereignty. This article is authored by Kirit P Solanki, former MP, Lok Sabha and Pradeep Singhvi, executive director, Energy and Climate Practice, Grant Thornton Bharat LLP.
