• India has made rapid progress in clean energy, especially solar, positioning itself as a global leader.
• In 2024, India installed 24.5 GW of solar capacity, ranking third worldwide after China and the US.
• Featured prominently in the UN Secretary-General’s 2025 Climate Report for scaling up solar and wind energy; India’s efforts with the International Solar Alliance (ISA) have reinforced its global role.
• The renewable sector employs over 1 million people and contributes around 5% to GDP growth; decentralized off-grid solutions alone created 80,000 jobs in 2021.

The Climate Finance Gap

• Despite the impressive momentum, India faces an enormous funding gap. Achieving national climate and clean energy targets by 2030 will require between $1.5 trillion and $2.5 trillion in investments.
• Finance is needed for a broad range of sectors: expanding renewables, modernizing grids, advancing battery storage, scaling sustainable transport, deploying green hydrogen, climate-resilient agriculture, and adaptation/loss & damage.
• Current climate finance flows are growing but insufficient and concentrated among large corporations; MSMEs, agri-tech innovators, Tier II/III infrastructure face challenges accessing climate finance due to high risks and lack of concessional funding.

Climate Finance Trends

• India’s green, social, sustainability, and sustainability-linked debt issuance reached $55.9 billion by Dec 2024, with green bonds accounting for 83% of this total.
• Green bond investment is projected to exceed $45 billion by 2025.
• Still, the gap for future climate investments is vast, demanding fresh strategies.

Policy Recommendations & Financial Innovations

• Public finance must play a catalytic role—leveraging budget allocations and fiscal incentives to de-risk green projects and attract private investment.
• Blended finance models (combining concessional and commercial funds) are essential, with tools like credit guarantees, subordinated debt, and risk-sharing to broaden participation.
• Greater efforts to mobilize domestic institutional capital, including pension and insurance funds, will require regulatory reform and robust ESG frameworks.
• Innovative solutions are needed: the new Carbon Credit Trading Scheme, blockchain for transparent finance tracking, AI-based risk assessment, and tailored models for India’s economic reality.
• Boosting finance to adaptation and loss & damage is critical, ensuring vulnerable communities benefit and resilience is strengthened.
• Successes include Solar Park auctions, sovereign green bonds, and SEBI’s social bonds framework.

Broader Implications

• The transition must be inclusive: climate finance should reach MSMEs, agri-tech firms, rural infrastructure, not just large corporates.
• Consistent, transparent climate finance is key to achieving India’s 2070 net zero target, SDGs, and strengthening global climate leadership.
• India’s progress offers a model for G-20, COP, and South-South cooperation, but closing the climate finance gap remains crucial for sustaining momentum.

Prelims Practice Question

Which of the following best describes ''greenwashing'' in the context of climate finance?  

(a) The practice of planting trees to offset carbon emissions

(b)  Making unverified or exaggerated claims about environmental benefits of a project or product

(c)  Providing subsidies for renewable energy projects

(d)  Converting coal plants to run on natural gas

Mains Practice Question

Evaluate India’s renewable energy achievements in context of global leadership. Critically analyze why expanding climate finance is essential. Suggest measures to bridge the finance gap.