01 Read
What happened
Green finance channels capital into projects that deliver environmental benefits — renewable energy, clean transport, sustainable agriculture, and climate resilience. In India, instruments such as green bonds, green deposits, and ESG funds are growing, supported by SEBI's green bond framework and RBI's sustainable finance guidelines. India's NDC targets and its net-zero commitment by 2070 require an estimated $2.5 trillion in climate investment by 2030, making private green finance indispensable alongside public spending.
02 Understand
Why it matters
Green finance is not a single instrument but an ecosystem of mechanisms that price environmental risk into capital allocation decisions. It operates across three layers.
First, instruments: Green bonds raise debt for specific environmental projects, with proceeds ring-fenced and independently verified. Sustainability-linked bonds tie borrowing costs to ESG targets. Green deposits allow banks to lend retail savings to green projects. India's sovereign green bond programme, launched in 2022-23, raised ₹16,000 crore in its first tranche.
Second, regulators: SEBI mandates Business Responsibility and Sustainability Reporting (BRSR) for the top 1,000 listed companies and has issued a framework for green debt securities. RBI issued its Sustainable Finance Framework for its own balance sheet and has been integrating climate risk into banking supervision through its Discussion Paper on Climate Risk (2023). NABARD operates the National Adaptation Fund for Climate Change (NAFCC) and channels green credit to rural and agricultural sectors.
Third, the global architecture: Green finance is anchored in the Paris Agreement's Article 2.1(c), which calls for making finance flows consistent with low-carbon, climate-resilient development. The Green Climate Fund (GCF) and Global Environment Facility (GEF) are multilateral instruments that co-finance India's climate projects. India's NDC, updated in 2022, targets 50% cumulative electric power from non-fossil sources by 2030 — a commitment that makes green finance a policy imperative, not just a market preference.
First, instruments: Green bonds raise debt for specific environmental projects, with proceeds ring-fenced and independently verified. Sustainability-linked bonds tie borrowing costs to ESG targets. Green deposits allow banks to lend retail savings to green projects. India's sovereign green bond programme, launched in 2022-23, raised ₹16,000 crore in its first tranche.
Second, regulators: SEBI mandates Business Responsibility and Sustainability Reporting (BRSR) for the top 1,000 listed companies and has issued a framework for green debt securities. RBI issued its Sustainable Finance Framework for its own balance sheet and has been integrating climate risk into banking supervision through its Discussion Paper on Climate Risk (2023). NABARD operates the National Adaptation Fund for Climate Change (NAFCC) and channels green credit to rural and agricultural sectors.
Third, the global architecture: Green finance is anchored in the Paris Agreement's Article 2.1(c), which calls for making finance flows consistent with low-carbon, climate-resilient development. The Green Climate Fund (GCF) and Global Environment Facility (GEF) are multilateral instruments that co-finance India's climate projects. India's NDC, updated in 2022, targets 50% cumulative electric power from non-fossil sources by 2030 — a commitment that makes green finance a policy imperative, not just a market preference.
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