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- India needs ₹162.5 lakh crore (₹11 lakh crore annually) by 2030 to achieve climate commitments.
- SMEs (crucial to India’s green transition) face financial and regulatory hurdles in accessing green capital.
- The report highlights innovative financing mechanisms and policy reforms to bridge the gap.
New Delhi, 21st March 2025: India’s ambitious climate commitments, outlined under the ‘Panchamrit’ goals at COP26, need an urgent, structured approach to green financing. Despite global growth in climate finance, India faces a ₹11 lakh crore annual shortfall in green capital, threatening its transition to a low-carbon economy.
Primus Partners’ latest thought leadership report, Financing the Future: Bridging India’s ₹11 Lakh Crore Annual Green Capital Gap, explores the challenges, opportunities, and innovative financial solutions needed to unlock sustainable investments at scale.
Some Key Findings:
- Funding Shortfall: India needs ₹162.5 lakh crore by 2030 to meet its Nationally Determined Contributions (NDCs), but current green finance mobilization covers only 30% of the need.
- SMEs – A Critical Yet Overlooked Player: Small and Medium Enterprises (SMEs) form the backbone of India’s economy, contributing nearly 30% of GDP and employing over 110 million people. They play a crucial role in India’s green transition, yet they face systemic barriers in accessing climate finance. Key challenges include policy uncertainty, stringent lending criteria, lack of collateral for green loans, inadequate awareness of sustainability-linked financing options, and the absence of tailored financial instruments that meet their unique needs. Without strategic intervention, SMEs will struggle to adopt sustainable practices, which could significantly slow down India’s decarbonization efforts.
- The Role of ESG in Investment Decisions: Investors are increasingly prioritizing sustainability-linked financial products. Valued at $27.48 trillion in 2023, the global ESG investment market is anticipated to reach $130.88 trillion by 2032.
- New Green Financing Solutions: The report highlights the ‘3I Framework’ – Instruments, Institutions, and Incentives – as a roadmap to help SMEs access climate finance through green bonds, blended finance, and sustainability-linked loans.
- Policy and Regulatory Reforms Needed: The government’s proposed climate finance taxonomy and green financing policies, such as SEBI’s green bond regulations and RBI’s climate risk framework, are key enablers but need faster implementation.
Bridging the Green Capital Gap
“India’s green transition represents both an environmental necessity and an economic opportunity. To meet our ambitious climate goals, it is imperative that we unlock innovative financing models and ensure SMEs can access the capital they need to scale green initiatives. This report outlines actionable steps that both policymakers and investors must take to close the green capital gap and accelerate India’s sustainability mission,” said Pooja Lahri, Vice President at Primus Partners.
Recommendations and the Way Forward
The report notes that achieving scale in climate finance calls for a collaborative, multi-stakeholder approach. Accordingly, the report calls for:
- Establishing a Green Capital Market: Enabling SMEs to issue green bonds, sustainability-linked loans, and carbon credits to tap into global green finance.
- Public-Private Collaboration for Blended Finance: Combining government-backed guarantees with private capital to de-risk green investments.
- Standardizing Sustainability Reporting Frameworks: This will help drive transparency and facilitate green investment decisions.
- Decarbonisation-as-a-Service (DaaS) for SMEs: A pay-per-use model allowing SMEs to lease green technologies instead of making large upfront investments.
- Creating a National Blockchain-based Carbon Credit System: Besides improving transparency and reducing fraud, it will help SMEs monetize emission reductions via a real-time carbon tracking platform
