India Needs Over 3 Times More Green Investments For 2030 Climate Target—In Charts

India's rapidly growing green investments remain significantly short of what is needed for the country to achieve its 2030 climate targets.

Green finance flows to key real economy sectors like clean energy, clean transport and energy efficiency stood at an average Rs 3.09 lakh in FY19 and FY20, according to an analysis by the Climate Policy Initiative. That's a fraction of the annual Rs 11 lakh crore that is estimated to be required.

Narendra Modi's administration is aiming for 50% of India's power needs by 2030 to come from non-fossil fuel sources, while reducing emissions intensity. The cabinet has approved the updated Nationally Determined Contribution but India is yet to submit it to the UN Framework Convention on Climate Change.

The analysis tracked both public and private investment flows in three key areas—clean energy, clean transport and energy efficiency. It noted that between FY18 and FY20, annual green finance flows had grown more than 150%. Yet, it said that much faster growth and supporting policy is required to fill the investment gaps.

While the need for more green finance in India is well acknowledged, the analysis also throws up some other interesting trends.

Bulk of funding for green projects in India continues to come from domestic sources, with foreign flows comprising less than 15% of the total. The share of domestic funding has remained consistent at about 85% over the four years that were analysed.

Further dissection of domestic investments highlights what the private and public sectors are prioritising for mitigating emissions. Private flows tended to go more towards energy efficiency and renewable energy. Public funds were more directed towards clean energy and clean transportation.

In fact, almost all of the investments in electrifying transport have come through either funding from public sector units or through central and state budgets.

Debt financing is the most popular funding instrument used in India accounting for nearly half of the total investments. Roughly 26% of the investments were through equity finance, while about 19% came from government budgets.

Domestic corporate financial institutions almost exclusively preferred using debt for project funding or financing the balance sheets.

Public sector units and international development financial institutions showed a preference to fund projects with low-cost debt instead.

The analysis was primarily focused on investments towards mitigation—that focus on containing climate change by reducing emissions. However, it also attempted to quantify the investments that go towards adaptation—that are investments for improving resilience to extreme climate events.

In FY19 and FY20, India saw average annual fund flows of Rs 36,000 crore for disaster monitoring, flood mitigation and drought management. The report said it is "nowhere" close to government's own estimate Rs 28.9 lakh crore that was required by FY20.

"Given that India is one of the most vulnerable country to climate change, there is a pressing need for funds to flow to adaptation sectors," it said.

The analysis also points for the need to improve climate-related financial reporting and strengthen disclosures to improve transparency. It called for the need for standardised taxonomy and disclosure requirements around green finance.

It also said there was a need to diversify fund flows towards decentralised energy if India was to meet its 2030 targets.