It is overwhelmingly accepted that climate change is a very significant threat to humanity. Countries all over the world are mobilizing resources and capital to tackle this challenge. At COP26, India announced a net zero emissions target by 2070 and enhanced 2030 NDCs. Perhaps most critically, India called for $1 trillion in climate finance over the next decade from developed countries. Financial resources and sound investments are needed to address climate change, to both reduce emissions, promote adaptation to the impacts that are already occurring and to build resilience.
India, like many developing countries, lacks the financial resources to make the transition to clean energy that could reverse climate change-leaving vital mitigation and adaptation needs unmet.
It is estimated that India will require more than US$ 2.5 trillion to fulfil its climate mitigation commitments by 2030. This does not take into account the costs of a just transition, which will likely grow exponentially without immediate action. Today, climate investments in India can fulfil only 13% of the previously estimated mitigation financing needs. India needs an additional $1 trillion in adaptation and resilience investments between 2015 and 2030, i.e. $67 billion annually around the year 2030.
There are several clear challenges with regard to raising the required climate finance for scaling up climate action. Low-carbon and climate-resilient development options often require upfront investments that can be costlier than conventional solutions. They often also require low-cost, long-term financing, which is a mismatch with the expectation of the short-liability duration of most financiers. Climate finance still needs to be fully mainstreamed into the investment processes, owing to gaps in technology and capacity. And it must also to be tracked and analysed more effectively in order to highlight opportunities to mobilize finance and fulfil investment potential.
Given the sheer size of the investment requirement, both public and private investment flows will have to be mobilized. It is also imperative that climate change issues be integrated within financial governance systems.
Shubhashis Dey (Director, Climate Policy & Finance) asserts that “financing the net zero transition will require proportionate, transformative increases in investment, mobilising debt, strengthening capital markets and creating new and innovative financial instruments and alternative financial tools”.
Shakti’s climate finance program seeks to enhance capital flows for climate mitigation and adaptation in India and to create an enabling financial ecosystem that can deliver positive climate impact. We work with members from the banking and finance industries, technical experts and key stakeholders to convene collective action, facilitate shared learning and develop practical resources to equip financial institutions to scale up the overall quantum of climate finance. We facilitate the integration of financial risks and opportunities from climate and environmental factors into mainstream financial decision making and aid the formation of a robust green market in India.