Indian Taxonomy for Sustainable Activities

As India commits to a net zero target, trillions of dollars of investment are required from the public and private sectors to fund sustainable projects and activities. India must explore both domestic and international debt and equity markets to raise green investments of such a massive scale. But the lack of nomenclature that is commonly agreed and benchmarked is one of the biggest challenges to channelling finance towards impactful green investments. This is why India is working on initiatives towards building a sustainable taxonomy, as many countries including the EU, South Africa and China, have already done.

Shakti is contributing to this process as a member of the Working Group for Sustainable Taxonomy set up by the Department of Economic Affairs of the Government of India. We provide inputs towards the development for Sustainable Taxonomy system i.e., a common language and a clear definition of what is ‘sustainable’ and what constitutes sustainable economic activities. The taxonomy is designed to align with global taxonomies, while being suited to the Indian context (for example giving equal weightage to green and social considerations).

The taxonomy will provide a reference for:

• mobilizing international and domestic debt and capital at scale to finance our climate, environmental and social priorities
• tracking debt and capital flow into our climate, environmental and social priorities and encourage disclosure by financial institutions, private and public sector entities
• redesigning market and policy incentive structures to support our climate, environmental and social priorities

By doing so, it will provide clarity to investors and businesses alike, help solve the existing information asymmetry in the market and boost climate finance.