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Slow but steady
With companies in India exploring various financing options to support the development of capital-intensive technologies such as hydrogen or carbon capture, green finance is gathering speed.
India requires INR 15,000 crores to INR 20,000 crores of annual Foreign Direct Investment (FDI) in renewable energy alone, as per the Ministry of New and Renewable Energy’s report on financial constraints in the sector. To address this, the government has authorized 100% annual FDI for renewable power generation and distribution projects. According to the government’s investment agency Invest India, renewable energy projects worth US$196.98b are ongoing.
Private sector companies are investing in green projects as they see the potential for long-term returns and positive environmental impact. The market for Green Social, Sustainability and Sustainability-linked (GSSS) bonds, which includes green, yellow (solar) and blue (marine) bonds, is gradually expanding. According to a report by Fitch Ratings, GSSS-linked debt bonds accounted for US$20b in the Indian debt market as of January 2023.
As reporting norms such as the Business Responsibility and Sustainability Report (BRSR) take shape, bond-issuing companies will likely witness higher credit ratings, expanding the market for such debt instruments.
According to a World Bank report, keeping spaces cool using alternative and innovative energy-efficient technologies can open an investment opportunity of US$1.6 trillion by 2040.
Besides government agencies and domestic companies, international organizations such as Asian Development Bank (ADB) and World Bank have also increased their funding for green projects in India to reduce the gap in commercial investments in renewable energy and boost the confidence of various stakeholders.