India requires adequate climate financing for energy transition, emissions reduction, climate adaptation and sustainable development.

Government Initiatives

• National Adaptation Fund for Climate Change (NAFCC): To support adaptation activities in the States and Union Territories (UTs) vulnerable to the adverse effects of climate change.
• National Clean Energy and Environment Fund (NCEEF): Finances and promotes clean energy, renewable energy technologies and related research and innovation in India.
• Sovereign Green Bonds (SGBs): Issuance of ₹477 billion SGBs to finance green projects.
• Priority Sector Lending (PSL) framework: Includes Green activities and sovereign green bonds.
• Others: Climate Finance Taxonomy and Green Steel Taxonomy; RBI's Climate Finance and Climate Risk Management Directions (2025) etc.

Challenges

• Massive financing gap and inadequate international climate finance commitments.
• Lack of a comprehensive climate finance architecture and clear green classification.
• Limited private-sector participation due to high risks and low profitability of green technologies.
• Inadequate integration of climate risks into financial decision-making.
• Other challenges: Risk of greenwashing; limited borrowing capacity and access to states; etc.

Conclusion

India can bridge its climate finance gap by swiftly implementing a robust Climate Finance Taxonomy, strengthening RBI's green finance regulations, expanding support for climate adaptation through PSL, establishing a dedicated State Climate Finance Facility and scaling up sovereign green bonds.