India Needs Blended Finance To Mobilize $1 Trillion for Climate Targets: WB

 Chennai: India needs around $1 trillion by 2030 to achieve its climate change adaptation targets. India will have to go for blended concessional finance to mobilize private investments.

As per estimates in India’s long-term low emission development strategy, submitted to the United Nations Framework Convention on Climate Change (UNFCCC) in 2022, the country needs tens of billions of dollars by 2050 to achieve net zero by 2070. Also, based on updated Nationally Determined Contributions, India’s adaptation finance requirements stand at around $1 trillion by 2030.

Public funding of this magnitude could be difficult to allocate, especially because of the need to route limited public funds towards immediate social priorities and contingencies. A report by IFC and the International Energy Agency finds that investments need to more than triple from $770 billion in 2022 to $2.2-2.8 trillion per year by the early 2030s to help emerging markets reach their energy and climate goals. Around 60 per cent of this will need to come from the private sector. It is essential to crowd in private sector investment for India’s mitigation and adaptation goals.

There are several innovative financing instruments that can unlock private sector climate-related investments. Blended concessional finance for climate has become a powerful tool to mobilize private investments. Blended concessional finance, or blended finance, combines concessional finance from donors or third parties alongside development finance institutions’ (DFIs’) normal own account finance and/or commercial finance from other investors, to develop private sector markets, address the Sustainable Development Goals, and mobilize private resources.

In India, critical sectors for either climate mitigation or adaptation have been identified and climate-related blended finance investments will be prioritized in these sectors. These identified sectors, which include agriculture, land and water management, power, transport, infrastructure, health, industry, in addition to the circular economy, are in line with India’s net-zero ambitions while keeping the government’s short-, mid-, and long-term priorities in mind. The blended finance market in India is nascent but at an inflection point.