Who's Investing in Climate Change for Small Businesses?

The 3I framework—Instruments, Institutions and Initiatives— can serve as a compass for SMEs to effectively capitalise on climate finance. For SMEs, accessing loans, bonds and equity investments, or climate finance, is key to cutting costs and staying competitive in transitioning global supply chains.

Crafting Resilience

India’s shift to a low-carbon economy is driven by institutions supporting SME sustainability efforts. Public and private sector banks and non-banking financial companies (NBFCs), provide long-term credit plus financial guidance.

The government-run department of industries and district industries centres promote sustainable industrial development and infrastructure for SMEs.

Nationally, the Small Industries Development Bank of India (Sidbi) provides affordable energy efficiency and green finance schemes, while the Bureau of Energy Efficiency promotes energy-efficient technologies.

The National Bank for Agriculture and Rural Development (Nabard) supports rural SMEs with financial and policy-driven interventions for sustainable agriculture and business practices.

Support Systems for SMEs

The MSE Green Investment and Financing for Transformation (MSE Gift) Scheme helps SMEs adopt green technology through interest subvention and credit guarantees, benefiting around 12,000 MSEs and leading to energy and cost savings.

The MSE Scheme for Promotion and Investment in Circular Economy (MSE-SPICE) supports SMEs in adopting circular economy practices, particularly in waste management sectors.

The Climate Change Fund (CCF), managed by Nabard, is a major climate finance mechanism, funding mitigation and adaptation projects while fostering climate resilience and awareness.

The Policy for Financing Transmission Projects ensures financial assistance for integrating renewable energy into the power grid. The Loan Against Securitisation of Future Cash Flow of Renewable Energy Projects helps developers secure funding by leveraging future revenues, improving liquidity and accelerating renewable energy deployment.

The Special Product for Funding Renewable Energy Projects provides financial solutions through bonds, bank loans and other instruments, fostering sector growth.

International institutions also contribute significantly to climate finance. The Vivriti Capital Climate Finance Project has secured a $25mn investment to finance EVs, solar and wind energy and waste management.

The Asian Development Bank (ADB)-backed India Infrastructure Finance Company Limited Project has received a $500mn loan to support sustainable infrastructure. This includes a sustainability unit, an environmental scoring framework and long-term capital.

Blockchain technology is emerging as a game-changer for decarbonisation by improving visibility and traceability in supply chains. By recording transactions in an immutable digital ledger, it enables companies to monitor energy consumption and emissions accurately.