Finance Ministry To Explore Use of Blended Finance For Green Projects

Updated on: 24 April 2023 4:07 pm

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Budget 2023-24: Creating An Enabling Ecosystem For Green Growth Photo: The Budget supports cost effective solutions to ensure round the clock power supply from renewable resources and usher in stability for the grid

According to reports, the finance ministry is looking at the idea of allowing financial institutions to raise money using blended financing instruments to invest in climate-friendly projects.

Blended finance entails using public sector or nonprofit financial resources to gradually phase in private sector investment, hence catalysing private financing in high-risk, lengthy projects.

According to the sources, the use of blended finance encourages investments in new and emerging sectors and draws commercial capital to projects that support sustainable development while giving investors financial returns. They also added that it has the potential to catalyse private financing for such projects.

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The government is reportedly considering it from all sides because it has yet to be tested.

The ambition of the prime minister to achieve net zero emissions by 2070 is matched with blended finance.

India's goal to achieve net zero emissions by 2070 was stated by Prime Minister Narendra Modi in Glasgow in 2021.

The Union Cabinet approved India's updated Nationally Determined Contributions (NDCs) last year, which included more ambitious climate targets and the Prime Minister's "Panchamrit" agenda, which was unveiled during the Glasgow conference.

The amended NDC states that India is now committed to reducing the emissions intensity of its GDP by 45% from 2005 levels by 2030 and reaching around 50% of cumulative installed capacity for non-fossil fuel-based energy sources.

In order to keep global temperature increases to far below 2 degrees Celsius above pre-industrial levels, while aiming for 1.5 degrees Celsius to avoid the worst effects of climate change, countries must adopt Nationally Determined Contributions (NDCs).

According to sources, the International Sustainability and Standards Board (ISSB) is working with the Securities and Exchange Board of India and the Reserve Bank of India to develop standards for climate financing and sustainable finance.

Engagement with the standard-setting organisation is required, according to insiders, in order to ensure that the duty is not too onerous for Indian enterprises to bear and that emerging economies are unable to comply.

In the coming months, the ISSB is expected to announce standards for climate financing and sustainable finance.