In a recently published report, the International Finance Corporation (IFC) underscores the pivotal role of blended finance in facilitating India’s transition towards sustainable energy practices. The report titled “Blended Finance for Climate Investments in India” accentuates blended concessional finance as an innovative financial approach to attract private sector investments into climate mitigation and adaptation projects with significant developmental impacts.
India has ambitious targets to reduce the emissions intensity of its GDP by 45 percent by 2030, compared to 2005 levels, and to derive 50 percent of its power capacity from non-fossil fuel sources. However, the energy sector alone accounts for 75 percent of the nation’s total emissions, necessitating immediate action.
The report identifies critical sectors such as energy, transport, waste management, agriculture, biodiversity, health, and more, where investments must be prioritized to align with India’s climate objectives. However, a substantial funding gap looms, with India needing to escalate climate investments from $18 billion to $170 billion annually by 2030. Currently, only $44 billion per year is available for climate initiatives in India.
Shalabh Tandon, Regional Head of Operations & Climate and Interim South Asia Director at IFC, stressed the urgency of innovative financing and partnerships to mobilize private sector solutions, especially in alignment with India’s net-zero aspirations.
The report acknowledges positive regulatory changes, including tax exemptions related to blended finance, already in progress. However, it also highlights existing challenges such as knowledge gaps in deal structuring and the absence of a regulatory framework.
Amitabh Kant, G20 Sherpa for India, emphasized the necessity of appropriate regulations to incentivize low-carbon alternatives and accelerate green markets’ growth. The report advocates for addressing regulatory hurdles, engaging donors and development finance institutions (DFIs), capacity building, creating a regulatory sandbox, and initiating pilot transactions using existing structures to kickstart the blended finance market while regulatory changes evolve.
IFC, a global leader in blended finance implementation, has deployed $4.6 billion of concessional donor funds from fiscal year 2010 to 2023, supporting 457 high-impact projects across 90 countries and enabling $13.2 billion in investments from its own account and $9.7 billion in third-party capital.
The report highlights the critical need for blended finance in India’s climate journey and calls for concerted efforts to create an enabling environment for its growth and success.
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