India stands at a critical juncture where its climate ambitions intersect with the urgent need for inclusive and sustainable growth.
With bold pledges to reach net-zero emissions by 2070 and to install 500 GW of non-fossil fuel energy by 2030, the country has taken a leadership role in global climate action. But achieving these goals hinges on a key challenge: mobilising vast amounts of capital, and doing so in a way that supports equitable development across sectors and regions.Estimates suggest that India will require over USD 10 trillion in cumulative investment by 2070 to meet its climate commitments. This includes financing for clean energy, low-carbon transport, climate-resilient infrastructure, nature-based solutions, and sustainable manufacturing. Public funds alone will not be sufficient. Nor will traditional private investments flow at the necessary scale without addressing risk perceptions and the lack of bankable, climate-aligned projects.
This is where blended finance becomes crucial. By strategically combining concessional public or philanthropic funds with commercial capital, blended finance structures can reduce risk and increase the attractiveness of investments in climate-related sectors. This approach is already gaining traction in India but needs far greater scale and institutional support to become a mainstream financing model.In sectors such as utility-scale solar and wind energy, private investment has flowed relatively easily due to predictable returns and supportive policy frameworks. However, many emerging sectors remain undercapitalised despite their significant climate and development benefits. These include rooftop solar, battery storage, electric mobility, climate-smart agriculture, decentralised renewable energy systems, and energy efficiency in buildings and small industries.
Blended finance can play a transformative role here. For example, a concessional loan can support an early-stage solar mini-grid in a remote area, or a first-loss guarantee can reduce the risk for banks financing electric buses or battery manufacturing facilities. Public or philanthropic capital can be used to unlock private funding by providing guarantees, viability gap funding, or technical assistance, particularly in underserved regions and for smaller enterprises.India has already demonstrated the potential of blended finance through initiatives such as the Green Growth Equity Fund, a collaboration between India and the UK that channels capital into sustainable infrastructure and green businesses. Likewise, programmes like Powering Livelihoods, supported by philanthropic capital, have helped scale clean energy-based enterprises in rural India, often led by women.
Despite these examples, blended finance remains a largely underutilised tool in India’s climate finance landscape. Experts argue that a more coordinated and systemic approach is needed. This includes clear policy signals, greater regulatory clarity, and institutional capacity to design and manage blended structures.One of the major challenges is building a pipeline of investable, climate-positive projects at scale. Many state governments, local bodies, and smaller enterprises lack the technical expertise and resources to develop projects that meet financial and environmental performance benchmarks. National and state-level institutions must work together to support project development, especially in climate-vulnerable and economically weaker regions.
Equally important is the innovation of financial instruments that suit India’s unique development context. Risk-sharing mechanisms, results-based financing, concessional green bonds, and blended climate funds are some of the models that can be adapted and scaled. Financing solutions must also prioritise equity, ensuring that marginalised communities, women entrepreneurs, and micro-enterprises are not left out of the low-carbon transition.Moreover, impact tracking and transparent reporting are key to attracting ESG-aligned global investors. Clear metrics on emissions reduction, climate resilience, and social inclusion will help build trust and credibility. India’s recent move to establish green taxonomies and guidelines is a step in the right direction, but implementation at scale is essential.
Collaboration is another cornerstone of success. A climate-aligned financial ecosystem must bring together central and state governments, financial institutions, philanthropic foundations, development banks, and the private sector. Philanthropic capital, in particular, has a unique role — it is flexible, risk-tolerant, and well-suited to incubate innovations that commercial investors may hesitate to fund initially.India’s leadership in digital infrastructure and inclusive financial technologies also offers an edge. Digital tools can help track project performance, disburse funds efficiently, and ensure accountability — all vital for scaling blended finance models with high transparency and impact.
If India succeeds in building a robust ecosystem for blended climate finance, it can not only meet its own goals but also offer a replicable model for other emerging economies. As climate risks intensify globally, the world is looking to large developing countries to show how growth and sustainability can be pursued together.
The need for climate finance is urgent, and the cost of inaction is growing. By embracing blended finance, India has an opportunity to chart a path that is financially viable, socially inclusive, and climate-resilient.
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