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Green Finance in India: Driving Sustainable Development Through Policy and Innovation
Green finance is emerging as a game-changing concept in India. As our country progresses on its journey to climate commitments, this is becoming more relevant by the day. The management of key financial resources is very important, especially for industries like sustainable agriculture, renewable energy, and electric mobility.
And now, it is increasingly important to ensure that these resources are going towards projects that are environmentally sustainable and responsible. This change in focus is also changing how financial institutions, policymakers and researchers, are creating growth and strategic plans.
Understanding Green Finance
Green finance essentially means financial investments flowing into projects and initiatives that bring environmental benefits. This includes clean transportation, renewable energy, energy efficiency, waste management and sustainable agriculture. Broader sustainable finance encompasses this idea to include social and governance considerations, aiming for long-term resilience in both economies and communities.
For India, this transformation is imperative. Under the obligations of the Paris Agreement and a pledge to achieve net zero by 2070, rallying green capital is essential to bridge the gap between climate responsibility and growth aspirations.
The Landscape of Green Finance in India
The landscape of green finance in India has evolved significantly over the past decade. The Reserve Bank of India (RBI) has begun exploring frameworks for climate-related financial risks, while the Securities and Exchange Board of India (SEBI) mandates Business Responsibility and Sustainability Reporting by listed companies. India also ranks among the leading issuers of green bonds. India ranked as the fourth-largest emerging market source of aligned GSS+ debt globally following China, South Korea, and Chile with cumulative issuance worth USD 55.9 billion by December 2024, up by186% from USD 21.4 billion in 2021.
Institutions such as the National Investment and Infrastructure Fund (NIIF) and Indian Renewable Energy Development Agency (IREDA) are also driving innovation by structuring investment vehicles to attract global capital. The landscape of green finance in India reflects growing alignment between financial institutions, government policy, and international climate goals.
Case Study 1: Yes Bank’s Green Bond Initiative
In 2015, Yes Bank became the first Indian bank to issue a green bond, raising ₹1,000 crore to fund renewable energy projects. This pioneering step marked a turning point in green finance in India, signalling the private sector’s readiness to invest in sustainability. Since then, several other banks and corporates, such as Axis Bank and NTPC, have followed suit, making India one of the top 10 green bond markets globally.Case Study 2: The International Solar Alliance (ISA) and India’s Solar Push
India’s leadership in the International Solar Alliance (ISA) demonstrates how innovative policy and finance can converge. By mobilising over $2 billion in concessional financing and building collaborative frameworks, India has scaled solar capacity dramatically, surpassing 70 GW in 2023. This model showcases how sustainable finance can be aligned with global cooperation to achieve transformative change.
Policy and Regulatory Push
No conversation on green finance in India can be complete without addressing the role of government policy. From the Reserve Bank of India’s emphasis on climate-related financial risks to the Securities and Exchange Board of India’s (SEBI) ESG guidelines, regulators are pushing the financial ecosystem toward sustainability. Government-backed programs like the National Solar Mission and the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme are also prime examples of green finance driving innovation.
Despite progress, challenges remain. The green finance ecosystem faces barriers such as limited awareness among investors, lack of standardised definitions of “green” projects, and relatively higher upfront costs of renewable infrastructure. Strengthening policy incentives, improving regulatory clarity, and building investor confidence will be crucial for expanding green capital flows.
Innovation and the Role of Private Sector
Beyond regulations, innovation is shaping the future of sustainable finance. Fintech startups are creating platforms for retail investors to invest in green bonds. Microfinance institutions are experimenting with clean energy loans for rural households. Large corporations are setting sustainability-linked targets that tie directly to financing structures.
Real-World Impact
Green finance in India has already produced tangible outcomes:
- India is among the top three countries in the world for renewable energy investments.
- The issuance of sovereign green bonds worth billions has attracted global investors.
- Grassroots projects — from financing solar pumps for farmers to funding affordable housing with green certification — are improving both livelihoods and environmental outcomes.
These successes highlight how financial innovation and policy can work hand-in-hand to enable sustainable development.
The Role of Policy Schools in Shaping the Future
Realising India’s green ambitions requires not only capital but also skilled professionals who understand the intersection of finance, policy, and sustainability. This is where institutions like the Indian School of Public Policy (ISPP) play a critical role. ISPP equips future leaders with the analytical tools, financial acumen, and policy insights needed to design frameworks that drive green finance in India forward.
Through its specialised curriculum and experiential learning, ISPP prepares graduates to work in areas such as climate policy, ESG investing, and sustainable infrastructure planning. Alumni are increasingly engaged in projects that translate financial innovation into real environmental impact, bridging the gap between theory and practice.
At ISPP, we believe that future policy leaders must not only understand economics and finance but also grasp the urgency of climate action. By training professionals who can craft evidence-based solutions, ISPP positions itself as a hub for nurturing the very talent that will accelerate the growth of green finance in India. In this way, ISPP is directly contributing to India’s journey of sustainable development through policy and innovation.