India’s clean energy transition is gaining momentum. In 2024, India added 24.5 gigawatts (GW) of solar energy capacity, making it the third largest contributor globally after China and the United States, making it a key player in the global shift towards renewables.
The United Nations Secretary-General’s 2025 Climate Report recognises India, alongside Brazil and China, as a leading developing country in scaling solar and wind energy. In 2023, the renewable energy sector employed over a million people, contributing to 5% of GDP growth. Of this, off-grid solar alone employed over 80,000 people in 2021. India’s leadership in establishing the International Solar Alliance (ISA) is laudable.
The critical gap
But this impressive momentum needs a consistent push. Beneath the headlines lies a critical gap — the financial scaffolding that is needed to sustain and scale this transition. Without a dramatic expansion of climate finance, India will struggle to meet its climate targets.
The economic case for clean energy has solid basis. According to the International Renewable Energy Agency (IRENA), if India follows a 1.5°C-aligned pathway, it could achieve average annual GDP growth of 2.8% through 2050, more than double the G-20 average. Battery-integrated renewables, decentralised grids and green hydrogen technologies are all creating new opportunities for inclusive, future-ready growth. Yet, this momentum hinges on the missing piece of climate finance.
The size of India’s climate finance gap is wide. Recent estimates indicate a requirement of $1.5 trillion by 2030 to stay on a 1.5°C pathway, while the Ministry of Finance places the figure at over $2.5 trillion by 2030 to meet national targets. This includes capital for expanding renewables, strengthening the electricity grid, deploying battery storage, scaling up green hydrogen, and transitioning to sustainable transport and agriculture. The current flow of climate finance falls well short of this target.
By December 2024, India’s cumulative aligned green, social, sustainability and sustainability-linked (GSS+) debt issuance had reached $55.9 billion, representing a 186% increase since 2021, with green bonds accounting for 83% of total aligned issuance. The trajectory remains strong, with green bond investment in India crossing $45 billion in 2025, and sustainable finance targets aiming for $100 billion by 2030, indicating robust private sector engagement.
However, the challenge of expanding beyond large corporates remains valid. While the private sector was responsible for 84% of the total green bond issuance, access for micro, small, and medium enterprises, agri-tech innovators, and local infrastructure developers continues to need enhancement through concessional finance and risk-sharing mechanisms. India’s successful solar energy auctions under the Solar Park Scheme have been cited as one initiative in support of attracting private financing. Similarly, India’s issuance of sovereign green bonds and the success of Securities and Exchange Board of India (SEBI)-regulated social bonds have channelled private capital into climate action, education and health care.
Changes to strategy
To unlock this gap in finance, India must diversify and deepen its climate finance strategy, starting with public finance. National and State governments can use Budget allocations and fiscal tools to attract private capital and de-risk green investments.
Blended finance can bridge this divide. While concessional finance and risk-sharing mechanisms are often referenced, there is a need to examine how they work across sectors, scales and investor profiles. Credit enhancement instruments such as partial guarantees or subordinated debt can improve the risk-return profile of green projects, making them more attractive to private lenders. Similarly, performance or loan guarantees can unlock finance for mid-sized clean energy infrastructure in Tier II and III cities, where governance and delivery risks may deter investors.
Scaling such models will require unlocking domestic institutional capital, from pension funds, insurers and sovereign wealth funds. India, too, can unlock similar potential by enabling its institutional investors such as the Employees’ Provident Fund Organisation or the Life Insurance Corporation, to allocate a portion of their portfolios to climate-aligned investments. This would require regulatory reforms such as clearer environmental, social, and governance investment guidelines, risk mitigation instruments and long-term green project pipelines.
Tap carbon markets
Policy and institutional support are critical. Carbon markets offer another avenue. India’s new Carbon Credit Trading Scheme could unlock new finance streams if it is transparent, well regulated and equitable. Equally urgent is financing for adaptation and loss and damage.
India must lead not just on clean energy but also on climate finance innovation, with visible, scalable breakthroughs. This can be through blockchain for tracking climate finance, Artificial Intelligence-driven risk assessment for green portfolios, or tailored blended finance models that reflect India’s unique social, environmental and economic realities.
Flavia Lopes is Programme, United Nations Environment Programme (UNEP) India. Balakrishna Pisupati is Head, United Nations Environment Programme (UNEP) India. The views expressed are personal
Published – October 04, 2025 12:08 am IST
