Green financing refers to providing financial support for projects for renewable energy, energy-efficient buildings, sustainable infrastructure, and other initiatives.

• It involves restructuring capital flows so that every investment not only yields economic returns but simultaneously strengthens sustainability.

Significance of Green Financing: 

• Meeting Emission Targets: India needs over USD 10 trillion by 2070 to meet net-zero targets.
• Enhances national security & competitiveness: Through clean power, climate-smart agriculture and resilient infrastructure.
  • Enables leadership in future value chains, making India a hub for green industries.
• Job creation: India is set to create a huge number of green jobs i.e. around 7.3 million by the financial year 2027-28 and 35 million by the year 2047.
• Other: Environmental gains, ensuring just transition, developing disaster resilience etc.

Challenges related to green financing:

• Regulatory barriers and policy uncertainties: Energy (Concurrent subject) faces inconsistent policy implementation across states and sectors.
• Limited Environmental, Social, and Governance (ESG) expertise in financial institutions.
• Cost of Financing: For a 100 MW solar PV project, India’s rate is 10.0-11.5% compared to around 2.8% in Germany and 5.3% in the United States.
• Finance Deficit: India’s green bond issuances (USD 21 billion till 2023) remain small compared to its renewable energy targets (~500 GW by 2030).