IFC report underscores crucial role of blended finance in advancing India’s net-zero ambitions

According to an International Finance Corporation (IFC) report titled ‘Blended Finance for Climate Investments in India’, the utilisation of blended finance will play a pivotal role in bolstering India’s energy transition by attracting increased private capital for impactful climate projects. The report underscores the significance of blended concessional finance as an innovative financing strategy aimed at stimulating private sector investments in projects focused on both mitigation and adaptation, delivering substantial development benefits.

Blended finance combines concessional funds from government or philanthropic sources with funding from development finance institutions (DFIs) like IFC, aiming to attract private sector investments for projects with substantial development impact. These projects are at the edge of commercial viability and require extra financial backing to mitigate risks, create incentives, or rebalance the risk-return dynamics to make them more appealing to private sector investors.

India has set ambitious targets to decrease the emissions intensity of its GDP by 45 per cent by 2030, measured against 2005 levels, and to achieve 50 per cent of its power capacity from non-fossil fuel sources. As per the government analysis, the country faces a significant challenge in curbing greenhouse gas emissions, with the energy sector responsible for approximately 75 per cent of the country’s total emissions, followed by manufacturing industries and construction at 18.68 per cent, and transport at 13 per cent. The research outlines a number of crucial industries, including energy, transport, waste management, agriculture, biodiversity, health, and others, where expenditures should be focused to support the nation’s climate mitigation and adaptation goals in order to confront this challenge. To reach its net-zero goals, India will need to dramatically increase its climate investments from $18 billion to $170 billion annually until 2030. According to the Climate Policy Initiative’s 2022 data, the current annual investment allocated for climate action in India stands at a mere $44 billion.