Energetica India Magazine - September 2022

32 energetica INDIA- September_2022 India can avoid the missteps of devel- oped market leaders and produce a truly green taxonomy that attracts healthy global investment to further its energy transition. The Government of India has made commendable progress in pushing sus- tainability-related policy proposals for- ward. This includes the Securities and Exchange Board of India’s (SEBI) pro- posals to establish ESG rating regula- tions and strengthen India’s green bond framework, as well as the Reserve Bank of India’s recent recommendations to build resilience against climate risks in lending portfolios. The momentum is expected to increase with the Ministry of Finance’s impend- ing draft taxonomy developed by its sus- tainable finance taskforce. Although India recorded a 125% in- crease in renewable energy investment from the year before, reaching US$14.5 billion in the financial year 2021/22, the country needs more than double that re- cord annually to hit 450 gigawatts (GW) of renewable energy capacity by 2030. Government funding and domestic cap- ital alone will unlikely be sufficient to meet India’s renewable energy ambi- tions. Foreign investment must be en- couraged to step in. Foreign capital, however, awaits more clarity on India’s green investment pol- icies for becoming a low-carbon economy. A green or sustainable finance taxonomy, if designed properly, helps communicate to investors which assets require financ - ing for India to meet the Paris Agree- ment climate goals. India’s government has time to ascertain whether its draft taxonomy has the right fundamentals to attract capital, particu- larly if leveraging foreign private capital to finance clean energy. The government should be mindful of how global sustain- ability-focused investors—whose capital determines the relevance of a market’s sustainable finance agenda—have re - sponded to watered-down sustainable finance standards. Several green taxonomies have been pub- lished globally—and usually not with- out controversy. The latest saga, in July 2022, was the European Parliament’s backing of the European Commission’s proposal to temporarily label larger gas and nuclear power plants as “sustain- able”. If majority supported by the bloc and passed into law, it will damage the region’s climate credentials—enabling greenwashing—while deterring capital providers and international partners now sceptical of the region’s green in- vestments. Over the past six months, investors have heavily criticised the European Com- mission for compromising on gas and nuclear in the EU’s sustainable finance taxonomy to accommodate the interests of some member states and the gas in- dustry. The Institutional Investors Group on Climate Change (IIGCC)—with EUR FINANCE India Should Aim for a Truly Green Taxonomy to Gain Global Investor Buy-In A green or sustainable finance taxonomy, if designed properly, helps communicate to investors which assets require financing for India to meet the Paris Agreement climate goals. Christina Ng Shantanu Srivastava Research & Stakeholder Engagement Leader, Debt Markets, IEEFA Energy Finance Analyst, IEEFA