Given the rise in global warming over the years, it’s now well-known that climate change is a global emergency that transcends geographical boundaries. According to the World Meteorological Organization, 2024 is on track to be the warmest year on record after an extended streak of unusually high monthly global mean temperatures. The urgency for collective global action has never before been more pronounced. 

The UN COP29: A watershed moment?

For a cleaner, greener world, more than 32,000 people, including representatives from all 198 countries, have registered to attend the 29th United Nations Climate Change Conference of Parties (COP) in solidarity. The conference, held in Baku, Azerbaijan, between 11th and 22nd November 2024, aims to address this crisis through a multifaceted approach. 

With discussions ranging from climate transparency and finance to land usage, ocean conservation, and youth engagement, COP29 is likely to be a pivotal moment for global climate diplomacy.  Among the key areas of focus will be how countries can mobilize resources to meet their climate targets and the role of green financing in building a better, more sustainable future. For India, COP29 holds much significance as the country pushes towards its ambitious goal of achieving net zero emissions by 2070 alongside sustainable economic growth.

India’s climate targets and green financing

India’s goal of achieving net zero emissions underscores its long-term commitment to combating climate change. At COP27, India submitted its first Long-term Strategy for Low Carbon Development (LT-LEDS), signaling a structured approach toward reducing its carbon footprint. The country has also pledged to cut its emissions intensity by 45% by 2030, reflecting its alignment with global climate action. However, achieving these goals will require significant financial investment, and this is where green finance plays a crucial role.

In the simplest terms, green finance refers to increasing financial flows from public, private, and non-profit sectors toward sustainable development priorities. It aims to manage environmental and social risks, capitalize on opportunities that yield both financial returns and environmental benefits and ensure greater accountability in how funds are utilized. In India, green finance is becoming an essential tool for driving the transition toward net-zero emissions, particularly as sustainability becomes a cross-sectoral national agenda.

India’s green finance ecosystem, green bonds, and carbon pricing

As the concept of green finance evolves, India is exploring various instruments to facilitate its green transition. Initiatives such as green bonds, carbon pricing, and sustainable investment strategies are at the forefront of this shift. Green bonds, for instance, have emerged as a popular means of raising capital for environmental projects, while carbon pricing mechanisms are designed to internalize the environmental costs of carbon emissions, incentivizing businesses to adopt cleaner technologies. These tools, alongside investments in climate tech ventures, could help accelerate India’s journey toward sustainable development.

The outcomes of COP29 are extremely likely to play an instrumental role in shaping India’s green finance ecosystem. Discussions on carbon markets, financing mechanisms for clean technologies, and global frameworks for green finance will provide critical guidance for India’s policymakers, investors, and businesses. In particular, the potential for expanding carbon markets—where companies can buy and sell carbon credits—could open up new avenues for investment and environmental impact in India.

The role of RBI and emerging opportunities 

The Reserve Bank of India (RBI) has taken proactive steps in supporting green finance, introducing guidelines that encourage banks and non-banking financial companies (NBFCs) to accept green deposits. These deposits are reserved for projects that promote energy efficiency, clean transportation, climate adaptation, and biodiversity conservation. This move signifies the growing recognition of green finance as a critical element of India’s economic and environmental strategy.

Further, a 2022 World Bank report highlighted a potential $1.6 trillion investment opportunity in energy-efficient cooling solutions in India by 2040, further emphasizing the economic potential of sustainable investments. As temperatures rise and climate risks increase, such opportunities will become even more valuable. India’s green finance sector is expected to see more innovative financing solutions, including sustainability-linked loans, climate resilience funds, and increased private sector participation.

As India strives to meet its climate targets, green finance will serve as a critical lever for change, enabling the transition to a low-carbon economy. With COP29 providing a global platform for advancing climate finance discussions, India is at the cusp of a revolution. By aligning financial resources with sustainable development goals, the country can mitigate the impacts of climate change and position itself as a leader in the global green economy.

Sandiip Bhammer is Founder and Managing Partner, Green Frontier Capital