India’s Ministry of Finance has unveiled a draft framework for its Climate Finance Taxonomy.
According to ESG Today, the proposed taxonomy is designed to facilitate the large-scale capital mobilisation necessary to meet India’s climate goals, while tackling greenwashing and ensuring long-term access to clean and affordable energy.
India has committed to achieving net zero emissions by 2070, alongside an interim objective to reduce emissions intensity of its economy by 45% by 2030. The country is also aiming to generate approximately 50% of its electricity from non-fossil fuel sources by 2030. The Ministry of Finance estimates that approximately $2.5tn will be needed to meet these 2030 targets.
According to the ministry, the taxonomy seeks to “facilitate greater resource flow to climate-friendly technologies and activities, enabling the country to achieve the vision of being Net Zero by 2070 while also ensuring long-term access to reliable and affordable energy.”
India’s draft taxonomy aligns with similar initiatives underway globally, including frameworks established or in progress in the EU, UK, Singapore, Hong Kong, Canada and Australia. These taxonomies are increasingly being adopted as tools to clarify what qualifies as a sustainable economic activity and to channel investments into such areas.
The Indian framework proposes two main categories of classification: “climate-supportive” and “transition-supportive”. The former refers to activities that directly contribute to climate objectives such as emission avoidance, adaptation efforts, or relevant R&D. The latter includes activities that enhance energy efficiency or reduce emissions intensity in sectors where full emissions elimination is currently impractical.
The taxonomy will initially target sectors considered critical for the net zero transition. These include hard-to-abate industries such as iron, steel and cement; sectors with both mitigation and adaptation benefits like power, mobility and buildings; and areas crucial to climate resilience, including agriculture, food systems and water security.
The draft framework outlines the principles, rationale and methodology for classification, and will be supported by detailed sector-specific annexes. These annexes will define which technologies and activities qualify as either climate-supportive or transition-supportive under the taxonomy.
The government has launched a public consultation on the draft framework, with comments invited until 25 June 2025.
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