Less Emissions, More Innovations: Climate Tech and Green Investing in India

Climate tech and green investing have become attractive propositions over the last few years due to the urgency of hitting the world’s most important climate goal: limiting the Earth’s warming to 1.5 degrees. This is driven by substantial financial backing and the fact that climate tech is a profitable business with numerous models and opportunities. India’s unique challenge in this space is twofold: it has the world’s largest population and is the fastest-growing economy. As the world’s third-largest emitter of greenhouse gases, India’s efforts in climate tech and green investing are not only critical for its own future, but also have the potential to influence the global fight against climate change.

The Green Investing Landscape in India

Green investing, which involves directing capital towards environmentally responsible companies and projects, has been gaining momentum in India for some time. Investors are recognizing the financial potential of companies aligned with sustainable practices, leading to a surge in green funds and sustainable investment portfolios.

The success of green bonds has been a notable highlight. These bonds raise funds for projects with positive environmental impacts, such as renewable energy installations and sustainable infrastructure. In January 2023, India issued the first tranche of its first sovereign green bond, worth INR 80 billion. This was followed in February 2023 by the government announcing the issuance of another INR 80 billion in sovereign green bonds. These bonds demonstrate India’s commitment to increasing renewable energy output and lowering its carbon intensity through funding renewable energy and transportation electrification projects.

Prime Minister Narendra Modi has outlined the country’s strategy with a five-point agenda called “Panchamrit,” in accordance with the five nectar elements.

According to this agenda, India has pledged to: i) reach 500 gigawatts of non-fossil energy capacity by 2030, ii) meet 50% of the country’s energy requirement from renewable energy sources by 2030, iii) reduce the carbon intensity of the economy by 45% below 2005 levels by 2030, iv) reduce total projected carbon emissions by 1 billion tonnes by 2030, v) achieve the target of net-zero emissions by 2070.

Though ambitious, these targets are achievable with comprehensive government support. The push from the Make in India initiative has fueled renewable capacity addition. Sectors such as battery storage, electric vehicles (EVs), and green hydrogen are also seeing high government involvement and increasing investor interest. To set the global narrative in favor of decarbonization and support green energy, the government has allowed up to 100% Foreign Direct Investment (FDI) through the automatic route in the renewable energy industry.

Investing for the Better

India’s proactiveness in addressing climate change is also evident in the private sector. A prominent example is the Greenko Group. Greenko is a renewable energy company that has developed and operates a portfolio of solar and wind projects in the country. It has raised over $5 billion in funding from international investors to date. Committed to providing carbon-free solutions, the company aims to accelerate energy transition and sustainable growth. Having raised significant funding from all over the world, Greenko Group is a success story for both green investing and international collaboration in the fight against climate change.

Image by Master 1305 on Freepik

Another example highlighting the importance of these two points is the investment by Edinburgh-based UK Climate Investments (UKCI) in a 185 MW portfolio of solar farms in India. The company estimates that these solar farms will help avoid approximately 330 ktpa of harmful CO2 emissions over their operational lives. These farms will provide a stable, safe, and clean source of electricity for about 315,000 homes each year, in addition to contributing to India’s aim of 500 GW of renewable energy capacity by 2030.

Innovations in Climate Tech

With both the government and private sectors working towards solving the climate problem, emerging climate tech initiatives are making a real difference. For example, the Solar Energy Corporation of India (SECI), one of the world’s largest renewable energy buyers, has helped drive down the cost of solar power in India, making it more affordable for businesses and households.

In the agricultural sector, a number of startups, including the Bengaluru-based CropIn, are developing climate-friendly technologies. CropIn uses satellite imagery and artificial intelligence to help farmers optimize their water usage, improving yields and reducing water waste.

Broad-based support for innovation is also being provided by the Indian government’s Smart Cities Mission. This mission is investing in sustainable infrastructure, such as green buildings, smart grids, and public transportation, making Indian cities more livable and sustainable while contributing towards climate goals.

Issues to be Addressed

While India’s climate prospects show great promise, they also face significant challenges.

• Inadequate infrastructure and bureaucratic complexities hinder the swift deployment of sustainable technologies, impeding project scalability.
• The high initial costs associated with clean energy solutions continue to pose a barrier to investor entry, despite the long-term benefits.
• The lack of widespread public awareness and education about the importance of sustainable practices constrains demand for green products and services.
• Regulatory inconsistencies and policy uncertainties create an unpredictable business environment, deterring both domestic and foreign investors from committing to long-term sustainable projects.
• As India undergoes rapid urbanization and industrialization, land and resource scarcity intensify, posing challenges to sustainable land use and resource management.
• Addressing socio-economic disparities and ensuring equitable access to climate tech solutions remains a pressing concern, as marginalized communities often lack the resources to adopt or benefit from these technologies.

Overcoming these multifaceted challenges requires coordinated efforts from government, businesses, and the international community in order to allow climate innovation and sustainable investments to flourish.

Greener Pastures Ahead

India’s journey towards paving a sustainable future for itself and the world at large through climate tech initiatives and green investing has made significant progress and holds immense potential. The emergence of innovative startups, coupled with supportive policies and growing investor interest, paints a promising picture for the path ahead. However, challenges remain, requiring concerted efforts from multiple stakeholders. Continued collaboration between domestic and international players will be pivotal in shaping a greener, more resilient India, and contributing to the global fight against climate change.

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Written by: Nimesh Bansal