From Banks to Capital Markets: Alternative Investment Funds as a Potential Pathway for Refinancing Clean Energy Debt in India

The document analyzes pathways for refinancing clean energy debt in India to meet a $315 billion debt requirement by 2030. It identifies Alternative Investment Funds (AIFs) as the most viable near-term solution to bridge the gap between bank loans and capital markets, recommending a demonstration AIF—potentially sponsored by IREDA—to build investor confidence and create a replicable model for scaling renewable energy investment.

• India requires an estimated $450 billion to meet its 2030 clean energy targets, with debt funding requirements accounting for $315 billion based on a typical 70-30 debt-to-equity split.
• There are two primary pathways for shifting project debt to capital markets: securitization, where banks and NBFCs convert loan portfolios into financial securities, or developers accessing capital markets directly to retire existing loans. In India, these pathways have not yet seen substantive adoption.
• Alternative Investment Funds (AIFs) are identified as the most flexible and effective near-to-medium-term mechanism for expanding renewable energy access to capital markets. AIFs can facilitate investment in debt securities issued by developers, using proceeds to retire bank or NBFC loans.
• AIFs can help overcome Indian capital market barriers by enhancing credit ratings through partial credit guarantees from sponsors, aggregating multiple project loans to create scale, and attracting long-term institutional investors through anchor sponsors like the Indian Renewable Energy Development Agency (IREDA).
• To address structural barriers in the long term, the study suggests increasing investor protection during defaults to deepen the bond market and developing risk-transfer mechanisms such as Credit Default Swaps (CDS).

APA

Climate Policy Initiative (2019). From Banks to Capital Markets: Alternative Investment Funds as a Potential Pathway for Refinancing Clean Energy Debt in India. https://www.climatepolicyinitiative.org/publication/from-banks-to-capital-markets-alternative-investment-funds-as-a-potential-pathway-for-refinancing-clean-energy-debt-in-india/

Chicago

Climate Policy Initiative. From Banks to Capital Markets: Alternative Investment Funds as a Potential Pathway for Refinancing Clean Energy Debt in India. 2019. https://www.climatepolicyinitiative.org/publication/from-banks-to-capital-markets-alternative-investment-funds-as-a-potential-pathway-for-refinancing-clean-energy-debt-in-india/.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=From Banks to Capital Markets: Alternative Investment Funds as a Potential Pathway for Refinancing Clean Energy Debt in India |date=17 July 2019 |url=https://www.climatepolicyinitiative.org/publication/from-banks-to-capital-markets-alternative-investment-funds-as-a-potential-pathway-for-refinancing-clean-energy-debt-in-india/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiative2019from, author = {{Climate Policy Initiative}}, title = {{From Banks to Capital Markets: Alternative Investment Funds as a Potential Pathway for Refinancing Clean Energy Debt in India}}, institution = {Climate Policy Initiative}, year = {2019}, month = jul, url = {https://www.climatepolicyinitiative.org/publication/from-banks-to-capital-markets-alternative-investment-funds-as-a-potential-pathway-for-refinancing-clean-energy-debt-in-india/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }