Mobilizing Green Finance while Managing Climate Finance Risk in India

The report identifies a dilemma in India's financial system where policies to increase green finance may raise overall credit risk due to the perceived lower quality of green assets, while risk-management policies may inadvertently reduce green finance flows by increasing the cost of capital. It highlights gaps in current regulatory, fiscal, and capital market frameworks, including the inadequacy of ESG ratings and credit rating systems to factor in climate risks. To resolve this, the author proposes a three-pillar strategy consisting of Policy Interventions, Regulatory Prescriptions, and Market and Institutional Mechanisms to support India's 1.5-degree pathway goals.

• There is a tension between increasing green finance and managing financial risk: expanding green finance may increase the overall credit risk profile because green assets are perceived to have lower credit quality, whereas focusing on risk management can increase the cost of capital and reduce green finance flows.
• Current regulatory and fiscal frameworks in emerging economies are not conducive to green activities because these activities often lack proven collaterals, consistent information, and established track records.
• India's current ESG evaluation and credit rating systems are insufficient for mobilizing green finance, with ESG ratings specifically suffering from integrity issues and a lack of transparent data regarding environmental aspects.
• The report proposes a framework for intervention based on three pillars: Policy Interventions, Regulatory Prescriptions, and Market and Institutional Mechanisms to simultaneously increase green finance and manage climate-related financial risk.

APA

Climate Policy Initiative (2022). Mobilizing Green Finance while Managing Climate Finance Risk in India. https://www.climatepolicyinitiative.org/publication/mobilizing-green-finance-while-managing-climate-finance-risk-in-india/

Chicago

Climate Policy Initiative. Mobilizing Green Finance while Managing Climate Finance Risk in India. 2022. https://www.climatepolicyinitiative.org/publication/mobilizing-green-finance-while-managing-climate-finance-risk-in-india/.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=Mobilizing Green Finance while Managing Climate Finance Risk in India |date=30 March 2022 |url=https://www.climatepolicyinitiative.org/publication/mobilizing-green-finance-while-managing-climate-finance-risk-in-india/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiative2022mobilizing, author = {{Climate Policy Initiative}}, title = {{Mobilizing Green Finance while Managing Climate Finance Risk in India}}, institution = {Climate Policy Initiative}, year = {2022}, month = mar, url = {https://www.climatepolicyinitiative.org/publication/mobilizing-green-finance-while-managing-climate-finance-risk-in-india/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }