Mobilizing Green Finance while Managing Climate Finance Risk in India

This report by the Climate Policy Initiative examines the tension between increasing green finance and managing climate-related financial risks in India. It argues that current regulatory, fiscal, and capital market frameworks are inadequate for balancing these two objectives, and proposes a strategy based on three pillars: Policy Interventions, Regulatory Prescriptions, and Market and Institutional Mechanisms.

• There is a potential dilemma in pursuing the twin goals of increasing green finance and managing climate-related financial risks. Efforts to increase green finance may raise overall financial risk because green assets are perceived to have lower credit quality. Conversely, focusing on risk management may reduce green finance flows because the perceived higher risk of these assets leads to a higher cost of capital.
• Current regulatory and fiscal frameworks are insufficient for supporting green activities, particularly in emerging economies. This is due to the fact that green activities often have limited track records, inconsistent information, and less proven collaterals. Additionally, current supervisory frameworks do not adequately account for climate-related risks impacting financial risk.
• Capital markets and credit rating systems in India fail to effectively mobilize green finance. Long-term capital is funneled through credit rating systems that do not factor in climate-related risks. While Environmental, Social, and Governance (ESG) evaluations are becoming more popular, they suffer from integrity issues and a lack of transparency regarding the data driving the ratings.
• To achieve India's sustainability goals and the 1.5-degree pathway, the report proposes interventions across three pillars: Policy Interventions, Regulatory Prescriptions, and Market and Institutional Mechanisms. These recommendations are designed to address constraints for banks, capital markets, and institutional investors.

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} }