India‘s transition to net zero will cost between $10 trillion and $19 trillion, new research from the Grantham Research Institute at LSE has suggested.
According to Grantham’s Vaibhav Pratap Singh and Sangeeth Raja Selvaraju, responsibility for achieving the country’s planned net zero emissions target by 2070 will rest with two entities, the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI).
‘Collaboration in 2025 between SEBI, RBI and the Ministry of Finance will be essential to deepen the bond market and create a robust framework for financing infrastructure and related projects to achieve India’s net zero goals,’ they said in a report, Empowering the transition: key institutions in India’s climate finance landscape in 2025.
Financial stability
The RBI, which is responsible for formulating and implementing monetary policy to ensure price stability and supervising the financial system, will play an important role in ensuring financial stability while promoting transition financing and managing climate-related risks for banks and non-bank financial companies (NBFCs).
It recently proposed a Climate Risk Information System to assess exposure to physical climate risks, as well as publishing a draft framework last year requiring regulated financial entities to disclose climate-related financial risks.
SEBI, meanwhile, is responsible for protecting investor interests and regulating the securities market, including the issuance of Green, Social, and Sustainability (GSS) bonds.
‘SEBI could evaluate how it can play a greater role in collaboration with other relevant statutory bodies to expand segments such as mutual funds and other fund-based companies, credit insurance companies and financial auxiliaries,’ the authors write. ‘These entities currently represent roughly 22% of the total asset base of all non-bank companies including NBFCs, which is far below the global average of over 70%. These entities need a push.
‘This expansion is crucial for increasing the supply of capital beyond traditional channels, especially for early-stage companies and technologies integral to the transition. Some of these technologies, for example, carbon capture and green hydrogen, could be vital for the deep decarbonisation of certain sectors, enabling them to scale up and become ready for debt financing.’
Measuring physical risk
Physical risks from climate change also pose significant financial challenges, according to the authors, who noted that last year, the RBI’s Deputy Governor highlighted the growing risk of loan losses due to climate-related disasters.
‘There are also chronic risks, such as rising sea levels and shifts in precipitation patterns, that affect productivity and long-term livelihoods. It is important to assess and prepare for both acute and chronic climate-related risks,’ they state.
Key developments to watch this year will include the finalisation of RBI’s climate risk disclosure framework, the market response to SEBI’s transition bonds, and the integration of India’s upcoming sustainable finance taxonomy into broader regulatory strategies.
‘Furthermore, it will be interesting to see what details will be included in the final framework for disclosing climate-related financial risks for regulated entities; and how transition plans for different sectors will be integrated into the broader strategy for achieving net zero emissions by 2070,’ the authors note. Read more here.
