The government is taking steps to establish a National Green Financing Institution to support its net-zero target by 2070, as current funding for climate initiatives falls short of required levels, according to NITI Aayog’s annual report for 2024-25.
Addressing the Climate Finance Gap
NITI Aayog emphasized the urgent need for a dedicated institution to bridge the significant climate finance gap. The proposed institution will aggregate green capital from various sources and help reduce the cost of capital for climate-focused projects.
Exploring Structural Models
To operationalize the National Green Financing Institution, NITI Aayog is evaluating multiple structuring mechanisms. These include:
- A new green bank modeled on existing institutions like NaBFID or NABARD.
- Repurposing current organizations such as IREDA.
- Leveraging alternative financing mechanisms like the Climate Fund in GIFT City and Green InvITs.
- Studying best practices from international Green Banks to create an effective framework.
India’s Climate Commitments
India has set ambitious targets under its Nationally Determined Contributions (NDCs) submitted to the United Nations Framework Convention on Climate Change (UNFCCC) in 2022. These include:
- Reducing GDP emission intensity by 45% by 2030 (compared to 2005 levels).
- Ensuring 50% of installed electricity capacity comes from non-fossil fuel sources by 2030.
- Creating an additional carbon sink of 2.5 to 3 billion tonnes through increased forest and tree cover by 2030.
As reported by republicbiz.com, the establishment of a National Green Financing Institution will play a crucial role in mobilizing funds to achieve these climate goals efficiently.
