India needs 20 bn dollars investments each year to achieve climate targets

India aims to achieve a $5 trillion economy by 2025, aligning its growth process with sustainable development goals by 2030: Corporate Affairs Secretary Rajesh Verma

New Delhi: According to the report “ESG-into the Mainstream” released by FICCI in collaboration with Trilegal  on Saturday, India requires 20 billion dollars in investments each year to meet its climate targets and fund its green transition.

“It needs a large budget allocation, international finance from bilateral and multilateral sources, and green private investment,” the report said.

The report, released by Ministry of Corporate Affairs Secretary Rajesh Verma, comes at a timely juncture as ESG (Environmental, Social, and Governance) considerations are increasingly influencing the way in which businesses measure success.

Addressing the ESG summit, Verma said, “For India to achieve a $5 trillion economy by 2025, aligning its growth process with sustainable development goals by 2030 and achieving net-zero emissions by 2070, ESG investment and sustainable finance will play a critical role.”

Several initiatives have been taken by the Government of India towards responsible ESG. There has been increased recognition that ESG issues can affect the performance of a company. “India has been at the forefront in recognising the importance of responsible business practices,” he added.

Dr Mukund Govind Rajan, Chairman, FICCI Environment Committee, said, “Diverse stakeholders around the world are driving the ESG agenda. The growing momentum in ESG investing will ensure greater resource use efficiency.

“Indian companies are also increasingly embracing the ESG agenda as there is a growing realisation that business as usual will no longer work. We need to move towards an Indian sustainable finance taxonomy to provide a holistic ecosystem for both domestic and foreign investors, “he said.

The narrative around ESG has changed significantly over the last couple of years, from being seen as a compliance imperative to taking centre stage in boardroom discussions and driving investment and business strategy decisions.

Chapter 1 of the report, Unlocking Green Finance, explores India’s readiness to access and deliver climate finance and other related aspects such as uniform carbon tax policy and green taxonomy for enhancing investor confidence.

It delves deep into potential sources of finance and novel structures and the need to incentivize investors willing to provide “first loss capital” to de-risk projects and catalyse further investments.

Focussing on redefining corporate citizenship – the road to sustainability, the report details how corporations can contribute to the sustainability agenda, non-financial metrics, and management of ESG risks.

The report also explores the themes of ESG Crisis Readiness and Regulation of ESG Ratings Providers in India through global comparisons and makes recommendations on the ESG framework that pre-empts ESG crises as well as handles them responsibly when they arise.

Given that assessment of the ESG metrics is based on softer, uncrystallized principles, the report underscores the need for revisiting the requirement for accreditation of ERPs along with proposals for eligibility criteria such as net worth requirements, infrastructure and manpower requirements.

“A light-touch principle-based regulation coupled with increasing shareholder activism and investor awareness will help set the broader framework within which ERPs operate and act as a check on the activities of ERPs, which will in turn set the roadmap for corporate governance for the coming decades,” it said.

The report also spotlights reforms in the power sector to encourage ESG-led investment in India’s climate transition.