India Marches On To Drive Greater Climate Action

India Marches On To Drive Greater Climate Action

India, one of the most climate-vulnerable nations in the world, is facing growing urgency to mobilize climate finance and policy innovation (see A Tale Of Two Halves: India’s Prime Minister Modi’s ESG And Sustainability Report). In 2024, 93% of days were marked by extreme weather events – heatwaves, floods and cyclones – cementing the consensus that climate adaptation is no longer optional but a prerequisite for India’s long-term economic and developmental goals.

Estimates suggest that cumulative adaptation-related expenditure alone – spanning agriculture, water resources, infrastructure, ecosystems and more – will total approximately $648.6 billion by 2030, using 2023–24 as the base year. This underscores the scale of investment required even under a business-as-usual (BAU) scenario.

In a notable move, on May 7, 2025, India’s Ministry of Finance released its draft framework for the Climate Finance Taxonomy (CFT): a classification system designed to steer capital toward climate-aligned activities. Central to India’s roadmap for achieving its commitment of reaching net zero by 2070, as made at COP26, the taxonomy also aims to reduce greenwashing risks while supporting the country’s estimated $2.5 trillion financing need by 2030 for its low-carbon transition.

The proposed taxonomy, which is open for public consultation until June 25, 2025, identifies two key categories of activities:

• Climate-supportive activities: activities that directly contribute to emissions reduction, climate adaptation, or climate-focused research and development.
  
  
• Transition-supportive activities: activities that improve emissions intensity or energy efficiency in sectors where immediate emissions elimination is not yet feasible.
  
  

It also emphasizes sector-specific pathways, initially targeting:

• Hard-to-abate industries: like iron, steel and cement.
  
  
• Dual-benefit sectors: such as power, mobility and buildings, which offer both mitigation and adaptation opportunities.
  
  
• Adaptation-centric sectors: including agriculture, food and water security, which are key to India's climate resilience.
  
  

With the CFT, India joins global peers such as the EU and UK, which have already operationalized sustainable finance taxonomies. As of April 2024, 47 such taxonomies have been released worldwide, covering nearly 75% of advanced economies. However, only about 10% of emerging and developing markets have adopted some kind of taxonomy, highlighting India’s proactive stance in the global South.

The taxonomy builds on broader regulatory momentum in the country, including enhanced sustainability disclosure requirements under Securities and Exchange Board of India’s (SEBI) Business Responsibility and Sustainability Report (BRSR) framework, which applies to its top 1,000 listed firms. While India aspires to become a fully developed economy by 2047, the reality of this ambition entails a sharp rise in per capita energy consumption. Balancing this developmental trajectory with the demands of aggressive climate targets will require a balanced, yet bold, approach to sustainable finance, industrial decarbonization and ecosystem resilience. The proposed taxonomy represents a foundational step in translating this vision into actionable progress.

If you’re interested in understanding the key sustainability regulations at play in India and the actions firms can take to navigate the landscape effectively, please read Strategic Focus: Understanding ESG And Sustainability Regulations In India.

For further insights into the sustainability regulatory regimes across other regions, check out:

• Strategic Focus: Understanding ESG And Sustainability Regulations In Australia
• Strategic Focus: Understanding ESG And Sustainability Regulations In Brazil
• Strategic Focus: Understanding ESG And Sustainability Disclosure Requirements In Canada
• Strategic Focus: Understanding ESG And Sustainability Regulations In The UK
• Strategic Focus: ESG & Sustainability In The US
• Strategic Focus: Understanding ESG And Sustainability Disclosure Requirements In Japan (Upcoming)