India’s Ministry of Finance has released a draft framework for a national Climate Finance Taxonomy, laying the foundation for a classification system to direct investments toward activities aligned with the country’s climate commitments and to curb greenwashing in capital markets.
The proposed taxonomy is intended to mobilize large-scale financing required for India’s transition to net zero emissions by 2070, and to help meet its interim target of reducing the emissions intensity of GDP by 45% by 2030. India also aims to source 50% of its electricity from non-fossil fuels by the end of this decade.
In a statement accompanying the release, the Ministry said the taxonomy is being developed to “facilitate greater resource flow to climate-friendly technologies and activities,” while also ensuring continued access to affordable and reliable energy during the country’s economic development.
The Finance Ministry estimates that achieving India’s 2030 climate targets will require $2.5 trillion in investment, making a credible framework essential for unlocking both domestic and international capital.
Two-Tiered Classification: Climate-Supportive and Transition-Supportive
The proposed taxonomy introduces two categories for qualifying activities:
- Climate-supportive: Activities that directly contribute to emission reduction, climate adaptation, or relevant R&D.
- Transition-supportive: Activities that lower emissions intensity in sectors where full decarbonization is currently unviable.
The initial focus of the taxonomy will be on hard-to-abate sectors such as iron, steel, and cement; sectors with co-benefits for mitigation and adaptation such as power, transport, and buildings; and climate-resilient sectors like agriculture, food, and water security.
The draft framework outlines guiding principles, objectives, and classification methodology, and will be followed by sector-specific annexures identifying eligible activities, technologies, and projects.
Part of a Global Trend
India’s move aligns with global efforts to formalize sustainable finance definitions. Taxonomy systems have already been developed or proposed in the European Union, United Kingdom, Canada, Singapore, Hong Kong, and Australia, with India’s version aiming to reflect both international best practices and domestic priorities.
The Ministry has opened a public consultation on the draft framework, with comments accepted until June 25, 2025. Stakeholders are encouraged to provide input on the draft to help shape the final version of the taxonomy.
CLICK HERE TO ACCESS — DRAFT FRAMEWORK OF INDIA’S CLIMATE FINANCE TAXONOMY
