India releases draft Climate Finance Taxonomy to direct investment

India's Ministry of Finance released a draft framework for a national Climate Finance Taxonomy to classify investments aligned with climate goals and curb greenwashing. The taxonomy will shape how Indian companies and financiers label climate-supportive activity, affecting capital access across hard-to-abate sectors.

The Ministry of Finance issued a draft framework establishing a national Climate Finance Taxonomy to direct capital toward activities aligned with India's net-zero-by-2070 commitment and its interim goal of cutting GDP emissions intensity 45% by 2030. India also targets 50% non-fossil electricity by decade-end. The Ministry estimates achieving 2030 climate targets requires $2.5 trillion in investment. The taxonomy creates two categories: climate-supportive activities that directly reduce emissions, and transition-supportive activities that lower emissions intensity where full decarbonization is unviable.

The taxonomy's initial focus targets hard-to-abate sectors including iron, steel, and cement; sectors with mitigation and adaptation co-benefits such as power, transport, and buildings; and climate-resilient sectors like agriculture, food, and water security. Companies operating in these industries, alongside domestic and international investors and lenders, will be directly affected as the framework defines which projects qualify as green. Sector-specific annexures identifying eligible activities, technologies, and projects will follow the principles and classification methodology set out in the draft.

Stakeholders should review the draft framework and submit comments through the public consultation, which accepted input until June 25, 2025. Companies in covered sectors should assess how their activities map against the climate-supportive and transition-supportive categories and monitor the forthcoming sector-specific annexures that will define eligible technologies and projects. Investors should track how the final taxonomy reflects international best practices from the EU, UK, Canada, Singapore, Hong Kong, and Australia while accommodating India's domestic energy and development priorities.

Key figure — Investment required: $2.5 trillion to meet India's 2030 climate targets