Reforming Global Climate Finance: India’s Leadership and the Road Ahead

Context:

• During its G20 Presidency, India highlighted deep structural flaws in the global climate finance architecture, which remains rooted in 20th-century multilateral frameworks.

• The editorial argues that without systemic reforms, climate finance will remain inadequate to meet the needs of the Global South, even as climate impacts intensify.

• India has positioned itself as a key voice advocating equity, transparency, and innovation in climate finance governance.

Key Highlights:

India’s Climate Finance Vision

• Prime Minister Narendra Modi has consistently stressed the need for:

  • Transparent tracking of climate finance and technology flows

  • Fair support for developing countries

• India needs $467 billion by 2030 to decarbonise key sectors.

• India’s net zero target of 2070 will require over $10 trillion in cumulative investment.

• Global climate finance needs exceed $7 trillion annually.

Domestic Efforts and Innovations

• Over two-thirds of India’s climate finance is domestic, sourced through:

  • Public budgets

  • Sovereign green bonds

• India is developing a Climate Finance Taxonomy to:

  • Define what qualifies as green investment

  • Enhance credibility, consistency, and investor confidence

• Regulatory bodies such as Reserve Bank of India and Securities and Exchange Board of India are:

  • Developing disclosure and accountability norms

  • Strengthening oversight of green financial instruments

Detailed Insights:

• The current global climate finance system is criticised for:

  • Hollow commitments and unmet pledges

  • Opaque accounting practices

  • Prioritising creditor interests over climate vulnerability

• Institutions such as:

  • Multilateral Development Banks (MDBs)

  • Green Climate Fund (GCF)

  • Global Environment Facility (GEF)
    face challenges of:

  • Concentrated decision-making power

  • Weak accountability

  • Complex access mechanisms for developing countries

• India advocates MDB reform to:

  • Go beyond lending public money

  • Mobilise private capital at scale

  • Support adaptation, resilience, and Loss & Damage financing

• Blended finance, guarantees, and risk-sharing instruments can:

  • De-risk private investments

  • Channel funds to high-risk, high-need regions and sectors

• Global reform priorities should include:

  • Transparent climate finance accounting

  • Democratised governance across MDBs

  • Innovative debt restructuring and resilience finance tools

UPSC Relevance (GS-wise):

GS Paper 2 – International Relations

• Global climate negotiations

• Role of India in multilateral reforms

• North–South equity in climate action

GS Paper 3 – Economy & Environment

• Climate finance mechanisms

• Green investments and sustainable growth

• Role of financial regulators in climate governance

Prelims Focus

• Definitions: Climate finance, Green bonds, MDBs

• India’s net zero 2070 target

• Climate finance figures and institutional reforms