Blended finance models, carbon pricing and strategically aligned CSR funds could be the key to unlocking the private sector’s investment potential
India’s changing dynamics with the geopolitical powers of the world coupled with its accelerating economy have put us in a unique spot– one that allows it to be the voice of the Global South. India’s position on climate change commitments attracted global attention during the 26th Conference of Parties (COP26) in Glasgow, during which Prime Minister Modi committed to India achieving net-zero emissions by 2070.
This ambitious pledge, unprecedented for a developing nation, was a point that speaks of a profound shift in India’s climate policy. The country’s newfound authority was further solidified after last year’s G20 Presidency.
Among the many deliberations that India helmed with the other delegations, there was also a renewed global focus on the urgency of climate action. The Urgency of Mobilising Capital in the Global South, while the impacts of climate change are global and far-reaching, the impacts of this Research shows that 55 vulnerable countries have suffered $525 billion combined climate crisis-fueled losses in the last 20 years. The number is estimated to reach $580 billion per year by 2030. This is because large-scale investments are required for mitigation or adapting to the consequences.
The Loss & Damage Fund, proposed at COP27 and operationalised at COP28, was a move India with the rest of Global South welcomed.
Though it is receiving initial contributions from developed nations, these fall short of what many developing countries deem necessary. Further, a recent study by CEEW found that the developed world, which is responsible for three-fourths of existing carbon emissions in the world — will end up emitting 38 per cent more carbon in 2030 than they have committed, if one were to look at the current trajectories. 83 per cent of this overshoot will be caused by the European Union, Russia and the United States. It is critical to ensure the rescue and rehabilitation of countries facing the cascading effects of this global issue disproportionately. India has held the Global North accountable - not just as the voice of the Global South but owing to its vulnerability.
Understanding India’s Stance around 619 million persons in India bore the brunt of climate change-induced extreme heat between June 16 and June 24. This is more than any other country in the world. These incidents are not just environmental, but also economic and health-related. Cities grind to a halt under the force of extreme weather, leaving economic scars and jeopardising the
marginalised.
Creating a resilient and sustainable future for India necessitates a just transition, which in turn requires significant financial investment. India faces a substantial climate financing shortfall of USD 3.5 trillion. To address this, we need investment support amounting to USD 1.4 trillion by 2070, translating to an average annual requirement of USD 28 billion over the next five decades. While international support is undoubtedly crucial, harnessing the potential of domestic mechanisms like carbon pricing and blended finance models is crucial for long-term sustainability.
Novel mechanisms of blended finance can not only help bridge the financing gap to fulfil India’s needs but can also unlock significantly higher investment from the private sector. This will also help in reducing overdependence on external climate capital as the primary instrument for climate capital. Strategic Alignment of CSR Funds Corporate India makes substantial expenditures as part of their Corporate Social Responsibility.
We have an opportunity here to strategically align these CSR funds in a manner that accelerates our efforts of achieving SDGs. According to provisional data from the Ministry of Corporate Affairs (MCA), spending on health reached Rs 9,987 crore in FY22, compared to Rs 8,382 crore on education. In contrast, spending on the environment was Rs 2,837 crore in FY22, which is double the Rs 1,337 crore spent in FY21.There is a major scope for increasing the quantum of CSR funds being streamlined towards carbon projects. This notion reverberates further in the Reserve Bank of India’s report on currency and finance, wherein equitable CSR funding is listed as the crucial policy alternative to mitigate climate risk. While energy and mitigation have received the most amount of climate financing for India, more investments should be directed towards nature-based solutions and environment ecosystems that crosscut both mitigation and adaptation in India. This will help create permanence in carbon removals that will help mitigate the effects of climate change.The flexible nature of CSR provides businesses in the country a significant chance to foster positive transformation and marry socio-economic advancement by finding environmental solutions. Yet, these dual benefits are attainable only with a committed long-term vision and detailed planning.
(The writer is CEO, ProClime; views are personal)
