India released a draft framework for its first climate finance taxonomy on Tuesday, aiming to channel more investments toward environmentally sustainable projects and improve transparency in climate-related financial flows.
The draft, developed by the Indian government’s think tank NITI Aayog with the International Finance Corp. and supported by the Swiss State Secretariat for Economic Affairs, sets out criteria to define and classify the country’s green and climate-aligned economic activities.
The taxonomy is designed to help investors, financial institutions, and policymakers align capital flows with India’s climate targets, including its nationally determined contributions under the Paris Agreement and net-zero commitment by 2070.
“This framework is a key step toward mobilising sustainable finance at scale,” said NITI Aayog in a statement. “It will bring clarity, avoid greenwashing, and help the financial sector identify and monitor green assets and activities.”
Focus on High-Impact Sectors and Development Priorities
The taxonomy initially focuses on five sectors: energy, transport, buildings, forestry and sustainable agriculture.
It provides a list of eligible activities and criteria based on principles such as substantial contribution to climate goals and “do no significant harm” to other environmental objectives.
India, the world’s third-largest emitter of greenhouse gases, has also emerged as a significant market for renewable energy.
The government aims to achieve 50 percent of its cumulative electric power installed capacity from non-fossil fuel sources by 2030.
The taxonomy’s development follows global efforts by the EU, China, and other countries to establish green finance classifications, though India’s framework is tailored to its development needs and climate priorities.
The draft is open for public consultation until June 7; a finalized version is expected later this year.
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