Draft Framework for India’s Climate Finance Taxonomy

In May 2025, to boost climate-aligned investments and address greenwashing concerns, the Finance Ministry has unveiled the draft ‘Framework of India’s Climate Finance Taxonomy.’

Key Points:

Purpose: The taxonomy will classify activities as ‘climate supportive’ or ‘climate transition’ to align with India’s Net Zero by 2070 target and the Viksit Bharat 2047 vision.
Investor Guidance: The taxonomy aims to help investors and banks identify and fund sectors that genuinely contribute to climate goals—avoiding greenwashing.
International Significance: It addresses the lack of consensus on defining ‘climate finance’ in global forums, such as the UN climate talks, where funding gaps persist between commitments ($300B) and actual needs ($1.35T).
Sector Coverage: Includes power, mobility, buildings, agriculture, food, and water—with an investment need of Rs. 56.68 trillion (~USD 648.5B) for adaptation till 2030.
Hard-to-Abate Sectors: Recognises the need to support low-emission pathways for sectors like steel, cement, and thermal power through improved technologies like AUSC plants (46% efficiency).