Making Finance More Accessible To Climate Technology In India – How To Achieve It?
ClimateAngels | Aug 23, 2023
Vasudhaiva Kutumbakam = One Earth · One Family · One Future = The World Is One Family’ echoes loudly from the heart of India and its governing bodies.
Even the upcoming G20 summit (to be held in New Delhi, from Sep 9-10, 2023) includes ‘Green Development, Climate Finance & LiFE’ as commemorating themes.
However, despite this ethos and significant steps toward enabling a green future for the incredible country on planet Earth, gaps persist. One noteworthy area of concern is the complex financial space of the country, which poses hurdles to seamless climate investing in climate technologies such as Energy-Efficient Appliances, Smart Grids, Electric Vehicles (EVs), Energy Storage Solutions (environment-friendly batteries), Carbon Capture and Storage (CCS), and more.
The financial system of the country (even after rolling out several reforms and scraping the old ones) is still difficult to navigate and popular among investors and business leaders across the globe. In this article, you’re on a journey to find out WHY? You’ll also discover potential ways about how these financial roadblocks can be eliminated to make a clearer and more greener future for all.
Recent Climate Change Statistics
Climate Change and its life-threatening effects are evident. According to the latest report from World Meteorological Organization (WMO), July of 2023 was the world’s hottest month on record.
Source: Guardian Graphic [The Guardian], Copernicus/ERA5
As temperature soars to its new normal, climate action is a must. There was a time when the world reports used to mention about Global Warming. It has ended, and “the times of Global Boiling and random weather shifts have arrived” instead.
The era of global boiling has arrived; a stark warning from the UN
Take a moment to watch the video:
Video source: The Guardian and The United Nations
With technologies that favor climate and the environment where we live (or say the climate technologies), it is possible (with dramatic, immediate climate action) to limit the temperature rise between 1.5C – 2C (that is, above pre-industrial levels). This will help us avoid the worst-case scenario of climate change.
Human civilization is sitting on the hot seat because of the gradual rise in average temperature. It is a result of the well-defined, and a well-known problem we are observing since our childhood days – pollution. This pollution acts as a greenhouse around the earth and has made the weather go extremely worse.
India’s Emergence as a Hub for Climate Tech Startups
There’s no need for NASA’s James Webb Telescope to delve deep and understand the shifts happening in our societal structure, biodiversity, atmosphere, and environment.
While India shines as one of the fastest-growing economies, it grapples with the formidable challenge of curbing escalating pollution levels. A primary contributor is coal-based power generation, along with other sources of pollution. In response, individuals, public figures, and the government have embarked on much-needed climate action.
Today, with the Government of India championing the ‘Go Green’ movement and active involvement from educational institutions, tech startups, public figures, and both public and private climate finance, the country has emerged as a favoured destination for climate change investments.
According to a recent report by a prominent Indian news outlet, Indian climate tech startups managed to secure USD 1 billion in funding during the first half of 2023.
Additionally, based on a report from Unitus Capital and Climake, climate investments in India could potentially reach $1.01 trillion between 2022 and 2030, averaging around $112 billion annually.
Imagine the possibilities if India’s financial powerhouse becomes even more conducive to climate change investments, enabling the creation of climate technologies that can contribute to cooling the Earth’s average temperature. Exciting, right?
Role of Climate Tech Companies and Venture Capital Firms
To keep the temperature-rise below 2-degrees, climate tech companies/climate tech startups are developing technologies and methods to overcome this existential threat. Venture capital firms or VCs (in short) are eager to offer climate investment funds to climate tech startups and build a sustainable Climate Tech India Community.
Climate Tech Venture Capitalists, together with climate tech startups are investing in climate technologies that will significantly minimize the risk of extreme pollution and keep the average temperature low for a sustainable future.
Climate tech companies are innovating day and night to find solutions critical to fighting climate change.
Not only the climate startups, but the government of the country is also proactively promoting and monitoring other tech start-ups that are researching and developing cutting-edge solutions such as electric vehicles (EVS) of every shape and size, energy storage systems (to store energy in the electric, solar, and Hydro form), smart grids (for efficient energy distribution), and CCS – carbon capture & storage facilities powered by modern tech.
These innovative solutions are essential for cleaner mobility and to build a low-carbon economy.
How Can Incubators and Accelerator Programs Help Facilitate Climate Change Investing?
Incubators and startup accelerator programs for climate change play a crucial role in extending their invaluable guidance and mentorship to climate tech start-ups.
Collaborations with national and international giants like International Finance Corporation, IMF, NAFCC, and individuals from the private sector are serving as pathways for Indian climate tech start-ups to tap into novel markets and innovative climate technologies.
Through this next-level partnership, climate tech leaders can craft and roll out cost and eco-friendly, powerful climate tech solutions with enhanced efficacy and streamlined precision.
This unified constructive collaboration of efforts propels the swift journey towards a carbon-neutral economy, further bolstering India’s strides as a central climate-tech hub.
However, scaling up and easing climate finance in developing countries to pave the way for sustainable development is not as easy as it sounds. Every developing country has its own complexities. Let’s see how India can minimize the climate finance hurdles to support her budding climate tech startups community:
Investment Requirements
Developing economies like India need significant investments to combat climate change and its adverse effects. If estimated, at least USD 1 trillion is needed for energy infrastructure by 2030. USD 3 – 6 trillion is required across other sectors annually by 2050. In addition to that, funding of USD 140 – 300 billion a year by 2030, and about much higher amounts post-2050 (to adapt climate-related challenges).
Note: The public sector must play a leading role in making the dream of a greener future a reality. Private sector will follow on their footsteps.
Swift Action Needed
The urgency to fight climate change is clear. Boosting private climate financing quickly is more crucial than ever, considering the formidable targets. This need of the hour is elaborated in the Global Financial Stability Report.
Catalyzing Private Climate Change Investing
Here are the 5 potential ways to facilitate investing in climate tech startups and finance solutions that hold importance:
1. Balanced Climate Risk Pricing Approach
Accurate carbon pricing is essential to attract green investing toward climate-beneficial projects.
2. Innovative Climate Financing Instruments
Creative financial tools can help overcome climate investing barriers, encouraging participation from diverse green investors to increase the green tech and climate investment funds–whether private, individual, public, or global groups.
3. Wider Climate Change Investor Base
Expanding the pool of investors to include international banks, investment funds, insurers, impact investors, and philanthropic capital.
4. Multilateral Development Banks (MDBs)
For comparatively less-developed economies, MDBs such as World Bank Group (WBG); comprises IBRD and IFC, Asian Development Bank (ADB), African Development Bank (AfDB), Inter-American Development Bank (IDB), and European Bank for Reconstruction and Development (EBRD) play a pivotal role in funding vital low-carbon infrastructure projects.
5. Guiding Climate-Focused Finances
Developing financial frameworks that identify assets contributing to lowering the carbon emissions over time is important. This encourages businesses of all sizes, even in carbon-intensive industries, to move towards low carbon emission goals.
The Road To A Greener Future
The bottom line of facilitating climate finance/climate change investing in developing nations for climate tech startups is to address the information compiled in this article. Collectively, the aim is to amplify investing in climate change solutions in fastest growing economies, and raise climate investment funds contributing to the crucial battle against climate change and fostering a sustainable future for everyone. And to sustain life on planet Earth!
Further Insights For You:
1. What Is Climate Investing?
2. What Are The Themes Of Climate Investment? Unlocking Investing Opportunities In India
3. What Is ESG Investing and Why Is It Important To Consider?
4. Insights From McKinsey’s Climate Investment Analysis
5. India’s Investment Against Climate Change
References:
1. https://en.wikipedia.org/wiki/Vasudhaiva_Kutumbakam
2. https://en.wikipedia.org/wiki/2023_G20_New_Delhi_summit
3. https://www.theguardian.com/
4. https://cds.climate.copernicus.eu/#!/home
6. https://www.youtube.com/UNITEDNATIONS
7. https://m.timesofindia.com/business/india-business/no-funding-slowdown-for-climate-tech-startups-companies-bag-1-billion-funding-in-first-half-of-2023/articleshow/101464302.cms
8. https://s3.ap-south1.amazonaws.com/cdn.climake.co/reports/2022/The+State+of+Climate+Finance+in+India+2022.pdf
9. https://www.imf.org/en/Publications/GFSR/Issues/2022/10/11/global-financial-stability-report-october-2022#Chapter-2:-Scaling-Up-Private-Climate-Finance-in-Emerging-Market-and-Developing-Economies:-Challenges-and-Opportunities