The Expert Committee on Climate Finance has submitted its first report on Transition Finance to the International Financial Services Centres Authority (IFSCA).
The Expert Committee, established by IFSCA, aims to develop a climate finance ecosystem with a focus on transition finance, providing a roadmap for GIFT IFSC to become a global centre for climate financing. The report highlights the importance of transition finance in driving investments towards hard-to-abate sectors such as steel, cement, shipping, and fertilizers, which are crucial for India’s economic growth and the development of other nations.
The committee, chaired by Dhruba Purkayastha of the Council on Energy, Environment and Water, offers strategic recommendations by exploring global best practices and regulatory landscapes to enhance GIFT IFSC’s role in attracting international climate capital flows. These recommendations aim to create a robust ecosystem for transition finance, facilitating capital mobilization for India’s net-zero goals and serving as a model for other developing economies.
Key recommendations
Key recommendations include identifying 15 high-emission sectors in India as recipients of transition finance and developing a locally relevant taxonomy in collaboration with the finance ministry or the Securities and Exchange Board of India. The report suggests aligning India’s climate finance norms with the Paris Agreement targets and providing clear guidelines for general corporate finance to qualify as transition finance.
To attract international investors, the report recommends allowing compliance with the taxonomies of key jurisdictions and suggests waiving withholding tax on transition finance raised through GIFT until 2030. The committee also advocates for tax incentives for green financial technology firms, credit guarantee funds for high-risk transition finance instruments, and enabling corporate social responsibility funds to invest in green technology development.
The committee emphasises the need for comprehensive disclosures of net-zero targets and decarbonisation roadmaps by companies, as well as climate risk disclosures by financial institutions. It proposes various instruments to raise transition finance, including debt instruments, sustainability-linked derivatives, equity instruments, and alternative investment funds. Additionally, the report underscores the importance of blended finance instruments, trade finance, export credit agencies, and carbon credits in creating customized transition finance solutions for India.
