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The Ministry of Finance has released the Draft Framework of India’s #Climate #Finance #Taxonomy, and for anyone working in sustainability, finance, policy, infrastructure or #ESG, this is a document that demands your attention.
What is it?
The Climate Finance Taxonomy is India’s first official classification system to define what qualifies as a “climate-aligned” activity or investment. It aims to bring clarity, prevent greenwashing, and ensure that climate finance flows into projects that actually contribute to mitigation, adaptation, or transition.
What It Contains?
1. A Hybrid Approach – India’s taxonomy will blend #qualitative and #quantitative criteria:
- Qualitative: Broad principles that align with India’s climate goals (e.g. Net Zero by 2070, energy security, resilience)
- Quantitative: Performance thresholds like #GHG intensity reduction, emission factors, efficiency benchmarks, and best-in-class standards to be developed over time
2. Phased Development
- Phase 1: Establish the broad framework and classification logic
- Phase 2: #Sector-specific annexures with detailed thresholds, to be reviewed and updated over time
3. Two Activity Baskets : Every activity/project will be placed in one of two categories based on its climate alignment:
A. Climate Supportive Activities
- Tier 1: Absolute GHG emission #avoidance, high-impact adaptation, renewables, clean energy
- Tier 2: Projects that improve #efficiency or resilience but have some #emissions due to current technological or economic constraints
B. Transition Supportive Activities
- These are projects in #hard- #to- #abate #sectors (like #steel, #cement, etc.) where no viable low-carbon alternatives currently exist in India. These must still show: Defined emission reduction pathways, No long-term risk of stranded assets, Alignment with India’s policy and developmental roadmap
4. Sectoral Coverage
- #Power: renewables, nuclear, thermal upgrades, green hydrogen
- #Mobility: EVs, public transport, green logistics
- #Buildings: energy efficiency, sustainable construction
- #Agriculture, Water, Food Security: adaptation, irrigation, resilient crops
Hard-to-Abate Sectors: steel, cement; others to be added progressively
