Green Finance Market in India (2025 - 2030)

India’s green finance market is entering a transformative phase, aligning financial growth with environmental sustainability. Between 2025 and 2030, green finance will become a cornerstone of India's efforts toward achieving net-zero goals. With strong policy support, rising investor interest, and corporate ESG commitments, the sector is positioned to mobilize capital at scale for green infrastructure, renewable energy, and climate-resilient development.

Market insights:

Like green finance for mitigation sectors in India during 2022 - 23 originated from domestic sources, accounting for approximately 83% of total funding from both public and private entities. Like previous years, domestic finance in 2021 - 22 was almost evenly distributed between clean energy (43%) and energy efficiency (41%). Domestic finance rose by 17%, reaching INR 3.09 trillion (USD 41.5 Bn) annually in 2021 - 22, up from INR 2.63 trillion (USD 37 Bn) in 2019 - 20.

Financial instruments like green bonds, sustainability-linked loans, and ESG funds are gaining traction across public and private sectors. India’s renewable energy goals, particularly targeting 500 GW of non-fossil fuel capacity by 2030, are catalysing massive capital requirements, much of which will be sourced through green finance mechanisms.

Public sector banks, multilateral agencies, and private institutions are increasingly integrating green finance frameworks into their lending portfolios. The regulatory environment is also maturing, with SEBI introducing green bond norms and the RBI recognizing climate risk in financial stability assessments. These developments are creating a more structured and transparent green finance ecosystem, opening new avenues for institutional and retail investors.

Market influencers:

Key drivers for green finance in India include strong government support, increasing ESG compliance mandates, global investor pressure for climate-aligned portfolios, and India’s clean energy transition roadmap. National initiatives like the Sovereign Green Bond Program, Production-Linked Incentive (PLI) schemes for green technologies, and urban sustainability projects are fuelling demand for green capital. Moreover, Indian corporates are increasingly adopting sustainable finance practices to attract global investment and align with international reporting standards like TCFD and GRI.

However, challenges persist. The lack of a unified taxonomy for green finance leads to inconsistency in definitions and reporting standards. Many financial institutions face capability gaps in assessing environmental risks and measuring green impact. Greenwashing remains a significant concern, potentially undermining investor trust. Additionally, the underdevelopment of secondary markets for green instruments and the limited participation of small and medium enterprises in green funding ecosystems may restrict market inclusivity and scalability.

Market trends:

Several evolving trends are reshaping India’s green finance landscape. The mainstreaming of ESG investing is prompting traditional financial institutions to embed sustainability metrics into decision-making processes. Sustainability-linked instruments - where financing terms are tied to environmental performance - are gaining popularity among corporate and institutional investors. Fintech and climate tech startups are introducing innovative platforms for carbon accounting, green asset verification, and sustainable investment tracking.