India Can Tap $1.2 Trillion in Institutional Capital For Green Transition: Report
The report says the funding needs are not uniform across sectors and power sector requires the largest amount of capital
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A new report by the Climate Sustainability Initiative in collaboration with National Stock Exchange found that India can mobilise $1.2 trillion from domestic institutional investors by 2050 to support its green transition. This will help bridge the climate finance gap that threatens the country's net-zero ambitions.
The report titled “Accessing Institutional Capital for India’s Green Transition” said that India will require $22.7 trillion in cumulative investments by 2070 to achieve net-zero target, leaving a financial shortfall of $6.5 trillion, citing a Niti Aayog report. The country’s climate transition will need sustained investments across renewable energy, clean transportation,
According to the report, pension funds, insurance companies and mutual funds currently manage about $2.1 trillion in assets and it is projected to rise to $34 trillion by 2050. However, only a small fraction of these assets is currently directed toward green investments.
The report said these investors could contribute about 15%, that is, $1.2 trillion of total green finance needs between 2026 and 2050 as they are structurally suited to provide long-term capital, whereas banks face asset-liability mismatches if too much capital is allocated to long-duration loans, the kind of capital several green technologies need. Mature, contracted assets such as utility-scale solar, wind, transmission lines, and other infrastructure-like projects align well with the long liability profiles of insurers and pension funds.
Power Sector Faces The Largest Funding Gap
The report said these funding needs are not uniform across sectors. The power sector has the largest requirement, at $4.3 trillion through 2050, accounting for about 54% of total net-zero financing needs, with a financing gap of about $2 trillion.
The report estimated that institutional investors could channel around $402 billion into green power projects over the period, primarily through equities, bonds, and alternative investment vehicles such as Infrastructure Investment Trusts (InvITs) and securitisation structures.
The transport sector is also projected to attract $327 billion in institutional finance by 2050, while green industrial projects could receive $476 billion, driven largely by investments in electric vehicles, clean manufacturing, and industrial decarbonisation.
Regulatory Barriers Limiting Green Funds
The report also highlighted significant barriers preventing institutional investors from financing green projects at scale.
Pension funds and insurers remain heavily concentrated in government securities and other low-risk assets due to regulatory requirements, liability-driven investment mandates, and strict credit-rating thresholds. Mutual funds have greater flexibility but require deeper product innovation, and clearer definitions of green assets, the report noted. Pension funds currently allocate only 0.2% of assets to alternative investments despite regulations allowing up to 5%, limiting capital flows to innovative green projects.
Recommendations
The report recommended a combination of regulatory reforms, risk sharing mechanisms, and market innovations. It mentioned partial credit guarantees, green asset securitisation, green InvITs, and green real estate investment trusts (REITs) as the most promising tools and rated them highly on both feasibility and scalability.
The report also called for greater use of blended finance, loan-loss reserves, performance insurance, and targeted tax incentives for green investment products. These measures could help reduce perceived risks, improve project bankability, and attract long-term institutional investors into sectors such as renewable energy, energy storage, green hydrogen and sustainable mobility.