India’s state-run development financial institution, the Small Industries Development Bank of India, has for more than two years been working to support climate mitigation and adaptation among the country’s millions of micro and small businesses. Its Green Climate Finance vertical has deployed more than $1 billion in green loans to small businesses delivering or adopting renewable energy, energy efficiency and electric mobility, as well as support for efforts in the circular economy and climate adaptation.
Now, to ramp up a new $4 billion program, SIDBI has secured a $215 million commitment from the Green Climate Fund.
“That is going to be one of the largest programs for micro and small businesses — not only in India, in the entire world,” said SIDBI’s Rajiv Kumar. “We’re going to touch the lives of more than 11 million people over the next three years.”
The blended finance deal, which the Green Climate Fund is delivering in a mix of grants and debt, represents what India’s climate and impact investors say is needed to help India finance its green transition, adapt to climate change, and achieve its sustainable development targets.
India’s blended finance market has grown nearly 8x since 2010, reaching $1.3 billion in 2022, according to a report by Asha Impact and the Impact Investors Council, or IIC, a trade body. The blended finance network Convergence reports that blended finance transactions worldwide topped $15 billion last year.
“There’s a growing global and local interest, but the bottom line is that it’s still hard work,” said Prachi Jain Windlass of the Michael & Susan Dell Foundation at IIC’s biennial impact conference in Delhi.
India’s capital gap for achieving the UN Sustainable Development Goals is $200 billion annually, said Windlass. India’s total social spending, including government spending, is $300 billion.
Meanwhile, combined private philanthropy, including corporate social responsibility funds, add up to $15 billion, while official development assistance to India is only around $3 billion.
“No matter which way we look at it, we need to narrow this funding gap,” Windlass said.
Blending finance has a good track record, she noted, leveraging an average $4 in private finance for every $1 of catalytic investment. “That’s the kind of quadrupling we need.”
SIDBI is looking to raise an additional $16 for every $1 of capital from the Green Climate Fund.
Battery deployments
That kind of investment escalation is on the minds of India’s renewable energy and green infrastructure developers. Two-thirds of the India of 2047 has yet to be built. Unlike today’s developed nations, India is looking to chart a greener path to growth. Large renewable energy and electric vehicle subsidy programs will play a key role, even though they’re working at odds with increased coal production.
“The task ahead for India is something the world has never seen,” said Saurabh Kumar of the Global Energy Alliance For People And Planet.
GEAPP, an initiative of the IKEA and Rockefeller foundations and the Bezos Earth Fund, is leveraging concessional capital and pooling commercial funding for battery storage development projects to support India’s goal of generating 500 gigawatts in renewable energy by 2030.
working on battery storage developments in the country to align with India’s plan of generating 500 gigawatts in renewable energy by 2030. In order for all of that new energy to be integrated into the grid, India will need 47 gigawatts of battery storage capacity, said Kumar.
The first “grid-scale battery energy storage plant in India” is expected to be commissioned by mid-February and will have the ability to store 40 megawatts of power. GEAPP is also helping utilities build battery storage pilots.
“We hope these actions catalyze at least five to 10 gigawatts in the next two to three years,” said Kumar.
Circular solutions
Climate tech has been a major focus for impact investors in India. While most investment capital has so far gone to renewable energy and electric vehicle companies and infrastructure, investors are also looking at new innovations.
One emerging sector is India’s circular economy, particularly recycling agricultural and textile waste. Reclaimed straw, agricultural fiber pulp and other waste produced in India could yield 11 million tons of new materials annually, according to Canopy, a nonprofit working to transform supply chains to stop global deforestation.
“This is where we think India is really going to shine,” said Valerie Langer of Canopy.
Developing new and upcycled materials will require $13 billion to $15 billion in investment. “Because these are new technologies, there’s room for venture capital to come in,” said Langer. “It feels like this is the right time.”
