Climate Finance Taxonomy: India’s First Framework Explained
Why in the news
India prepared to unveil a comprehensive taxonomy defining which investments count as climate-aligned, to attract domestic and foreign capital for clean energy and adaptation.
Key facts
- Announced: Union Budget 2024 by Nirmala Sitharaman; linked to Paris Agreement obligations.
- Hybrid classification: climate-supportive and transition-supportive investments.
- Two stages: foundational taxonomy, then sector-wise annexures.
- Equal weight to adaptation and mitigation; MSMEs emphasised.
- Verification criteria guard against greenwashing.
- Aligned with net-zero by 2070 and Viksit Bharat 2047.
What a taxonomy does
It classifies green and climate-resilient assets, eligible activities and sector priorities.
Significance
- Clarity for investors on what qualifies as green finance.
- Targeted incentives; helps meet NDCs.
- More private participation in climate finance.
Exam angle
- Drafted by: Department of Economic Affairs.
- Key term: greenwashing.