UK to Pump $1.2 B into Green Projects in India: 11th Eco & Fin Dialogue

UK to Pump $1.2 B into Green Projects in India: 11th Eco & Fin Dialogue

At the 11th India-UK Economic and Financial Dialogue (EFD) held yesterday, Finance Minister Nirmala Sitharaman and UK Chancellor Rishi Sunak signed off a $1.2 billion package of public and private investment in green projects and renewable energy to boost India’s green growth ambitions.

The dialogue saw the announcement of new steps to tackle climate change and boost investment, driving forward the bilateral agenda of an Enhanced Trade Partnership.

The $1.2 billion package includes comprises a $1 billion investment from CDC, the UK’s development finance institution in green projects in India, joint investments by both governments to support companies working on innovative green tech solutions, and a new USD 200 million private and multilateral investment into the joint Green Growth Equity Fund which invests in Indian renewable energy.

“Indian and UK launching a Climate Finance Leadership Initiative strengthens the partnership between India and UK in the climate space. Given access to finance will be a key factor determining deployment and achievement of the ambitious 450 GW renewable energy target by 2030, this initiative will help in channelising more investment into clean energy in India. While this is a good start, however, India needs US$500 billion of investments by 2030 to achieve the target, implying that more investment needs to come,” said Vibhuti Garg, Energy Economist, Lead India, IEEFA.

The two ministries also launched the Climate Finance Leadership Initiative (CFLI) India partnership. CFLI India aims to work with financial institutions, corporates, and existing sustainable finance initiatives, to accelerate efforts to mobilise private capital into India. The partnership will be led by the CFLI, a group of leading financial institutions responsible for $6.2 trillion of assets, chaired by Michael Bloomberg, and supported by the UK Government, Government of India, the Global Infrastructure Facility, and City of London.

“The UK and India already have strong ties, and today we’ve made important new agreements to boost our relationship and deliver for both our countries,” said Sunak.

“With trade negotiations also coming up, our agreement to be ambitious when considering services will create new opportunities in both markets, supporting jobs and investment in the UK and India,” he said.

At the EFD, both ministers agreed to be ambitious when considering services in the upcoming UK-India trade negotiations and strengthen the financial market collaboration efforts already underway to finance growth.

The UK also welcomed India’s recent decision to lift the Foreign Direct Investment (FDI) cap in the insurance sector from 49 per cent to 74 per cent which will help British firms to take greater ownership of their operations in India.

According to UK government statistics, UK-India bilateral trade stands at around 18 billion Pounds in 2020 and supports nearly half-a-million jobs in each other’s economies.

The countries have set a goal to double trade by 2030, including through negotiating a Free Trade Agreement (FTA) following an Enhanced Trade Partnership (ETP) agreed between Prime Minister Narendra Modi and his UK counterpart Boris Johnson earlier this year.

The joint statement signed at the end of the EFD covers a broad range of areas, including the financial services and opening up new opportunities for UK financial firms and helping more Indian companies access finance in the City of London.

According to official figures, over the last five years, Indian firms have raised GBP 13.41 billion in Masala, dollar and green bonds listed on the London Stock Exchange (LSE), with the LSE dubbed the “largest global centre for Masala Bonds”.

The two governments also welcomed the launch of the India-UK Global Innovation Partnership under the Trilateral Development Cooperation Framework, wherein India and UK will co-finance equally a fund over 14 years to support the transfer and scale up of climate-smart inclusive innovations from India to third countries.

Progress of the UK-India strategic partnership on GIFT City (Gujarat International Finance Tec-City), India’s first International Financial Services Centre (IFSC), to promote links between GIFT City and the UK financial services ecosystem was also highlighted in the EFD joint statement.

“Both countries welcome that UK banks are the first international banks to set up in GIFT City, underlining the strength of UK-India cooperation. Both sides agree to explore facilitating the dual listing of green, social and sustainable bonds on the London Stock Exchange (LSE) and IFSC exchanges, to enable firms to raise foreign capital,” the statement notes.

“The massive scale of India’s low carbon transition will require upfront capital investments. Dedicated funding like this can be used to build new green energy, industry, and urban infrastructure and avoid lock-in to carbon-intensive projects. These new funding initiatives should also prioritize investments in decentralized rural energy and micro, small and medium enterprises (MSMEs), which have great potential to reduce emissions and support livelihoods but have lower capacity to access finance,” said Ulka Kelkar, Director, Climate Program WRI.

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Soumya Duggal

Soumya is a master's degree holder in English, with a passion for writing. It's an interest she has directed towards environmental writing recently, with a special emphasis on the progress being made in renewable energy.