India’s journey towards a sustainable, low-carbon economy is no longer a matter of policy aspiration but an urgent necessity. As climate change intensifies, the pressure on India’s financial sector to support mitigation and adaptation efforts has grown exponentially. Yet, a critical road – block persists ~ there is a glaring shortage of bankable climate-related projects that can attract steady financing. This is where the concept of a common pool of vetted, high-pro – bability projects, recently proposed by Reserve Bank of India Governor Sanjay Malhotra could be a game-changer. For years, Indian banks and non-bank financial companies (NBFCs) have been cautious about large-scale green financing. Their concern is not ideological; it is commercial. Climate-related projects, particularly in renewable energy, sustainable agriculture, and climate-resilient infrastructure, often carry unfamiliar risks and uncertain returns. This perceived lack of creditworthiness limits their access to traditional financing channels.

Many small and medium enterprises working in the climate sector struggle to present projects that meet the stringent due diligence standards of banks, which further hampers the flow of capital to where it is most needed. The proposal to create a common pool of climate focused, bankable projects addresses this challenge head on. It offers a collective approach to de-risking investments by leveraging the expertise and experience of regulated entities that have already financed similar initiatives. If executed well, it could streamline the vetting process, create standardised frameworks for risk assessment, and build investor confidence in a sector that urgently needs funding. Moreover, such a pool can foster collaboration rather than competition among financial institutions.

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In India’s highly fragmented banking and NBFC sectors, sharing insights on project viability, repayment performance, and risk mitigation strategies could lead to more efficient allocation of resources. Smaller institutions and first-time lenders to the green economy would in particular benefit from access to this collective knowledge and pipeline of projects. The central bank’s emphasis on climate-related financial disclosures and risk management frameworks has already nudged regulated entities towards greater accountability. However, without a robust pipeline of viable projects, policy mandates and disclosure norms can only go so far. India’s estimate of needing over a trillion dollars in green investment by 2030 underscores the scale of the challenge. Beyond the financial system, the success of this common pool approach could have ripple effects on the real economy.

Sectors like energy, transportation, construction, and agriculture stand to gain from easier access to capital for climate-smart technologies and practices. The benefits could be tra nsformative ~ lower emissions, enhanced resilience to climate shocks, and the creation of green jobs. India’s financial sector has an opportunity to lead by example. By embracing collective strategies to address the climate finance gap, it can lay the foundation for a more sustainable and inclusive economic future. The common pool model is not just a proposal ~ it is a necessary step towards unlocking climate finance at scale