India has released a draft framework for its first climate finance taxonomy, aimed at directing more investments toward environmentally sustainable projects and enhancing transparency in climate-related financial flows.

Developed by NITI Aayog in collaboration with the International Finance Corporation (IFC) and with support from the Swiss State Secretariat for Economic Affairs, the draft taxonomy outlines clear criteria for defining and classifying green and climate-aligned economic activities across the country.

Designed to guide investors, financial institutions, and policymakers, the framework supports alignment of capital flows with India’s climate commitments, including its nationally determined contributions (NDCs) under the Paris Agreement and its pledge to reach net-zero emissions by 2070.

Targeted Sectors and Development Context

Initially, the taxonomy focuses on five high-impact sectors: energy, transport, buildings, forestry, and sustainable agriculture. It specifies eligible activities and criteria based on key principles such as making a substantial contribution to climate goals and ensuring no significant harm to other environmental objectives.

As the world’s third-largest greenhouse gas emitter, India is also rapidly expanding its renewable energy capacity. The government aims to achieve 50% of its total installed electricity capacity from non-fossil fuel sources by 2030.

India’s taxonomy initiative follows similar efforts in the EU, China, and other countries but is uniquely adapted to the nation’s development priorities and climate challenges.

The draft framework is open for public consultation until June 7, with a final version expected to be released later this year.

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