Indian releases draft Climate Finance Taxonomy

India’s Ministry of Finance has released a draft framework for the Climate Finance Taxonomy for driving capital to net-zero goals. The framework aims to direct investments towards clean energy and climate-resilient infrastructure. 

The draft provides private market firms, asset managers, and impact investors a standardized, science-based framework that may help them identify credible green and transition investments, reduce greenwashing risk, and gain clarity on policy-aligned sectors.

Let’s explore the draft of India’s Climate Finance Taxonomy in detail. 

About the Climate Finance Taxonomy draft

The Climate Finance Taxonomy draft is a classification system that defines which economic activities are truly sustainable and aligned with India's Net Zero 2070 target and development goals under Viksit Bharat 2047, offering a clear policy-aligned framework for climate-related investments. 

It covers mitigation (GHG reductions, renewable energy), adaptation (climate resilience, sustainable agriculture), and transition (support for hard-to-abate sectors like steel and cement), making it relevant across a range of investment strategies.

Key aspects of the Climate Finance Taxonomy

• The draft aims to unlock an estimated $2.5 trillion goal in green investments by providing transition supportive activities with initial focus on sectors such as power, mobility, agriculture, buildings, and industries like iron, steel and cement. 
• The implementation in the draft suggests it will take place in phases: the Framework and the sectoral annexures. 
• Beginning with a comprehensive framework that outlines the core principles, sectoral coverage, and alignment with India’s net zero target for 2070 and clean energy goals for 2030. 
• Then, sector-specific annexures will follow, providing detailed guidance on eligible activities, quantitative thresholds, and benchmarks. 
• With built-in safeguards like “Do No Significant Harm” and science-based screening, the taxonomy helps investors mitigate greenwashing risks and align portfolios with global and local ESG expectations.

Next steps

The public comments on the draft are open until 25 June 2025; sector-specific technical criteria will follow, offering investors early insight into India’s green finance landscape.

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