Off shore renewable energy, clean water systems and sustainable shipping in India, are to get USD $500 million of private investment.

The loan capital will come from a partnership between the private investment arm of the World Bank Group – known as International Finance Group – along with India’s third largest bank, Axis Bank.  

The International Finance Corporation (IFC) – whose largest donor is the UK government – and Axis Bank will also use the capital for green building projects in the country. 

The investment is being referred to as ‘blue finance’, and is thought to be the first of its kind in India with a focus on water systems. 

Blended finance for climate investments in India

The IFC says its mission is to advance economic development by investing in for-profit and commercial projects aimed at poverty reduction and promoting development.

In an announcement about the loan, the IFC said: ‘With India’s rapid urbanisation and economic growth, there is a substantial opportunity to enhance water and energy efficiency.

‘The water and wastewater treatment market size was estimated at $1.6 billion as of 2022 and is expected to reach $3 billion by 2029.

‘Additionally, the green buildings sector presents an investment opportunity of $1.4 trillion by 2030, driven by a need for sustainable infrastructure. Most of these investments need to come from the private sector to offset limited public funding.’

In the IFC’s report last year titled Blended Finance for Climate Investments in India, the organisation says that climate investments could be boosted in India by offering loans with interest free payment terms and lower than market repayments terms.

Directing long-term funding to the blue economy

Amitabh Chaudhry, managing director and chief executive officer of Axis Bank, added: ‘With the increasing effects of climate change into the global ecosystem and the growing awareness of environment sustainability, it’s imperative for banks to adopt sustainable lending practices.

‘We are thrilled to announce our inaugural blue loan in India, marking our largest climate finance initiative in the country to date.’

Makhtar Diop, managing director of IFC added that India serves as an ‘exceptional testing ground for innovative approaches to climate adaptation.

He continued: ‘This loan will not only catalyse private sector investment in this emerging asset class, but also direct long-term funding toward fostering a sustainable blue economy.

Generating green jobs in India through social investment

‘Additionally, it aims to enhance financing for climate projects across India, with a strong emphasis on green buildings that will mitigate climate change impacts and generate jobs.’

As part of its advisory services, the IFC will help Axis Bank grow its green buildings portfolio, including affordable housing projects.

The investment builds on the UK-IFC Market Accelerator for Green Construction Program, a collaboration between the UK government and the IFC. 

Launched at the end of 2023, it was the first UK-IFC bilateral partnership in blended concessional (risk-tolerant) finance for climate change mitigation. The intention is to elevate green construction practices in more than 20 emerging and developing economies.

Claudia Cahalane is investments editor at Alliance.