India’s Green Finance Taxonomy: A Comparative Assessment with Global Standards

Abstract

The importance of green finance has significantly increased, due to growing urgency of climate change and sustainable development. Green finance act as an important mechanism to mobilize capital toward environmentally sustainable activities. A comprehensive taxonomy is essential to identifies and categorizes appropriate green economic activities, thereby enhancing transparency and reducing the possibility of green washing. As a means to define environmentally sustainable economic activity and direct financial flows toward climate-resilient development, green finance taxonomies are crucial. Green finance taxonomies act as an outline for institutions and, investors providing common definitions for sustainable assets, with pillars typically involving the company’s significant environmental contribution, avoidance of considerable harm, and social safeguards. Several nations throughout the globe have developed structured green finance taxonomies, such as China’s Green Bond Endorsed Project Catalogue and the European Union (EU) Green Taxonomy, which offers comprehensive technical screening criteria and disclosure requirements. The green finance ecosystem is evolving significantly in India, with strong support from regulatory measures, such as the issuance of sovereign green bonds, and improved sustainability reporting requirements for businesses and financial institutions. However, the absence of comprehensive and unified global green finance taxonomy raises issues such as uniformity, consistency, comparability, and global coherence.

This research paper aims to analyse India’s new green finance taxonomy and determine its alignment with leading global green finance taxonomy standards. The study utilizes a descriptive and comparative methodology that is entirely based on secondary data drawn from reports, policy documents, and regulatory frameworks published by international organizations such as World Bank, OECD, and European Commission as well as Indian institutions such as the Reserve Bank of India and the Securities and Exchange Board of India. Criteria for technical screening, standards disclosure requirements, sectors covered in taxonomy and the application of the "Do No Significant Harm" principle are the key aspects of comparison in this research paper.

The finding of this study discloses that India's green finance framework partially aligns with international standards, particularly in areas like clean transportation and renewable energy; however, it is still primarily principle-based and lacks specific technical thresholds and uniform disclosure requirements. Furthermore, this research paper concludes that grater alignment with international green finance taxonomies would boost investor confidence, increase market transparency, and strengthen India's entry into global sustainable finance markets. To support the development of robust and internationally aligned green finance taxonomy for India, policy recommendations are proposed in this paper.