06 Oct 2026
BlurbThe present article discusses the potential application of India’s green finance taxonomy in climate-positive financing, including climate-friendly investments. The article also addresses ways through which green financing can prevent greenwashing and contribute to achieving India’s decarbonisation aims. The article provides an overview of the climate finance area in India and compares it to South Africa. SummaryWe look at howIndia can develop a credible green finance system that advances India’s environmental goals. The article addresses issues of greenwashing, taxonomies, experience in South Africa, and the need to strengthen green finance. We also examine the difficulties in designing a framework and outline how India can develop its strategy. Finally, we try to understand how green finance can go beyond lip service and truly make a difference in building a sustainable and climate resilient future. Is India’s Green Finance Really Green? A green label is a gate. Who set the lock, and who gets the key? Imagine two Indian companies approaching a bank for money. The first is a renewable energy company building a solar power plant. The second is a steel manufacturer trying to replace its coal-intensive production process with newer technology. Both require finance to reduce emissions but come from different starting points. The solar company may already fit comfortably into a notion of a green investment. The steel manufacturer, meanwhile, is in an industry that is challenging to decarbonise. Its transition could reduce pollution and emissions significantly, but it may rely on fossil fuels while innovative technology is being introduced. Now comes the subjective question: should both projects have access to green finance? If we only finance activities that are already environmentally friendly, we risk leaving some of the largest sources of emissions untouched. But if we allow every company to call its business sustainable because it promises to improve in the future, we risk making green finance another marketing exercise. This is where India’s proposed green finance taxonomy enters the conversation. A taxonomy is not simply a list of green industries. It is a system of criteria that allows us to figure out which economic activities are environmentally sustainable, are making a credible transition and do not meet the required standards. As India develops its infrastructure, industries, and financial markets, we should look beyond the colour of a financial label. We need to ask what the money supports, what environmental improvement it can achieve and who might miss a transition. The challenge is not simply to make finance greener. It is to make a transition credible and accessible. What is a green finance taxonomy, and why do we need one? A green finance taxonomy defines which economic activities qualify as environmentally sustainable or contribute to a recognised environmental aim. It provides financial institutions, companies, investors, and regulators with a common language to discuss sustainability. At first, this may sound like a technical exercise but think about how often we meet words such as green, eco-friendly, climate-conscious, and sustainable. A company may describe a new factory as green because it uses solar electricity. Another may call a building sustainable because it has energy-efficient lighting. A third may issue a bond to finance cleaner transport. All three may be making genuine efforts, however, without clear criteria, it is hard to compare their claims. A taxonomy tries to answer a more precise question: what environmental aim does an activity support, and what proof shows that it satisfies the required standard? For us, the importance of a taxonomy lies in the distinction between a promise and a measured outcome. A company saying it intends to reduce emissions is different from a company showing how much it expects to reduce it, when and how it will verily. This distinction is critical because green finance involves public trust as well as private money. Investors need to know what their money funds and banks need a consistent way to assess projects. Companies need to know what they must prove to make environmental claims. A taxonomy can provide a common one. But is every green-looking project green? Not necessarily. Imagine a commercial building that installs solar panels on its roof. The panels may reduce its dependence on electricity generated from fossil fuels. But what if the building consumes excessive amounts of water, has poor waste management, or is built in an ecologically sensitive area? The solar panels are a good move, but it does not necessarily make every aspect of the building environmentally sustainable. The same problem can exist in transport. An electric bus has no tailpipe emissions while running, but the environmental impact of its battery production, electricity supply and eventual disposal still matters. This is why we need to examine projects, not rely on one attractive feature. A taxonomy should help us separate genuine environmental contributions from claims that are incomplete, exaggerated, or unsupported. It should also consider that environmental performance is not often an all-or-nothing scenario. Some activities are already relatively low-carbon, some are moving away from high-emission practices, and some may have no credible transition plan at all. The challenge is to create a framework that recognises these differences without weakening the standards that make green finance meaningful. Why does India need a taxonomy when it already has green finance? India’s development needs make this question particularly important. We are building roads, expanding cities, improving public transport, increasing electricity generation, and supporting industries that employ millions of people. These activities require substantial investment, and we face the challenge of reducing emissions, improving resource efficiency, and adapting to climate-related risks. India’s transition cannot be achieved by financing renewable energy alone. It requires changes in sectors such as steel, cement, construction, freight, and urban infrastructure. These sectors are intrinsically tied to everyday life. Steel is used in bridges, railway tracks, buildings, and manufacturing. Cement is essential to housing and infrastructure. Transport links workers to jobs and goods to markets. Buildings dictate how much energy and water we consume. If these sectors continue to grow without improving their environmental performance, the costs of development may be harder to manage. At the same time, refusing finance to every high-emission sector is not a realistic solution. Existing factories cannot all shut down overnight and be replaced completely by new facilities. Such an approach could disrupt employment, increase costs, and hinder essential infrastructure development. We need to consider how capital can support a credible transition. A taxonomy can help by clarifying which activities deserve financing because they are already sustainable and which may qualify because they are making credible progress towards an environmental goal. It can help investors find projects that are not yet green but may contribute to long-term decarbonisation. A taxonomy, however, does not create money by itself. It does not guarantee that banks will lend, that investors will accept the risks or that companies will have the technology to transition. Its role is to enhance the quality of decisions around where money goes. How is this connected to India’s development goals? It goes beyond climate policy. SDG 8 – Decent Work and Economic Growth: We need to support economic activity and jobs while ensuring that the transition does not unfairly burden workers. SDG 9 – Industry, Innovation, and Infrastructure: Cleaner industrial processes, resilient infrastructure and technological innovation require long-term investment. SDG 12 – Responsible Consumption and Production: Resource efficiency, waste reduction and responsible production must become part of how businesses run. SDG 13 – Climate Action: Financing emissions reductions and climate resilience is essential to responding to climate change. SDG 17 – Partnerships for the Goals: Governments, banks, companies, research institutions, and climate funds need to work together because no single institution can finance or deliver the transition. A taxonomy can connect these goals to financial decisions. But that connection only becomes important when applying a framework to actual projects and not simply mentioning it in sustainability reports. Who decides what qualifies as green? This is where the issue becomes more complicated. A green finance taxonomy is not a universal definition that every country follows automatically. Different economies have different industrial structures, energy systems, development priorities and climate challenges. A country that has a large share of renewable electricity may have different transition needs than one where coal is deeply entwined with electricity generation and industrial activity. India must develop criteria that reflect its own economic realities while being clear enough for international investors to understand. The Reserve Bank of India, the Securities and Exchange Board of India, the Ministry of Finance and other relevant government institutions all have roles in the wider financial and regulatory environment. Their responsibilities are not the same, and a taxonomy would need clearly defined institutional ownership, coordination and implementation arrangements. For example, financial regulators can set up disclosure and market requirements within their respective mandates. Government departments can shape national climate and economic priorities. Sector ministries can contribute technical knowledge about industrial processes, transport systems and infrastructure. Banks and investors, meanwhile, need to translate those criteria into project screening and lending decisions. But who decides whether a steel plant’s transition plan is credible? Who checks whether a building meets environmental requirements? Who decides whether the social costs of a project are acceptable? These decisions cannot rely entirely on a company’s claims. We need transparent criteria, independent verification where necessary and a clear process for challenging decisions. Otherwise, the taxonomy may become a system in which companies with better consultants and more persuasive reports qualify more easily than those delivering meaningful environmental improvements. The question is not only who writes the rules, but who can understand them, who can afford to comply with them and who is responsible when the evidence does not match a claim. Where does India stand in comparison with South Africa? India is not the only country trying to define credible green finance. South Africa provides a useful comparison because it has also faced the challenge of aligning climate objectives with an economy that relies significantly on carbon-intensive industries. The comparison is particularly relevant because both countries need to address the environmental consequences of economic activity without ignoring employment, energy access and development needs. South Africa’s Green Finance Taxonomy was developed through a collaborative process involving public institutions, financial-sector stakeholders, and technical experts. Its framework is based on environmental objectives and technical criteria, with an emphasis on defining activities that contribute to environmental sustainability. India’s approach should be considered in the context of its own policy development and financial system. The Indian government has been working on a green taxonomy framework while the country’s green finance landscape also includes instruments such as sovereign green bonds and regulatory tools relating to sustainable finance. The important distinction is that a taxonomy is not the same thing as a green bond framework or a disclosure rule. A bond framework explains how a particular issuer intends to use and report on funds. A taxonomy defines the environmental criteria against which activities may be assessed. What can we learn from the comparison? The South African experience shows the importance of having technical criteria that can be used by financial institutions, not just broad environmental language. India needs to develop a framework that is rigorous enough to prevent misleading claims while being flexible enough to acknowledge credible transition activities. We should also look at how the two countries approach the social dimensions of the transition. In economies where employment and local livelihoods are tied to coal, mining, heavy industry and related supply chains, environmental policy cannot be separated from the question of what happens to workers and communities. A project may reduce emissions while causing substantial disruption to a community that depends on an existing industry. That does not automatically make the project a bad choice. The transition plan must address those consequences instead of treating it as someone else’s problem. The comparison also poses a practical question for international finance. If India and South Africa use different technical thresholds, how can investors compare projects across both markets? The answer is not necessarily to copy one country’s framework into another. It is to make the differences transparent and explain the reasons behind them, ensuring that the underlying claims stay credible. A taxonomy should help us understand the transition, not hide its complexity behind a label. When does a project deserve the label? To understand what a taxonomy could signify in practice, it is helpful to think beyond definitions and look at the kinds of projects that could approach a bank or investor for finance. Steel, buildings, and transport serve as three sectors with different potential to contribute towards environmental aims, but also different risks that a credible taxonomy should be prepared to deal with. Case study 1: Steel – can a high-emission sector qualify for transition finance? Steel is vital to India’s development. It finds use in railway infrastructure, housing, machinery, and even renewable energy equipment. But the production process for conventional types of steel is extremely emissions-intensive, particularly when coal-based methods are used. Transitioning away from these processes entails significant investments, technological upgrades, and a long trajectory. Suppose a steel manufacturer proposes to replace its current equipment with more energy-efficient machines, increase the amount of scrap steel being used and transition to lower-emissions production technologies step by step. The company approaches a bank and asks for transition finance. Should the project qualify? The answer should rest on what the company can prove. First, we need to look at the project’s substantial contribution towards any environmental aim. Does the proposed project reduce emissions significantly compared to the manufacturing process currently being used? Is the improvement measurable? Has the company projected a credible timeline? Second, we need to consider if the project has significant adverse effects on other environmental areas. Does it worsen water stress? Does it create added pollution? Are waste materials handled properly? Are hazardous substances controlled? Third, we need to assess the implications of the project for society. What happens to the workers who may be displaced when their production technology is upgraded? Are they provided training? Are they protected from health hazards? Can the local community see shifts in employment patterns and environmental quality? These are crucial factors to ask, as a transition project may not at once reach the performance level of an emissions- or impact-free facility. A taxonomy should therefore distinguish between a project that is genuinely transitioning and one that is simply replicating its operations under a new name. For example, a company cannot simply demonstrate a credible transition by announcing a future ambition and continuing its current course of action. A bank should seek for a documented baseline, a defined pathway for emissions reductions, the investments in this process, the milestones being achieved and a method for tracking progress. The question: Is the financing enabling a measurable change in steel production or just supporting business as usual? India’s electric mobility transition encompasses electric two-wheelers, cars, buses, and other means of transport. Electric vehicles can cut down tailpipe emissions and potentially contribute to overall emissions reductions, depending on the electricity mix and the vehicle’s life cycle. But an electric vehicle is far from impact-free. Battery production requires materials and energy. Battery disposal and recycling need processes. Charging electricity generation affects the overall emissions profile. Suppose a city transport authority has decided to replace some of its diesel buses with electric buses. The project may reduce air pollution and improve the efficiency of public transport. But a taxonomy evaluation should look at more than the number of electric buses that will be acquired. How much diesel consumption will be avoided? What are the emissions reductions expected? Is the charging infrastructure reliable? How will batteries be disposed of at the end of their useful life? Will the buses improve access to public transport for those who depend on it? We should also look at the project in the broader transport context. An investment in public transport may reduce emissions by enabling more people to use it, compared to private vehicles, but a similar project that promotes private mobility use without considering congestion and other transport factors may have different implications. The difference is vital in a financing decision. Finance should support the environmental contribution of the project and not reward the mere presence of a particular technology. The question: Does the project improve the transport system’s performance, and can this improvement be demonstrated? Few Case Studies Case Study 1: India’s Sovereign Green Bonds from fundraising to proving impact India’s Sovereign Green Bonds (SGBs) were issued in 2023 to partially fund climate/environmentally sensitive projects. The interesting twist here is the government’s desire to go beyond ‘raising green money’: the Department of Economic Affairs published the Sovereign Green Bonds Impact Report 2022-23 in February 2026, along with reports on the allocation of proceeds. This has the effect of testing India’s tentative taxonomy – does the project the money is being raised for qualify as green, and can the impact be measured following financing? The issue with the case study then moves the discussion from ‘was it labelled green’ to ‘what did the money do’. Case Study 2: Green Deposits – the issue of defining ‘green’ The RBI’s Green Deposit Framework is another Indian innovation in this area. Banks raising green deposits must follow the specified allocation matrix, which includes renewable energy, clean transportation, sustainable water and waste management, and green buildings among others. Crucially, the RBI insists on mandatory reporting, third party assurance/assessment and impact measurement while acknowledging the risk of greenwashing. Before the final taxonomy is agreed, however, the RBI will use an indicative list of eligible activities. Green deposits then, present another opportunity to explore whether a given classification can truly support genuine environmental finance, or if ‘green’ is likely to be used primarily for marketing purposes. What is substantial contribution, DNSH and social safeguards? Substantial contribution: What environmental improvement does the project deliver? A project should prove its contribution towards at least one recognised environmental aim. That could take the form of reducing greenhouse gas emissions, building climate resilience, reducing pollution, increasing resource productivity, or conserving ecosystems. But one must remember the word large. A minor improvement should not qualify a project for the same treatment as a major environmental transformation. For example, a factory has reduced its energy consumption slightly. This may be good, but the assessment should look at whether this is substantial, in line with the relevant criteria, and the project’s overall environmental performance. A strong assessment requires a baseline, measurable metrics and evidence that can connect the improvement to the project that is being financed. DNSH: Does the project create significant harm elsewhere? DNSH stands for “Do No Significant Harm.” The principle acknowledges that environmental aims are intertwined. A project that reduces emissions may cause significant harm to water resources, biodiversity, or pollution. A solar project, for example, may contribute to cleaner electricity generation, but its location, land use, water requirements, and waste management will need to be assessed. Similarly, an energy-efficient building may reduce electricity consumption, but may also involve significant harm in terms of construction practices and land use. DNSH helps in avoiding a narrow assessment in which one environmental benefit is used to bypass all other impacts. It does not necessarily require each project to have no impact. Infrastructure and industrial projects inevitably have unavoidable impacts, and the purpose of DNSH is to name, prevent, reduce, and manage significant harm according to the set criteria. Social safeguards: Who bears the cost of the transition? Environmental progress should be measured not on the cost that it imposes on people. A factory modernisation project may change the skills needed from its workers. A mine closure may negatively affect local businesses. A transport project may require land acquisition or affect livelihoods. A credible assessment should look at relevant risks and safeguards that can address them. These could take the form of worker health and safety, labour practices, community consultation, grievance mechanisms, fair treatment, and redeployment opportunities, if applicable. Social safeguards should not be considered a box-ticking exercise after the finance decision has been made. They should inform project design, risk assessment, and monitoring from the very beginning. A project that reduces emissions but leaves workers and communities without a plan for managing these consequences raises questions about whether its transition is truly sustainable. The three principles are therefore connected. Substantial contribution asks what environmental benefit is being delivered. DNSH asks what other environmental damage may occur. Social safeguards ask whether the transition is respectful of the people it affects. Why could small businesses be left out of the green finance conversation? The key challenge is not whether large companies can understand a taxonomy. It is whether smaller businesses can afford to prove that they meet its requirements. Micro, small, and medium enterprises, or MSMEs, are key to India’s economy and find existence in a multiplicity of sectors - manufacturing, services, construction, transport, supply chains, among others. Many are likely to want to improve their energy performance, reduce waste, upgrade machinery, or adopt cleaner production methods. Yet they may not have a sustainability department, or the consultants to prepare detailed environmental reports. Imagine a small manufacturing unit that wants to replace its old machine with a more energy-efficient model. The owner knows that the new machine will consume less electricity. The business may have its electricity bills to prove this. But the lender could require a detailed baseline of emissions, documentation of the recent technology being adopted, an environmental screening, a project-level assessment and ongoing reporting. For a large company, this process may be handled by its sustainability department. For a small business, it could incur additional costs and time, apart from unfamiliar documentation. This presents a conundrum: the businesses that need finance to make their environmental improvements may end up being the ones least able to prove that they qualify. A taxonomy that is complicated could inadvertently channel finance to companies that already have the resources to comply. The issue is not that environmental standards should be lowered for smaller businesses. It is about ensuring that compliance is practical and possible. What would help MSMEs? We could start with standardised reporting templates and simplified screening tools for smaller projects. Instead of asking every small business to prepare a lengthy sustainability report, lenders could use relevant indicators, such as energy consumption, fuel use, water consumption, and waste generated. Wherever applicable, the businesses could use verified utility bills, equipment specifications, energy audits, or other accessible documentation to make their case. Banks could also offer technical aid through partnerships with energy auditors, industry associations, and sustainability experts. A small enterprise seeking finance to get a cleaner machine should not have to go through the same administrative process as a large industrial complex, if the scale and risks of the projects are different. At the same time, simplified reporting should not become a loophole for unsubstantiated environmental claims. The aim should be to make reliability easier to achieve, not to remove the need for evidence altogether. What evidence should we demand before accepting a green label? A taxonomy becomes meaningful only once its criteria have been translated into action on the ground. If a company declares that a project qualifies for green or transition finance, we should demand to see the documentation. How do Indian examples bring this debate closer to home? We do not have to look far to understand why a credible taxonomy matters. Several existing Indian initiatives show how environmental aims are being connected to investment, infrastructure, and industrial development. These examples provide context to the kind of activities a taxonomy may need to assess, and the kind of evidence needed. Sovereign green bonds: Where does public finance fit in? India introduced its Sovereign Green Bond framework to mobilise resources for public-sector projects with environmental benefits. The framework provides a way to raise funds for eligible green expenditure, including areas such as renewable energy, clean transportation, energy efficiency and other environmental objectives. This is an important example because it shows how climate-related priorities can be connected to financial markets. However, the distinction between a green bond framework and a taxonomy remains important. A bond framework identifies eligible expenditure for a particular issuance. A taxonomy establishes broader criteria for determining whether economic activities qualify under defined environmental standards. The experience of sovereign green bonds also raises a question about accountability: how do we know that the money raised is being used for the stated purpose, and how do we assess the environmental outcomes of the funded projects? Allocation reports, transparent project selection and impact reporting can help answer those questions. Green hydrogen: Can appearing technology support industrial transition? India’s National Green Hydrogen Mission aims to support the development of green hydrogen production and its use across relevant sectors. Green hydrogen has potential applications in areas such as fertiliser production, refining and industrial processes where reducing emissions can be challenging. For a taxonomy, this creates an important assessment question. A project should not qualify simply because it uses the words green hydrogen. India’s electric mobility initiatives, including support for electric buses and charging infrastructure, give another relevant example. Electric public transport can contribute to lower local air pollution and reduced transport emissions, depending on the electricity mix and the wider system. But a taxonomy assessment should go beyond counting the number of vehicles purchased. It should consider the expected emissions reduction, energy use, charging infrastructure, battery management, and the accessibility of public transport. The wider lesson is that the environmental value of a project depends on how it works in practice, not only on the technology it adopts. Energy-efficient buildings: Can better design reduce future costs? India’s building sector offers opportunities to improve energy efficiency through better design, equipment, and construction practices. The Bureau of Energy Efficiency’s Energy Conservation Building Code provides a policy context for improving the energy performance of relevant commercial buildings. This is useful when considering how a taxonomy could assess buildings. It points towards measurable standards rather than broad claims about sustainability. However, compliance with an energy-efficiency standard should not automatically be presented as proof that a building meets every environmental aim. Water use, construction waste, location, and other relevant impacts still need to be considered. Across these examples, the same lesson appears repeatedly: existing Indian initiatives can provide a foundation, but the taxonomy must make the connection between an activity, its environmental contribution, and the supporting evidence clear. What happens when a project is not fully green yet? This is the most important question in the entire debate. If a taxonomy only recognises activities that are already environmentally sustainable, it may overlook projects that could deliver significant reductions in emissions over time. But if the framework accepts every project that promises to improve, it risks becoming too broad to be useful. We need a way to distinguish between a credible transition and a convenient relabelling exercise. Consider a factory that currently uses a high-emission production process. The company proposes a phased investment programme to improve efficiency, reduce fossil fuel use and introduce cleaner technologies. The project may not qualify as fully green today. However, it could potentially qualify for transition finance if it meets clearly defined requirements. Those requirements should include a credible baseline, measurable milestones, a realistic timeline, and evidence that the project is moving towards a recognised environmental aim. The company should also explain how it will avoid locking itself into high-emission infrastructure for decades. Transition finance should not become a permanent category for activities that repeatedly promise future improvements without delivering them. A credible framework could use periodic reviews to assess whether projects are meeting their milestones. If a company does not meet its commitments, the financing arrangement may need corrective measures or other consequences, depending on the terms and applicable rules. The purpose is not to punish every delay. Industrial transitions can face technological, financial, and supply-chain challenges. But those challenges should be shown and addressed rather than hidden behind a sustainability label. A simple decision tree for green finance Start: What activity is being financed? Find the project, environmental goal and available evidence. Does it meet the relevant technical criteria and prove substantial environmental contribution? Yes Eligible Proceed to DNSH and social-safeguard assessment. Not yet Assess transition Illustrative screening process, not an official Indian regulatory decision tree. Eligibility depends on the applicable taxonomy and its technical criteria. The “not enough evidence” category is especially important. A project should not automatically be treated as environmentally harmful simply because the applicant has not yet supplied sufficient information. But it should not receive a green classification either. This distinction gives businesses an opportunity to improve their documentation while protecting investors from claims that cannot be verified. It also makes the system more transparent. Instead of allowing decisions to depend on informal judgement, the framework can explain what evidence is missing and what needs to be done next. How can India make its taxonomy work in practice? India needs to make the taxonomy more specific and precise, rather than leaving “green” as an umbrella term. The proposed taxonomy for 2025 is already science-based and includes transition arrangements at a country level, and “Do No Significant Harm” principle, among others. It should be expanded to define specific criteria for different economic sectors, including steel, cement, transport, buildings, and other intensive industries, so that the finance allocated to them is genuinely impactful. The second is a critical review and disclosure stage. India has a useful example of a Green Deposit Framework, developed by the Reserve Bank of India (RBI). It requires third-party verification and assessment of deposits, with calculations of emissions averted, renewables generated, and waste recycled. Similar requirements for reviewing green bonds and other securities were introduced by SEBI in February 2026. Thus, India can take advantage of extensive independent expert reviews of ESG-linked financial instruments and their impact to ensure credibility of “green” labeling. The third pillar is redirecting finance, which implies actual transformation. RBI has identified a taxonomy as an essential basis for engaging financial institutions, supervisors, and stakeholders in transitioning towards a sustainable economy. It should be used to align banking activities, including credit allocation, investment, disclosure, and transition finance, with climate goals while being mindful of MSMEs’ needs. The key is to ensure that the finance redirected towards climate goals genuinely impacts sustainability: instead of being an abstract concept, “green” should be quantified in specific emissions reduced, cleaner energy, or other concrete outcomes. First , create clear and measurable criteria The criteria should be specific enough to guide real financial decisions. Broad terms such as “cleaner production” or “sustainable infrastructure” are not sufficient on their own. The framework should explain the relevant thresholds, evidence requirements, and environmental aims. It should also be updated as technologies develop and scientific understanding improves. However, regular updates should not make the framework unpredictable. Companies and investors need reasonable clarity about how criteria may change and how existing projects will be treated. Second, recognise transition without weakening standards India needs finance for sectors that cannot become low carbon overnight. A separate transition pathway could help direct investment towards credible improvements in steel, cement, transport and other difficult-to-decarbonise sectors. But the pathway should require evidence of progress, not just future promises. Clear milestones, monitoring, and transparent reporting can help distinguish genuine transition activities from relabelling. Third, make compliance accessible to MSMEs Smaller businesses should have access to simplified tools, standard templates, and affordable technical support. Banks and financial institutions could work with industry associations, auditors and public agencies to help smaller enterprises measure energy consumption, show improvements, and prepare financing applications. This would help prevent the taxonomy from becoming a system that only large companies can navigate. Fourth, strengthen transparency and independent verification The public should be able to understand why a project has been classified in a particular way. Where proper, independent technical review can strengthen confidence in the assessment. Financial institutions should also show their screening approaches and explain how they watch projects after financing. This does not mean every business must publish confidential commercial information. It means the environmental basis of a financial claim should be sufficiently transparent to be examined. Second, connect finance with technical help A company may have a credible transition plan but lack the technology or ability needed to implement it. This is where partnerships become important. Banks can provide finance, but technical institutions can help find upgrades. Climate funds can support projects that face financing barriers. Industry bodies can share knowledge and help smaller businesses understand the requirements. Public institutions can support common standards and infrastructure, while companies stay responsible for implementing and reporting on their projects. The transition will require more than a financial classification system. It will require a support system that helps projects become eligible in the first place. Who gets the key to green finance? A green finance taxonomy may appear to be a document filled with technical criteria, thresholds, and reporting requirements. But at its heart, it raises a much more human question: who gets access to the money needed to change? A large corporation may have the resources to hire sustainability consultants, prepare detailed reports, and develop a long-term transition strategy. A smaller manufacturer may be trying to replace an inefficient machine while managing everyday costs. A renewable energy developer may already fit familiar definitions of green investment. A steel manufacturer may need years of investment before its production process becomes significantly cleaner. A taxonomy must recognise these differences without allowing environmental standards to become meaningless. If it focuses only on activities that are already green, it could leave some of the most important transition opportunities behind. If it accepts vague promises, it could allow companies to use green labels without making meaningful changes. The way forward lies in combining clear technical criteria with credible transition pathways, strong environmental safeguards, and practical support for businesses. We also need to remember that taxonomy alignment is different from environmental impact. A project may meet a set of eligibility criteria, but the real-world outcome still depends on implementation. A building may meet an efficiency threshold, but its actual energy use needs to be checked. A factory may receive transition finance, but its emissions pathway needs to be tracked. A transport project may buy electric buses, but its broader environmental and social benefits need to be assessed. The label is the beginning of the process, not the end. India’s green finance transition will require cooperation between regulators, financial institutions, industry, researchers, and civil society. It will also require a willingness to acknowledge uncertainty, show shortcomings, and improve the system as new evidence becomes available. The purpose of a taxonomy should not be to make every financial product look green. It should be to help us understand which investments are environmentally credible, which are genuinely moving towards sustainability, and which still need to prove that they deserve the label. Because a green label is a gate. But the real test is not how many companies are allowed through it. The real test is whether the money that passes through that gate helps build a cleaner, fairer and more resilient economy. References Ministry of Finance, Government of India — Draft Framework of India’s Climate Finance Taxonomy (2025) https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2127562&reg=48&lang=2 South African National Treasury — South African Green Finance Taxonomy, 1st Edition (2022) https://www.gov.za/national-treasury ...Read more
