Assessing the Role of Green Bonds, Interest Subsidies, and ESG Policies in Driving Private Climate Finance in India within Nationally Determined Contribution Targets

Abstract

India's ambitious climate targets require unprecedented private sector investment, yet the mobilisation of finance for green start-ups and sustainability-driven SMEs remains underexplored. This study uses a secondary data analysis approach, synthesising existing literature, policy documents, and institutional reports from major stakeholders to assess the effectiveness of climate finance tools, including green bonds, interest subvention schemes, and ESG frameworks. The analysis shows that, while green bonds and established ESG frameworks have directed capital towards large-scale renewable energy and infrastructure projects, their full potential to support start-ups and SMEs is limited by low market awareness, high transaction costs, and inconsistent disclosure standards. By reducing capital costs, demonstrating project credibility, and encouraging sustainable innovation, these financial mechanisms hold significant promise for India's climate innovation ecosystem. Recommended targeted changes include unified green taxonomy, enhanced lending mechanisms, and specialized capacity-building programs to augment private sector involvement and generate new development prospects for budding green firms in accordance with India's NDCs.