Renewed US-India Climate Cooperation Should Focus on Driving Foreign Investment to India’s Green Transition

The United States (US) and India should work together to encourage greater foreign institutional investment in India’s green transition in order to help further progress the global effort to combat climate change, according to a new report from the Center for American Progress and India’s Council on Energy, Environment and Water.

The report recommends that President Joe Biden and Prime Minister Narendra Modi launch a US-India Green Transition Finance Initiative, a program to mobilize private finance for India’s sustainable transition and make it the centerpiece of a new leaders-level climate change strategy.

“Foreign institutional investment can play a critical role in advancing India’s transition to a green economy,” said Alan Yu, senior fellow and director of International Climate Policy at CAP and co-author of the report. “Making progress on India’s green transition would have a major impact in the battle against climate change, boost economic growth through job creation, improve public health, reduce air pollution, and offer long-term positive returns on investment. The United States and India have a shared interest in mobilizing all resources to confront these challenges.”

The report recommends a range of actions, such as green-tagging tools to increase visibility of assets for potential investors, enhanced U.S. International Development Finance Corp. catalytic finance activities in India, and new and transparent payment security mechanisms for power generators and distribution companies.

“India’s energy transition will be determined, in no small part, by the availability and accessibility of affordable capital at scale,” said Kanika Chawla, nonresident fellow at CEEW and co-author of the report. “With India presenting possibly the largest demand for international green capital, and the United States being home to some of the largest supply pools of private capital, a U.S.-India Green Transition Finance Initiative that facilitates private capital to flow into green projects between the two countries would signal the leadership of the two countries and the critical role they must play in advancing the global energy transition.”