ABSTRACT
This chapter provides several tailored or bespoke innovative financing mechanisms that can drive investments in low-carbon sectors and de-risk potential institutional capital. These instruments are designed to address sector-specific challenges and risks, leveraging diverse capital sources such as public finance, private debt, and sustainable bonds. By mitigating barriers and unlocking funding for climate-friendly projects across various sectors, these innovative financial mechanisms aim to accelerate India’s transition towards a low-carbon economy while ensuring a just and inclusive process.
This first of the chapter explores the role of sustainability-linked instruments or similar outcome-based financing mechanisms in repurposing existing coal power plants into renewable energy projects. The second section of the chapter emphasises the importance of mobilising green finance for micro, small, and medium enterprises (MSMEs). It discusses the challenges faced by MSMEs in accessing affordable financing options to adopt climate-friendly practices. In conclusion, this chapter underscores the critical role of innovative financial mechanisms in addressing the challenges of climate change and facilitating the transition to a sustainable and low-carbon economy. By harnessing these mechanisms, India can unlock the necessary investments, drive technological advancements, and foster a conducive environment for climate-friendly projects, ultimately contributing to global efforts to combat climate change.
