The recently concluded COP29 left many people disappointed due to a lack of progress on critical issues. The Western world offered insufficient climate finance, while major polluters sought to undermine the fossil fuel phaseout commitments made at COP28 in Dubai.
The science on the devastating impacts of climate change is unequivocal. Both the Intergovernmental Panel on Climate Change (IPCC) & the International Energy Agency (IEA) have stressed the urgent need for immediate &
drastic reductions in greenhouse gas emissions to limit global temperature increases to below 1.5°C or 2°C.
Although India’s per capita emissions are less than half the global average, it is currently the world’s third-largest emitter of carbon dioxide, placing a significant responsibility on the country to reduce its carbon emissions.
As a developing country, India has huge infrastructure needs & power demand is expected to soar in the coming decades. The country is therefore at a critical juncture. India must decide whether it will build its future on highly polluting coal power plants or invest in renewables such as wind and solar, which are among
the most affordable and cost-effective means of generating electricity in the country.
India’s future trajectory will depend on its political will and its ability to access international financial pools. This is why monitoring investments in coal versus renewables is important. While continued year on year growth in renewable investments offers hope, the easy availability of funds for expanding coal projects underscores the risks.
We have been analysing financial flows into coal and renewable energy for the past few years, & we can now see a consistent year-on-year increase in project finance for wind & solar projects. However, the previous analyses only focused on project finance, leaving out a significant flow of funds via corporate finance.
We expanded the scope of this seventh annual report to include corporate finance, to offer a more comprehensive view of energy finance trends in India. By comparing project finance with corporate finance, the report highlights key differences in how funds flow between coal power & renewable energy projects.
Trends in project and corporate finance in India align with global patterns.
Project financing for coal power projects has declined to negligible levels, while corporate finance for coal-dominated companies remains substantial. For context, corporate finance into coal projects nearly equals project financing into renewables. Renewable energy projects received project financing worth approximately INR 30,255 crore (USD 3,663 million) in 2023, whereas coal-dominated companies secured about INR 25,945 crore (USD 3,141 million) in corporate finance.
Corporate finance is not tied to specific assets and hence does not necessarily fund coal expansion projects directly. However, companies generating most of their revenue from coal often use additional financing to expand their coal power assets. Past instances of funds raised for green energy projects being diverted to expand coal mines in Australia underscore this risk.
Our analysis reveals that 65% of the corporate finance for coal-linked companies in India originated from U.S.-based banks. Notably, Jefferies Financial Group provided nearly 65% of the total corporate finance to coal-linked companies like Adani & JSW Energy, with the majority allocated to Adani. In 2022, Jefferies also participated in underwriting for Adani & financed Australian coal companies.
On a positive note, project financing for renewable energy projects in India has doubled, with over 70% of the funding directed toward new projects. While this year-on-year growth falls short of what is needed for India to achieve its 2030 renewable energy targets, it provides a glimmer of hope that with increased investment & policy support, progress will continue in coming years.
Read and download the report here: Coal vs RE Investment Report 2024