Posted on: Nov 10th, 2021

A Snapshot of Urban Green Finance in Two Indian Cities

Case Studies of Hyderabad and Kolkata

Around 40% of India’s population will live in cities by 2036, according to government projections, but climate change is already exposing these urban areas to extreme water and heat stress. At present, more than 40 Indian cities are listed in the world’s 100 most vulnerable cities to environmental and climate related events (Verisk Maplecroft 2021). The COVID-19 pandemic has only intensified these issues, increasing food insecurity and unemployment among India’s urban poor in recent years (Bhalotia et al. 2020).

The governing bodies that oversee India’s cities and states face formidable and complex challenges in bridging the urban development gap in this context. Addressing these challenges will require a systematic and comprehensive assessment of the current levels of urban green finance directed to climate change mitigation, adaptation and other environmental activities. This will help to map the role of relevant stakeholders and enhance understanding of governance and financing structures.

Increasing the transparency and accountability of urban climate governance in this way will serve as a starting point for identifying investment gaps and exploring opportunities for mobilizing new resources. It will also help to identifying ways to mainstream climate change and environmental objectives at central-, state-, and city-level through a well defined sectoral planning and budgeting process. With these aims in mind, this study examines the landscape of urban green finance in two Indian cities, Hyderabad and Kolkata. It maps the flow of green finance from public and private sources towards sectors contributing to climate change mitigation and adaptation in these two cities.

The sectors included in this study are:
• Clean Energy and Energy Efficiency
• Sustainable Transportation
• Waste and Water Management
• Air Quality
• Disaster and Risk Management
• Urban Green Coverage, Conservation and Biodiversity

The key findings of this report are as follows:

• State governments are key players in Indian climate policy and finance. Under India’s multi-level governance structure, states dominate policy implementation and financing of projects in sectors relevant to climate change action in cities. Understanding the role of state governments, sometimes more than city governments, is crucial to the analysis of urban climate action and finance in this country.

• Cities require support to tap into broader climate priorities and financing pools. A conducive environment for policy, institutional and financial support, will help urban local bodies (ULBs) to build synergies with national- and state-level climate priorities, and explore new and innovative financing mechanisms to drive climate action.

• More robust data collection processes will support implementation and tracking. A number of national and state policies, schemes and missions provide strategic guidance for cities pursuing climate action. Harmonizing and centralizing data collection will help track progress on their implementation.

The COVID-19 pandemic has increased pressure on governments to ensure that scarce public financial resources create long-term sustainable impacts. This is particularly important for countries such as India, where rapid urbanization and climate change are stretching resources even further. India should tap into a mix of domestic and international sources of capital and use innovative financial instruments to build resilient infrastructure for sustainable urban development. As this study shows, this will require clear, coordinated action by national, state and local government bodies.