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As the world rallies behind the theme “Our Power, Our Planet,” the imperative to accelerate renewable energy adoption has never been clearer. The Banking, Financial Services, and Insurance (BFSI) sector stands at the forefront of this transformation, wielding immense influence to shape a sustainable, low-carbon future. For regions like India and MENA, where economic growth and climate vulnerability intersect, the BFSI industry’s role is both a responsibility and an opportunity.
Global renewable energy targets are not just aspirational—they are essential to limit global warming to 1.5°C and meet the Paris Agreement goals. Achieving these targets demands a dramatic scaling up of clean energy investments, policy innovation, and cross-sectoral collaboration. According to IRENA, renewable energy capacity must be scaled up at least six times faster to meet these goals, with renewables comprising up to two-thirds of total energy consumption by 2050.
India’s rapid economic growth and rising energy demand have made the transition to renewable energy an urgent national priority. The country is the world’s third-largest energy consumer, with an import bill for fossil fuels reaching $185 billion in 2022. This heavy reliance on imported oil and coal exposes India to global price shocks and geopolitical risks, threatening both economic stability and energy security.
Renewables offer a sustainable solution, providing clean, indigenous energy that can help India reduce its dependence on fossil fuel imports. As of December 2024, 45% of India’s installed power capacity comes from renewables, positioning the nation as a global leader in clean energy expansion. Solar power, in particular, has become cost-competitive, with tariffs dropping as low as ₹1.99 per kWh, driving significant public and private investment.
The environmental imperative is equally strong. India has committed to reducing projected carbon emissions by 1 billion tonnes by 2030 and achieving net-zero emissions by 2070, in line with its Paris Agreement and Glasgow COP26 pledges. As Prime Minister Narendra Modi stated, “India’s climate actions have always been guided by our belief in the need to balance development and environment. We are moving forward with a clear roadmap to achieve our climate targets.”
Beyond climate and energy security, the renewable sector is a powerful engine for economic growth and job creation. According to a CEEW-NRDC report, India could generate 3.4 million jobs by 2030 through renewable energy expansion. Initiatives like the PLI scheme for solar modules and the National Green Hydrogen Mission further reinforce the government’s commitment to a sustainable, self-reliant energy future.
The BFSI sector is pivotal to India’s renewable energy ambitions. As the primary allocators of capital and risk managers, banks, investors, and insurers can accelerate the transition by channeling finance into clean energy projects, de-risking investments, and supporting innovation across the value chain.
Banks in India play a crucial role in financing the renewable energy transition by providing the large-scale capital necessary for project development, construction, and operation. Despite the growing importance of Non-Banking Financial Institutions (NBFIs) like REC Limited and Power Finance Corporation (PFC), banks remain key financiers, especially public sector banks such as State Bank of India, Union Bank, and Canara Bank.
Investors, including institutional funds, private equity, and foreign investors, are vital for providing the long-term, patient capital needed for renewable infrastructure. India’s renewable sector has attracted significant foreign investment, with international lenders and funds increasingly participating in project financing.
Insurers underpin the renewable energy transition by managing and mitigating risks associated with project development, construction, and operation. Given the complexity and novelty of many renewable technologies, insurance products are critical to unlocking financing and ensuring investor confidence.
The renewable energy transition in India requires a concerted effort from the BFSI sector. Banks must scale up green lending and innovate financial products; investors need to channel long-term capital and drive ESG stewardship; insurers must develop risk mitigation solutions tailored to renewable projects. Together, these actors can unlock the trillions of rupees needed to achieve India’s ambitious renewable targets, ensuring energy security, economic growth, and climate resilience.
As Shri Harsh Baweja, Director (Finance) of REC Limited, aptly summarized, “By stepping up investments, offering financial structured products, fostering infrastructure development, and supporting innovation, financial institutions play an instrumental role in ensuring India meets its ambitious renewable energy targets. They have a larger appetite to fund renewable power projects, this is up to 30% of their Tier 1 capital to a single borrower and 50% of their Tier 1 capital to a single group of borrowers.”
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