“Our Power, Our Planet”: The Role of BFSI in Achieving Global Renewable Energy Targets

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. 

Why Renewable Energy Targets Matter

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 Role of Banks, Investors, and Insurers in the Transition

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: Driving Capital Deployment and Innovation

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. 

Key actions for banks include:

• Adopting Renewable Energy Financing Obligations: As emphasized by MNRE Secretary P.K. Singh, banks need to adopt dedicated renewable energy financing obligations to meet the sector’s massive investment requirement, estimated at ₹30 lakh crore (approximately $360 billion) by 2030. “There is a need for a renewable energy lens and then working from that perspective. Climate change goals cannot be achieved till India de-carbonises,” Singh remarked

• Scaling Green Lending: Banks should increase credit allocation to renewable projects, including solar, wind, and emerging technologies like green hydrogen. This involves not only direct lending to project developers but also supporting NBFIs that specialize in infrastructure finance.

• Innovating Financial Products: The expansion of green bonds, sustainability-linked loans, and structured finance instruments can attract diverse investors and reduce the cost of capital. For example, refinancing long-term loans with extended maturities, as Adani Green Energy did in 2025, helps align debt servicing with project cash flows, improving financial sustainability. 

• Enhancing Risk Assessment: Integrating climate and ESG risk assessments into credit appraisal processes ensures that banks support financially viable and environmentally sustainable projects.

• Supporting MSMEs: Through partnerships with institutions like SIDBI, banks can facilitate green financing for micro, small, and medium enterprises (MSMEs), enabling decentralized renewable energy deployment

Investors: Channeling Long-Term Capital and Stewardship

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.

How investors can support the transition:

• Increasing Allocation to Renewables: Investors should prioritize renewable energy assets in their portfolios, recognizing the sector’s growth potential and alignment with global sustainability mandates. A fund manager noted, “India’s renewable energy market offers attractive risk-adjusted returns and aligns with our global sustainability mandate.”

• Engaging in Active Stewardship: Investors can influence companies and developers to improve ESG practices, enhance transparency, and adopt science-based targets.

• Supporting Innovation and Early-Stage Ventures: By investing in startups and emerging technologies such as energy storage, green hydrogen, and smart grids, investors can help accelerate the next wave of clean energy solutions.

• Utilizing Alternative Instruments: The rise of non-convertible debentures (NCDs) and green bonds provides investors with diversified, rated investment options in the renewable sector, as seen with JSW Energy and SWELECT Energy’s recent issuances

Insurers: Mitigating Risks and Enabling Project Viability

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.

Insurers can contribute by:

• Developing Specialized Insurance Products: Tailored coverage for risks such as weather variability, technology performance, and regulatory changes can reduce uncertainties for developers and financiers.

• Promoting Risk-Sharing Mechanisms: Collaborating with banks and investors to structure insurance-linked securities or guarantees that de-risk large-scale renewable projects.

• Integrating ESG in Underwriting: Factoring climate risk and sustainability criteria into underwriting processes helps align insurance portfolios with the energy transition.

• Supporting Innovation: Providing coverage for emerging sectors like green hydrogen and battery storage encourages investment in cutting-edge renewable technologies.

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.”