Investors role in India's Net Zero Emissions target by 2070

Investors role in India’s Net Zero Emissions target by 2070

To combat climate change, India will need to strike a delicate balance between the seemingly competing objectives of higher economic growth and lower carbon pathways. India is a developing country with low per capita energy use. Even historically, India’s contribution to cumulative global emissions has been only around 4%, despite having a much larger share of the world’s population. But the country is the third largest emitter currently, with considerable energy needs to support its projected demographic transition, urban expansion, and infrastructure development.

Lets explore how India aims to achieve its ambitious net-zero emissions goal by 2070, and the critical role investors will be playing in balancing economic growth with environmental sustainability.

India’s Delicate Balancing Act: Economic Growth Vs. Lowering Emissions

India has a challenging road ahead as it aspires to reach net-zero emissions by 2070. With its current position as the third-largest global emitter of carbon emissions, the country faces the intricate task of juggling robust economic development with ambitious climate action. While contributing just around 4% to the world’s cumulative emissions, India’s annual carbon emissions rose by an alarming 11% in 2021, making the nation’s net-zero goal a subject of acute importance.

Current Commitments: A Good But Insufficient Start

India has taken commendable steps towards mitigating climate change, such as setting renewable energy targets and rolling out initiatives in electric vehicles, green hydrogen, and solar technology. The government has even earmarked budget allocations specifically for climate actions. Despite these initiatives, the path to achieving the Paris Agreement’s 1.5°C temperature limit still looks arduous. A looming investment deficit, estimated to be as high as USD 3.5 trillion, could further delay the country’s journey to net zero by 2070.

The Pivotal Role of Corporate India

The corporate sector in India has a significant role to play in bridging the investment gap and driving the country towards its climate goals. With access to technology, resources, and vast networks, even small steps taken by Indian companies can trigger a substantial impact. Unfortunately, a majority of corporations have not fully committed to transparent and actionable climate strategies, leaving an opportunity for investors to step in and encourage better practices.

Shortcomings in Corporate Climate Commitments

While most companies in India’s NIFTY 50 index have some form of climate policy, these often lack specificity and transparency. Only six companies have verified decarbonization pathways, and there’s a lack of information on what kind of investments in R&D and innovation are being made to achieve their climate goals. Furthermore, corporate governance around climate action leaves much to be desired.

The Rising Role of Investor Stewardship

Investors are increasingly becoming the catalysts for driving corporate sustainability. Global asset managers committed to the Paris Agreement’s goals are redirecting their focus towards net-zero portfolios. Investment decisions are now being influenced by climate risk considerations and are further enforced by targeted dialogues and the possibility of divestment.

A Symbiotic Relationship: Investors and Corporate India

The Indian business landscape is experiencing heightened scrutiny from investors who are not just risk-averse but are also keen on driving change. Investors are emerging as key players in promoting transparency and accountability in environmental actions, thereby aligning economic growth with climate action objectives.

Towards a More Sustainable Future

With India’s accelerating economic growth and natural advantage in renewable energy, investors have a golden opportunity to direct their capital towards meaningful and high-impact climate initiatives. Over time, the investor-corporate dialogue is expected to shape accountability, thus ensuring that the journey towards net zero is not just aspirational but achievable.

By concentrating on projects that not only yield economic value but also contribute to sustainability, investors can help India achieve the delicate balance it seeks. After all, the road to net zero is long and winding, but with the collective effort of governments, corporations, and investors, the destination is not out of reach.