India’s net-zero transition will require a major reorientation of capital towards long-duration, climate-aligned infrastructure, with domestic institutional investors, development finance institutions, multilateral lenders, and catalytic capital providers all playing distinct roles, industry leaders said on Tuesday at the 4th Edition of The Economic Times India Net Zero Forum’26.
Sujit Kumar, Chief Economist, National Bank for Financing Infrastructure and Development, said India has a large pool of patient domestic capital in insurance, pension, and provident funds, but the challenge lies in de-risking infrastructure assets and in easing the flow of this capital into long-term, climate-resilient projects.
Patient capital imperative
Kumar asserted that India’s infrastructure and climate goals are complementary, not conflicting. However, he said building climate-resilient infrastructure will increase capital requirements, and the conventional financing system alone will not be enough to meet that need.
He said institutions such as NaBFID are important because infrastructure finance requires a generational lens. While banks and private equity investors often operate with shorter horizons, climate-aligned infrastructure needs capital that can remain invested for 2 to 3 decades.
“In infrastructure, your perspective has to be generational,” Kumar said.
He added that NaBFID has built a loan book of about ₹1.2 trillion in three years and has a sanctioned pipeline of close to ₹4 trillion, with a large share of lending carrying tenors of four to 15 years. This, he said, positions development finance institutions to operate beyond the timeframes typically served by commercial banks.
Crowding in capital
Michael Steidl, Regional Representative for South Asia at the European Investment Bank, said that multilateral development banks can support India’s net-zero financing journey by entering sectors where private capital remains hesitant due to risk perceptions, long tenors, or weak project bankability.
“We call ourselves the EU climate bank, so this is very close to the heart of what we are and what we do,” Steidl said.
He clarified that EIB’s financing does not come from public grants, but from capital markets, where the bank raises money using its strong credit rating. Its additionality, he said, lies in taking a longer-term approach, signalling confidence to private investors, supporting project preparation, and applying high standards of monitoring, procurement, and environmental and social safeguards.
“When we go and invest in a project, there is already a lot of comfort to the private sector,” he said.
Scaling through aggregation
Arvind Talan, Chief Financial Officer, Energy Efficiency Services Ltd, said India’s experience with demand aggregation offers a model for financing distributed energy transition assets. He pointed to EESL’s work under the UJALA programme, where large-scale procurement helped reduce LED bulb prices sharply and enabled significant energy savings without subsidy support.
“Scale would come, speed would come, opportunity would come when we are able to showcase this as a concept,” Talan said.
He said the same model can be applied to new areas such as industrial motors, super-efficient appliances, smart metering, electric buses and MSME energy efficiency. The core principle, he said, is to create a clear cost-benefit case in which energy savings repay the investment.
“Whenever you are saving your electricity cost, then pay me,” he said, explaining the pay-as-you-save model.
Catalysing emerging sectors
Tanya Singhal, Vice President – India, Global Energy Alliance, said philanthropic and concessional capital must be deployed where commercial capital has not yet entered because business models remain unproven. She said that mature renewable energy projects may no longer need philanthropic capital, but emerging areas such as storage and utility distribution modernisation still require catalytic support.
“If we see a sector which has a high likelihood to grow but is not getting financed, that is something ripe for us to come in,” she said.
Singhal cited the alliance’s support for a battery storage project for Delhi discom BRPL as an example of catalytic capital proving a business model.
She said storage is critical because renewable power remains intermittent, and India cannot keep adding clean energy at scale unless the grid can absorb and manage it.
“Storage is that gap that can help us do that, but that is not getting financed,” she said.
She also identified digital discom as a priority area. Without visibility into load flows, demand patterns and network constraints, utilities cannot plan renewable integration effectively. She said the next phase of the transition should focus not only on adding gigawatts, but on making the grid ready.
“Instead of just thinking about building gigawatts, you have to think about being grid ready,” she said.
Deepening capital markets
Sangeeth Selvaraju, Policy Fellow at the LSE Grantham Research Institute on Climate Change and the Environment, said foreign capital will remain important, particularly in equity financing, but India’s transition will continue to rely heavily on domestic capital. He said global asset owners, such as pension funds, insurers, and sovereign wealth funds, look for competitive hard-currency returns, stronger governance, improved disclosures, and clearer climate transition pathways before allocating at scale.
“They are not going to get the conversation started unless they see competitive hard currency returns,” he said.
He added that India must deepen its capital markets if it wants transition finance to reach beyond large, well-rated assets. Domestic institutional investors, he said, need to move beyond a narrow focus on government securities and high-rated instruments if capital is to flow into lower-rated bonds, MSMEs, and emerging transition sectors.
“Unless we get them to start building out lower-rated bonds, things that are not double A and triple A, the capital has got to go to the MSMEs,” Selvaraju said.
