London's financial sector could benefit by financing India's expanding renewable energy sector while furthering its own goal of increasing sustainable finance, the Institute for Energy Economics and Financial Analysis said on Thursday.
London-based institutions helped facilitate some of the earliest sustainable debt deals by Indian issuers. However, deal flows have since slowed amid weaker economic conditions, higher interest rates and currency risk concerns.
"India's clean energy boom is already investable, large and growing fast. The investment fundamentals are improving, offering one of the clearest opportunities for London's financial ecosystem to turn sustainable finance ambition into actual capital flow," IEEFA analysts said.
India, whose renewable energy capacity stood at about 263 gigawatts as of January, is aiming to reach 500 GW of renewable capacity by 2030 and needs significant funding, which creates major investment opportunities.
The country will need about $1.5 trillion in energy transition investment by 2035, IEEFA said, citing Wood Mackenzie forecasts. NTPC, the majority state-owned power utility, alone intends to spend about 40% of its planned $80 billion capital expenditure through 2032, on new renewable capacity.
"While India has managed record renewable capacity additions, continued high costs of capital versus OECD countries risks creating a vicious cycle in which insufficient financing slows deployment, raising transition costs and further deterring investment," IEEFA analysts said.
London's financial institutions should look to reduce this barrier, it said.