India needs a common taxonomy for just transition financing: Report 

India lacks a common taxonomy for just transition financing, making it difficult to define, measure, and align financial flows, according to a new report by the Institute for Energy Economics and Financial Analysis (IEEFA). 

As climate commitments in India are accelerating, the energy transition must also be just—meaning that the shift away from fossil fuels should be inclusive, equitable, and supportive of workers and communities dependent on carbon-intensive sectors like coal, steel, cement, and automotive.

Stakeholders emphasised the need for clarity on what constitutes just transition-aligned finance to mobilise capital effectively. 

The just transition (JT) financing ecosystem involves coordination across regulators, ministries, financial institutions, corporates, and civil society, each playing interlinked and critical roles.

While sustainable finance is evolving in India, there is a significant gap in funding for social priorities such as worker reskilling, community resilience, and regional economic diversification.

“Capital can be mobilised through public and private sources, guided by ministries via blended finance and incentives. Corporates and their supply chains are key to implementation, especially in high-emission sectors,” says the report’s co-author, Gaurav Upadhyay, Energy Finance Specialist, IEEFA.

Financial instruments like PSL (Priority Sector Lending), green deposits, and sovereign green bonds can be modified to include JT-aligned eligibility and impact criteria.

“For instance, Sebi has initiated sustainability reporting through BRSR and ESG-linked products, but JT indicators are still missing. Expanding BRSR to include social risk and JT metrics could help channel capital toward companies with credible transition plans,” says Labanya Prakash Jena, co-author and sustainable finance consultant at IEEFA. 

Investing in capacity building, financial innovation, and inclusive planning will ensure that India’s energy transition not only mitigates climate risk but also empowers its people and regions for a more equitable future.