NEW DELHI – India faces a critical imperative to integrate social equity into its rapidly accelerating clean energy transition, according to a new report released by the Institute for Energy Economics and Financial Analysis (IEEFA) on July 7, 2025. The report underscores a significant gap in financing for social priorities such as worker reskilling and community resilience, urging a coordinated, multi-stakeholder approach to establish a robust Just Transition (JT) financing ecosystem across the nation.

The IEEFA analysis highlights that while India's sustainable finance landscape is evolving, capital flows for social dimensions of the transition remain limited. This deficit poses a risk to the equitable shift away from fossil fuels, potentially leaving communities and workers in carbon-intensive sectors like coal, steel, and automotive vulnerable. The report advocates for a phased roadmap, beginning with pilot projects and fiscal incentives, progressing to medium-term regulatory scaling, and culminating in long-term structural reforms to embed JT principles across all sectors and institutions.

Regulatory bodies such as the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) are identified as pivotal in aligning financial flows with sustainability goals. Labanya Prakash Jena, co-author and sustainable finance consultant at IEEFA, noted, “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.” Similarly, the RBI can adapt tools like Priority Sector Lending (PSL) and Sustainability Linked Loans (SLLs) to support JT-aligned investments in vulnerable regions.

Government ministries, including the Ministry of Finance (MoF) and the Ministry of Environment, Forest and Climate Change (MoEFCC), are tasked with shaping the strategic and fiscal frameworks. Sangeeth Raja Selvaraju, Policy Fellow at the Grantham Research Institute at LSE and a report author, emphasized, “The MoF can embed JT into India’s fiscal framework by aligning green taxonomies, allocating resources, and creating a dedicated fund for affected regions and communities.” The MoEFCC can leverage initiatives like the Green Skill Development Programme and tap into international funds to advance workforce transitions and community resilience.

Corporates, though gradually integrating JT considerations, face challenges such as high transition costs and limited access to finance for Micro, Small and Medium Enterprises (MSMEs). They seek clearer policy guidance and supportive regulations. Gaurav Upadhyay, Energy Finance Specialist at IEEFA and co-author, stated, “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.”

Ultimately, a successful Just Transition in India necessitates sustained coordination among ministries, regulators, state governments, corporates, and civil society. Investing in capacity building, financial innovation, and inclusive planning will ensure India’s energy transition not only mitigates climate risk but also empowers its people and regions for a more equitable future.