India submitted its updated Nationally Determined Contributions (NDCs) to the UNFCCC under the Paris Agreement recently in August 2022. This is the first step towards formalising the five commitments made by the Prime Minister at Glasgow in 2021 and the first step towards the goal of net-zero by 2070. It is imperative however that India achieves its climate goals on time. There is a clear need to mobilise domestic and international funds in order to achieve these targets as climate finance is crucial to meeting India’s commitments towards climate action. This is explicitly mentioned in the updated NDCs as well that the goals are contingent on the availability of low-cost finance and technology transfer. 

Following this, investment in climate tech and innovation is critical. Startups, particularly, play a vital role in catalysing change. India is currently home to almost 73,000 DPIIT recognised startups as of June 2022. This makes India the third largest ecosystem in the world for startups. The credit goes mostly to the Startup India Scheme which has made headway for not just startups but also the number of jobs. Most of these startups fall in the fintech or agricultural sector. In the climate tech sector, the funding is limited to renewable energy and electric vehicles and not much in innovative startups. This is understandable since risk perception in climate tech investment is significantly different compared to fintech or IT. 

The report finds that funding is available for early stage startups mostly in the form of grants. However, when it comes to the later stages of expansion, funding is generally inadequate for the ‘missing middle’. There is an urgent need to support the scale up process in startups in the form of either grants, equity or low cost debt. The government can play an important role in improving the risk perception by buffering the investment process through a climate specific fund for startups. 

This report reviews the opportunities and challenges and provides potential solutions to accelerate climate tech finance in the country. It is aimed at policy makers, incubators and accelerator programmes, impact investors and entrepreneurs who want to address problems in the climate and energy space. 

Read the complete report here.