Climate finance is next chapter in UK-India economic partnership

This article is authored by Leslie Maasdorp, CEO, BII.

The UK and India share a common vision: A net-zero future that delivers affordable, reliable energy while strengthening long-term energy security. Linked by decades of friendship, a free trade partnership and an increasingly ambitious economic relationship, our two countries have continued to deepen cooperation across trade, technology, and innovation. Today, another opportunity stands out, one that has the potential to define the next phase of the UK–India partnership. Climate finance is no longer simply an enabler of the energy transition; it is fast becoming one of the defining pillars of our bilateral economic relationship.

Climate Finance (Representative)

The conversation around the climate crisis has matured considerably. It is no longer only about emissions targets or environmental commitments. Increasingly, it is about economic resilience, energy security and sustaining long-term growth. For India, one of the world's fastest-growing major economies, the question is no longer whether the clean energy transition will happen, but how it can be financed at the pace and scale the country requires.

India's energy transition is already well underway. Renewable energy capacity has expanded rapidly over the past decade, establishing the country as one of the world's leading renewable energy markets. In 2024, fossil fuels still supplied 78% of India’s electricity generation, while low-carbon sources supplied 22%. Wind and solar together contributed around 10%, with hydropower remaining the single largest clean energy source at about 9%. Since then, India has continued to expand its renewable energy footprint, with installed renewable energy capacity now exceeding 220 GW. In 2024, it overtook Germany to emerge as the world's third-largest generator of electricity from wind and solar. Together, these milestones underscore both how far India has come and the scale of the investment still needed to complete the transition.

This is where climate finance moves from being a development issue to becoming an economic imperative. India has well-established and increasingly sophisticated capital markets. But the scale of investment required for clean energy, transport and industrial decarbonisation extends well beyond what public finance and domestic banking systems can provide on their own. Global private capital is available, but it requires risk sharing, local expertise and credible investment platforms that can channel long-term finance into projects at scale.

This is where the UK and British International Investment can play a critically important role.

London is becoming the pre-eminent global hub for climate finance – as demonstrated recently by the size and intent of London Climate Action Week. The Global Green Finance Index consistently ranks the city as the world’s leading green finance centre, ahead of New York, Singapore and Hong Kong. The London Stock Exchange hosts one of the largest clusters of green-economy companies globally, and the UK is among Europe’s top issuers of sovereign green bonds.

For Indian businesses with grand climate ambitions, London is the place to go. But it’s not just private capital availability and expertise that sets London apart from its rivals. It is also home to the world’s oldest development finance institution. For nearly eight decades, the institution I lead, British International Investment, has been generating a profit for the UK taxpayer by investing in some of the least developed countries in the world. Core to our new strategy is to mobilise private capital into the markets where we operate - particularly for climate finance. And India will be at the centre of our ambitions. We recently launched British Climate Partners, a new £1.1 billion climate finance vehicle. Its first investment was North Star, a $300 million platform that will invest in the development of new Indian renewable projects. Another transaction announced this week, was our partial sale in Blueleaf Energy to the Emerging Africa & Asia Infrastructure Fund, which is managed by Ninety One. The transaction demonstrates our ‘originate-to-share’ approach under BCP in action: we use our capital to develop and de-risk climate investments, before bringing in institutional investors to help scale them.

India offers one of the world's largest opportunities to deploy climate capital into commercially viable projects that can generate both developmental and financial returns. This creates a partnership that extends well beyond traditional development cooperation. Climate finance offers an opportunity to deepen financial ties, unlock private investment, accelerate technology deployment and strengthen resilient supply chains all while supporting India's growth ambitions and contributing to global climate goals.

The India–UK Vision 2035 framework reflects this broader ambition and recognises that the energy transition will increasingly depend on collaboration across areas such as energy storage, grid transformation, offshore wind and investment mobilisation. These are not isolated initiatives. Together, they lay the foundation for a long-term economic partnership centred on sustainable growth.

Importantly, climate finance today is about far more than funding individual projects. It is about building markets. Investors are looking for scalable platforms, predictable policy environments and financing structures that help manage risk while attracting larger pools of commercial capital. When these conditions come together, they create a multiplier effect, enabling private investment to flow into sectors such as battery storage, transmission infrastructure, green hydrogen and industrial decarbonisation.

Development finance institutions have an important role to play within this ecosystem, not by replacing private capital, but by helping to mobilise it. By taking early-stage risk and demonstrating commercial viability, such institutions can help create the confidence needed for significantly larger pools of private investment to follow.

Ultimately, the success of India's clean energy transition will not be measured only by gigawatts installed or emissions reduced. It will be measured by the country's ability to strengthen energy security, build resilient infrastructure, create jobs, attract investment and sustain economic growth over the long term.

Climate finance is, therefore, no longer a niche area of cooperation. If the last decade strengthened our relationship through trade and investment, the next can be defined by how successfully we mobilise the capital needed to finance sustainable growth. That is a partnership with lasting value, not only for the UK and India, but for the wider global transition to a more resilient and prosperous economy.

(The views expressed are personal)

This article is authored by Leslie Maasdorp, CEO, BII.