Can Public Green Companies Accelerate Climate Finance for India’s States?
Nearly 80% of central funds allocated under the Swachh Bharat Mission (Urban) reportedly remain unutilised by states and union territories (Chatterjee, 2025). Per 2024 data, Maharashtra was the only state to fully utilise the 13th Finance Commission’s water management grant, while most other states utilised only around 25% (Gupta et al., 2024).
Subnational governments in India play a critical role in translating national climate objectives into state and local action, across sectors such as energy, transport, water, agriculture, urban development, waste management and land use. State action plans on climate change (SAPCCs) reflect this emphasis by aligning climate priorities with state-specific vulnerabilities and development needs. State governments finance their climate action through Finance Commission transfers, centrally sponsored schemes and national missions, grants and loans from financial institutions and development partners, and their own tax and non-tax revenues (Chakravarty et al., 2024). However, the availability of funds does not always translate into their effective utilisation, as the state-wise figures show.
Arguably, a dedicated can close the gap between available funds and projects that need to be financed. Green Companies are specialised development, advisory, and capital mobilisation vehicles that leverage public and private capital to pursue financing development goals that focus on sustainability and market mobilisation.
Now, why does this financing and implementation gap exist?
Stringent conditions attached to the release of grants have historically kept public low (Gupta et al., 2024). Additionally, widespread human resource shortages across government departments—particularly accountants, technical experts, and programme managers—hinder timely action-plan preparation and weaken on-ground implementation at the state as well as district levels (Bose et al., 2020).
The challenge, therefore, is not simply a shortage of public funding. It is an institutional gap between public climate priorities and the financial systems, institutional capacities and investment pipelines required to translate those priorities into bankable, investable projects. Government departments are well placed to establish policy priorities, allocate public resources and oversee implementation; but they are not ideally structured for the specialised functions required to develop bankable projects, structure complex transactions, manage investment risks and continuously engage with private investors and financial institutions. A dedicated state-level entity can fill this gap by combining a public-sector mandate with specialised financial and project-development capabilities.
Some states have already begun to solve this using intermediary agencies. The Tamil Nadu Green Climate Company (TNGCC), established in 2021, provides an example of a state-level climate entity that supports adaptation and mitigation efforts through dedicated climate missions. With state equity of INR 5 crore and access to government and international funding
How can state-sponsored green companies support sustainable development?
State-sponsored green companies—given a mandate to accelerate and mobilise the development of climate-resilient, sustainable infrastructure and services—can potentially transform the utilisation of state and central funding. Such green companies could function as specialised development, advisory, and capital mobilisation vehicles that leverage public and private capital to development and ensure market mobilisation. By operating at the interface of government entities, financial institutions and private investors, such green companies can aggregate public resources and channel them into a pipeline of bankable projects. Additionally, they can provide support for technical and financial structuring, , and facilitate to cost-effective financing solutions for public institutions.
The value of such an entity lies not in replacing government agencies, but in addressing the gap between state-led project development and access to external capital. A dedicated “green company” can help resolve two critical bottlenecks at the subnational level:
- Subnational governments and institutions struggle to utilise money devolved from the Finance Commission and various missions and schemes
- Funds may remain underutilised because government departments lack the technical, financial and implementation capacity to translate climate priorities into viable projects. A green company can support subnational governments by identifying and preparing climate-related projects, developing financing plans, structuring projects, and supporting procurement, implementation and monitoring.This is an important distinction from conventional government programme management. While government departments administer schemes and provide grants, the company can maintain a dedicated project-development function, with specialised technical and financial expertise. The objective is to shepherd projects from the initial concept stage to where they can attract public and private financing. This would also reduce transaction costs for individual government departments. A standardised pipeline of projects would also allow financial institutions to assess and serve them more efficiently.
- Limited fiscal space to finance climate-resilient infrastructure and development
- A specialised green company can complement direct public expenditure by using appropriate financial instruments to improve project viability, address investment risks and mobilise private capital where feasible. Depending on the project, this could include facilitating project-development funding, guarantees, or aggregating smaller projects into investable portfolios. The objective is to use public resources strategically to address specific financing barriers and attract additional capital, rather than relying exclusively on public funding to finance projects. State-level development institutions, such as the Karnataka Urban Infrastructure Development and Finance Corporation (KUIDFC) and Odisha Urban Infrastructure Development Fund (OUIDF), are mandated to ensure infrastructure development and financing; a green company could support them through preparing and planning climate-related projects, financial structuring, and mobilising investment. The latter’s precise role would need to be defined in relation to existing institutional mandates to avoid overlap and to identify opportunities for collaboration.
The way forward to fast-track sustainable development in every state?
India’s experience with underutilised public resources and limited green-finance capabilities underscores the need for dedicated financial intermediaries. Rather than competing with banks or replacing development-finance institutions, a state-sponsored green company could focus on project identification and preparation, financial structuring, and risk mitigation, while connecting projects with appropriate sources of capital. By strategically leveraging public resources to improve project viability and to attract domestic and international investment, it could improve fund utilisation, mobilise private capital and translate the state’s climate priorities into investable projects.
This is not merely another administrative layer—such a company would serve as a catalytic intermediary to accelerate subnational climate action and support India’s low-carbon transition.
By Kartikey Sharma, Consultant, Climate and Sustainability Initiative (CSI). Views expressed are personal.
END NOTE
[1] Concessional finance refers to loans or other financial support provided on more favourable terms than those available commercially, such as lower interest rates, longer repayment periods or grace periods.
[2] First-loss capital refers to an investment tranche that absorbs initial financial losses before other investors bear losses, thereby reducing the financial risk for subsequent investors and making projects more attractive to private capital.
References
Bose, M., Acharya, N., & Mahendru, V. (2020). Factors constraining fund utilisation in social sector schemes: An overview [Policy brief]. Centre for Budget and Governance Accountability. https://www.cbgaindia.org/wp-content/uploads/2020/02/Factors-Constraining-Fund-Utilisation-in-Social-Sector-Policy-Brief.pdf
Chakravarty, M., Pal, U., Sikka, A., & Jena, L. P. (2024). Financing adaptation in India. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2024/02/Financing-Adaptation-India_reportannexes.pdf
Chatterjee, S. (2025, December 8). 80% of central funds for Urban Swachh Bharat Mission unused by states, UTs: Govt. Hindustan Times. https://www.hindustantimes.com/india-news/80-of-central-funds-for-urban-swachh-bharat-mission-unused-by-states-uts-govt-101765197920610.html
Gupta, M., Mahesh, M., & Chaudhary, A. (2024). Finance Commission Grants: Conditionality, Absorption, & States’ Fiscal Behaviour. 1–31. https://www.nipfp.org.in/media/medialibrary/2024/07/Finaldraft_13.07.24.11am_Finance_Commission_Grnats_conditionality_Atrayee.pdf
Srividya. (2022, March 29). Green Climate Company to help Chennai fight climate change. Citizen Matters. https://citizenmatters.in/tngcc-chennai-climate-change-meendum-manjapai-wetlands-ramsar/
TNGCC (Tamil Nadu Green Climate Company). (2026a). Key highlights. Tamil Nadu Green Climate Company. https://tngcc.tn.gov.in/
TNGCC (Tamil Nadu Green Climate Company) (2026b). TN SHORE [sic] (World Bank). Tamil Nadu Green Climate Company. https://tngcc.tn.gov.in/project/urban-cooling-plan-unep/
