Global capital markets are undergoing a fundamental transformation as green investment steadily shifts from the margins to the core of financial decision-making. Once viewed as a values-driven niche, sustainable investing is increasingly recognised as a pragmatic response to climate risk, regulatory change and evolving market dynamics. Declining renewable energy costs, improved climate disclosures and clearer policy signals have encouraged institutional investors to reassess portfolio resilience.

This transition is evident in capital flows. Global clean energy investment is projected to approach USD 2 trillion annually, highlighting a decisive reallocation of financial resources toward low-carbon assets. Green bonds, sustainability-linked loans and ESG-focused funds have expanded across major economies, supported by net-zero commitments from governments and corporations. Asset managers and pension funds embed environmental criteria into fiduciary frameworks, while insurers adjust risk models to account for climate-related losses. Despite progress, inconsistent disclosure and greenwashing continue to test market credibility.

Economic fundamentals further explain why green investment has become mainstream. Technological advances have sharply reduced the cost of solar and wind power, making clean energy competitive with fossil fuels in many regions. Carbon pricing and energy security mechanisms have strengthened the case for low-carbon infrastructure, while renewable projects increasingly offer stable, long-term returns attractive to investors.

However, the global distribution of green capital remains uneven. Advanced economies attract most climate finance, while emerging markets face higher borrowing costs and project risks. Bridging this gap requires blended finance, risk-sharing mechanisms and stronger domestic capital markets to crowd in private investment at scale.

In the Indian context, green investment momentum is accelerating alongside broader development priorities. More than 80% of recent power-sector investment has been directed toward renewables, supported by policy reforms, competitive auctions and rising participation from investors. Capital flows into solar parks, grid modernisation and energy storage reflect growing confidence in sustainable infrastructure financing.

As climate risks increasingly shape economic outcomes, green investment has become a strategic financial imperative rather than an ethical choice. Investors now recognise that alignment with decarbonisation pathways strengthens long-term resilience, manages regulatory risk and supports sustainable value creation across global markets.

SOURCES:

1. https://www.reuters.com/sustainability/climate-energy/iea-expects-global-clean-energy-investment-hit-2-trillion-2024-2024-06-06/
2. https://unctad.org/system/files/official-document/wir2024_ch03_en.pdf
3. https://www.climatepolicyinitiative.org/wp-content/uploads/2024/10/Global-Landscape-of-Climate-Finance-2024.pdf
4. https://www.iea.org/reports/world-energy-investment-2025/india