IFC extends $500 mn loan to Axis Bank to fund green projects in India

International Finance Corporation (IFC), private sector lending arm of the World Bank Group, on Monday tied up with Axis Bank to provide a USD 500 million (about Rs 4,200 crore) loan to help develop a blue finance market and scale up financing of green projects in India.

This is IFC's first blue investment in India and the first blue transaction by a financial institution in the country, a statement said.

Blue loans are financing instruments that raise and earmark funds for investments such as water and wastewater management, reduction of marine plastic pollution, restoration of marine ecosystems, sustainable shipping, eco-friendly tourism, and offshore renewable energy.

This transaction is also the largest green financing by IFC in the country, it said, adding, the funding will enable Axis Bank to expand its climate finance portfolio.

With India's rapid urbanisation and economic growth, there is a substantial opportunity to enhance water and energy efficiency. The water and wastewater treatment market size was estimated at USD 1.6 billion as of 2022 and is expected to reach USD 3 billion by 2029.

Additionally, the green building sector presents an investment opportunity of USD 1.4 trillion by 2030, driven by a need for sustainable infrastructure. Most of these investments need to come from the private sector to offset limited public funding.

"We are thrilled to announce our inaugural blue loan in India, and our largest climate finance initiative in the country to date. India serves as an exceptional testing ground for innovative approaches to climate adaptation," said IFC Managing Director Makhtar Diop.

This loan will not only catalyse private sector investment in this emerging asset class but also direct long-term funding toward fostering a sustainable blue economy, he said.

Axis Bank Managing Director and CEO Amitabh Chaudhry said: "with the increasing effects of climate change into the global ecosystem and the growing awareness of environment sustainability, it's imperative for banks to adopt sustainable lending practices.

Given Axis Bank's focus on growing its climate and sustainable finance portfolios, along with its large size, systemic importance, and wide reach, the bank hope to be a strong and stable partner for IFC in the key focus area of climate finance in India, Chaudhry added.

The bank remains committed to supporting India's climate agenda with public commitment of incremental financing of Rs 60,000 crore (approximately USD 7.2 billion) in ESG-aligned sectors by 2030 (from August 2021), of which Rs 30,000 crore (approximately USD 3.1 billion) of incremental financing was achieved by March 2024.

Axis Bank has been a pioneering issuer of sustainable instruments among Indian financial institutions. The bank issued the first green US dollar bond way back in 2016 and also the first sustainable US dollar AT1 bond from India in 2021.

The bank, it said, with a long-standing history of being a pioneer in sustainable financing, will use IFC's financing to promote resource-efficient growth and to create jobs, while protecting the critical clean water resources and supporting the nation's climate goals.