IFC, Axis Bank to launch blue loans for green projects

World Bank Group member International Finance Corporation (IFC) is tying up with Axis Bank Ltd to offer a $500 million loan to help develop a blue finance market and scale up funding for green projects in the country.

The loan will be IFC’s first blue investment in India and the first blue transaction by any financial institution in the country, it said in a statement.

What are blue loans?

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.

The funding, which will help Axis Bank expand its climate finance portfolio, is also the largest such green investment by IFC in the country.

India’s fast urbanization and economic expansion have opened significant opportunities in water and energy efficiency. The water and wastewater treatment market, valued at $1.6 billion in 2022, is projected to double by 2029. The green buildings sector could see investments reaching $1.4 trillion by 2030 due to the demand for sustainable infrastructure, with most funding expected from the private sector due to limited public resources.

“We are excited to partner with IFC with whom we share a common vision of strengthening standards and lending practices to boost sustainable finance in India,” Amitabh Chaudhry, managing director and chief executive officer of Axis Bank, said.

“We are thrilled to announce our inaugural blue loan in India, marking our largest climate finance initiative in the country to date. India serves as an exceptional testing ground for innovative approaches to climate adaptation,” Makhtar Diop, managing director of IFC, said.

“This loan will catalyze private sector investment and direct long-term funding toward fostering a sustainable blue economy. Additionally, it aims to enhance financing for climate projects across India, with a strong emphasis on green buildings that will mitigate climate change impacts and generate jobs,” Diop said.

Axis Bank is among the first banks in India to have a board-approved environmental, social and governance (ESG) policy for lending that adheres to IFC performance standards, a statement said.

The lender said it “remains committed to supporting India’s climate agenda with public commitment of incremental financing of ₹60,000 crore (about $7.2 billion) in ESG-aligned sectors by 2030 (from August 2021), of which ₹30,000 crore (about $3.1 billion) of incremental financing was achieved by March 2024.”

As part of its advisory services, IFC will support Axis Bank in growing its green buildings portfolio, including for affordable housing projects and building capacity for impact reporting.

Through this engagement, IFC said it aims to catalyze the green buildings’ market in India. IFC will also provide a performance-based incentive of up to $2.9 million from the UK-IFC Market Accelerator for Green Construction (MAGC) program aimed at supporting the design and construction of green buildings certified by IFC’s EDGE (Excellence in Design for Greater Efficiencies) green buildings standard.