IFC Partners with Axis Bank to Provide $500M Loan for India’s First Blue Finance Market

Amitabh Chaudhry, Managing Director and CEO of Axis Bank, emphasized the urgent need for banks to adopt sustainable lending practices amidst the escalating effects of climate change.

The International Finance Corporation (IFC), a member of the World Bank Group and the world’s largest global development institution, has partnered with Axis Bank, one of India’s leading private sector banks, to provide a groundbreaking $500 million loan aimed at developing a blue finance market in India. This partnership represents IFC’s inaugural blue investment in the country and marks the first blue transaction by any financial institution in India.

What is Blue Finance?

Blue loans are innovative financing instruments specifically designed to raise and allocate funds for projects that focus on sustainable water management, marine ecosystem restoration, and combating marine plastic pollution, among other initiatives. This loan will not only foster investments in water and wastewater management but also support sustainable shipping, eco-friendly tourism, and offshore renewable energy projects.

This transaction is also noted as IFC’s largest green financing initiative in India to date. The funds will enable Axis Bank to expand its climate finance portfolio significantly, addressing critical environmental challenges as India grapples with rapid urbanization and economic growth.

Opportunities in India's Water and Energy Sectors

With the water and wastewater treatment market in India estimated at $1.6 billion in 2022 and projected to reach $3 billion by 2029, there is a substantial opportunity for enhancing water and energy efficiency. Additionally, the green buildings sector alone presents an investment opportunity of $1.4 trillion by 2030, driven by an increasing demand for sustainable infrastructure. Most of these investments will need to come from the private sector due to limited public funding.

Statements from Leadership

Amitabh Chaudhry, Managing Director and CEO of Axis Bank, emphasized the urgent need for banks to adopt sustainable lending practices amidst the escalating effects of climate change. “We are excited to partner with IFC, sharing a common vision of strengthening lending practices to enhance sustainable finance in India,” he remarked. “Given Axis Bank’s systemic importance and wide reach, we hope to be a robust partner for IFC in this crucial area of climate finance.”

Makhtar Diop, IFC’s Managing Director, expressed enthusiasm for the partnership, stating, “This inaugural blue loan in India signifies our largest climate finance initiative in the country to date. Our collaboration with Axis Bank aims to catalyze private sector investment in this emerging asset class, directing long-term funding toward fostering a sustainable blue economy.”

Axis Bank’s Commitment to ESG Practices

Axis Bank is among the first banks in India to have a board-approved Environmental, Social, and Governance (ESG) policy for lending, adhering to IFC's Performance Standards. The Bank has publicly committed to providing Rs 60,000 crores (approximately $7.2 billion) in ESG-aligned sectors by 2030, with Rs 30,000 crores (approximately $3.1 billion) already achieved by March 2024.

As a pioneer in issuing sustainable financial instruments, Axis Bank launched Basel III additional tier I bonds in 2021 and senior green bonds in 2016. The bank will utilize IFC's financing to promote resource-efficient growth, create jobs, and safeguard critical clean water resources while supporting India’s climate objectives.

IFC’s Advisory Role and Market Growth

In addition to the loan, IFC will provide advisory services to help Axis Bank enhance its green buildings portfolio, which includes affordable housing projects and capacity building for impact reporting. As part of this initiative, IFC will offer a performance-based incentive of up to $2.9 million from the UK-IFC Market Accelerator for Green Construction (MAGC) program, aimed at facilitating the design and construction of green buildings certified by IFC’s Excellence in Design for Greater Efficiencies (EDGE) standard.

Global Impact of Blue Finance

The IFC has a successful track record in the green finance market and is currently laying the groundwork for scaling blue finance initiatives globally. Since 2020, the IFC has provided over $1.9 billion in blue loans and bonds to private institutions worldwide, reinforcing its commitment to fostering sustainable development through innovative financing solutions.

This partnership between IFC and Axis Bank not only heralds a new era for blue finance in India but also underscores the urgent need for collaborative efforts to address environmental challenges while promoting economic growth.