Accelerate India’s transition to a low-carbon economy by increasing the penetration of low-carbon vehicles and advancing renewable energy infrastructure.
The Shriram Sustainable On-Lending Facility II Project involves AIIB providing a second debt facility (Facility II) of up to USD250 million (equivalent in INR) to Shriram Finance Limited (SFL), including up to USD100 million of private direct mobilization through risk transfer agreements. The Project aims to strengthen SFL’s capacity to finance low-emission vehicle ownership and renewable energy infrastructure in India.
Facility II supplements the USD100 million disbursed on July 20, 2023, under the previous facility (Facility I) approved in January 2023 (P000561). Facility II is structured to further advance SFL’s efforts in promoting sustainable transportation and broader green initiatives in India, incorporating key enhancements to deliver a more integrated e-mobility solution, increase allocations to climate mitigation financing, and scale impact through private direct mobilization to extend results beyond AIIB’s own financing.
By financing vehicle ownership and small-scale green infrastructure for individuals and small enterprises, the facility addresses both environmental and financial inclusion priorities. It supports the expansion of India’s low-emission vehicle fleet, EV charging and battery-swapping infrastructure, and rooftop solar systems – contributing to emissions reduction and national climate targets. At the same time, it broadens access to affordable retail financing for individuals underserved by the banking system, including first-generation entrepreneurs, driver-operators, and small fleet owners, enabling income-generating low-emission vehicle purchases. The structured on-lending model demonstrates scalability and promotes climate-aligned retail financing in emerging markets, fostering inclusive growth while advancing environmental objectives.
Applicable Policy and Categorization: AIIB’s Environmental and Social Framework (ESF), including the Environmental and Social Standards (ESS) and Environmental and Social Exclusion List (ESEL) is applicable to this Project. The Project is placed in Category FI and is expected to have limited adverse environmental and social (ES) impacts. Subprojects classified as Category A or Higher Risk Activities as per AIIB’s ESF will be excluded from this Project.
Environmental and Social Instruments: To manage ES impacts and in accordance with the applicable national laws and regulations and AIIB’s ESF, SFL has established an Environmental and Social Management System (ESMS), which will be enhanced to align with AIIB’s ESF. In addition to the ESMS, SFL maintains policy documents such as the Fair Practices Code (FPC), Business Responsibility Policy, Loan Recovery Policy, Whistleblower Policy, and the Policy on Prevention of Sexual Harassment at Workplace (POSH), which contain key provisions for ES risk management relevant to the Project. Natural gas vehicles, EVs, charging infrastructure, or solar rooftop installations exclusively dedicated to enabling coal mining or transportation will be excluded.
Environmental and Social Aspects: The Project is expected to have minimal adverse environmental impacts, as the ES risks and impacts generated from EV operations, charging infrastructure, and rooftop solar are locally and limited and can be mitigated through enhanced ESMS and the good international practices. Under national regulations, OEMs (Original Equipment Manufacturers) are responsible for collecting and disposing of waste batteries and e-waste. As per regulations, end-of-life batteries are removed and either refurbished (if feasible) or sent to registered recyclers for recovery of lithium, cobalt, nickel, and other materials. Similarly, e-waste from charging infrastructure and solar panels are recycled through authorized recyclers. SFL informs its borrowers about the rules and regulations and encourages them to hand over e-waste and discarded batteries to authorized recyclers or OEMs. The social risks are expected to be limited to consumer protection and labor and working conditions. SFL affirms its commitment to addressing gender risks and creating a safe and inclusive workplace through the implementation of its POSH Policy and Equal Opportunity Policy.
Occupational Health and Safety (OHS), Labor and Employment Conditions: SFL will require all sub-borrowers under business loans to comply fully with national and local labor laws. OHS risks are expected to be limited to vehicle safety and fire hazards from manufacturing defects or poor maintenance. Customers receive warranty documentation and safety guidance from dealerships. SFL urges customers to ensure regular maintenance of EVs and maintain safe conditions at the charging infrastructure.
Stakeholder Engagement, Consultation and Information Disclosure: SFL identifies customers, investors, lenders, employees, society, and government authorities as key stakeholders. Policies such as the Fair Practices Code and Business Responsibility Policy are disclosed on SFL’s website. As a publicly listed company, SFL publishes its annual Business Responsibility and Sustainability Report online. SFL has agreed to a timely disclosure of an overview of the enhanced ESMS and the information of AIIB’s Project-affected People’s Mechanism (PPM) on its website.
Project Grievance Redress Mechanism (GRM) and Monitoring and Reporting Arrangement: SFL as a part of its facility with AIIB has already established an external GRM as project-level GRM, which facilitates the receipt and resolution of grievances from stakeholders. GRM information available on https://www.shriramfinance.in/reach-us. The existing GRM is suitably developed and proportionate to the nature of SFL business. SFL also has an employee GRM for confidential grievance submission. In addition, SFL will require all commercial sub-borrowers to establish a functional GRM proportionate to nature and scale of ES risks. During implementation, AIIB will require submission of relevant ES documentation and periodic monitoring reports in an agreed format. AIIB will conduct post-reviews of sub-loan selection and implementation as part of supervision, including potential site visits and a detailed review of ES documentation for selected sub-loans.
Shriram Finance Limited
Vedansh Chandak
President - Corporate Finance and Treasury
