Corporate ESG Investing in India: How Businesses Can Attract Green Funds

In recent years, Environmental, Social, and Governance (ESG) investing has transformed from a corporate buzzword into a critical business strategy. Across the globe, institutional investors, private equity firms, and even retail investors are paying closer attention to companies that align with sustainable and ethical business practices.

In India, ESG investing is not just a trend—it’s becoming a mainstream requirement. With climate change, regulatory reforms, and investor demand for accountability, businesses that want to access capital must demonstrate ESG readiness. For corporates, this creates an opportunity: embrace ESG frameworks and attract green funds that are increasingly available both domestically and internationally.

This article will explore the current ESG investing landscape in India, its benefits, how companies can prepare, and why aligning with ESG metrics is now critical for long-term growth. For more useful business guides, you can check platforms like Winnerslist.in which share curated updates and resources.

Understanding ESG Investing

ESG investing evaluates a company’s performance on three core pillars:

1. Environmental (E): How a company manages its environmental footprint, carbon emissions, renewable energy adoption, waste management, and natural resource usage.
2. Social (S): Employee welfare, community engagement, diversity & inclusion, and respect for human rights.
3. Governance (G): Transparency, board accountability, compliance, ethics, and anti-corruption policies.

Globally, investors are shifting from purely financial metrics to a triple bottom line approach—people, planet, and profit.

ESG Investing in India: Current Landscape

1. Regulatory Push:
   • SEBI has mandated the Business Responsibility and Sustainability Report (BRSR) for the top 1,000 listed companies.
   • The Companies Act emphasizes Corporate Social Responsibility (CSR), complementing ESG efforts.
2. Investor Sentiment:
   • ESG-focused funds in India saw assets under management cross ₹13,500 crore in 2024, with steady inflows.
   • Global investors like BlackRock, GIC, and sovereign wealth funds are prioritizing Indian companies with strong ESG profiles.
3. Sectoral Trends:
   • Renewable energy, electric mobility, green real estate, and sustainable agriculture are attracting heavy green funding.
   • Manufacturing and IT firms are under pressure to cut emissions and show energy efficiency.

Why Companies Must Prioritize ESG

• Access to Green Capital: ESG-compliant companies are eligible for green bonds, sustainability-linked loans, and ESG-focused equity funds.
• Reputation & Branding: Customers and clients increasingly choose brands aligned with sustainability.
• Regulatory Compliance: Early adoption ensures smooth compliance with SEBI, RBI, and global investor mandates.
• Risk Mitigation: ESG reduces reputational risks, supply chain disruptions, and environmental penalties.
• Global Competitiveness: Export-oriented firms, especially in textiles, automotive, and chemicals, face ESG scrutiny from international buyers.

How Businesses Can Attract Green Funds in India

1. Adopt Measurable ESG Frameworks

Investors demand data-driven ESG disclosures. Companies should adopt:

• BRSR Core (mandatory for listed companies).
• Global Reporting Initiative (GRI) standards.
• SASB (Sustainability Accounting Standards Board) metrics.
• TCFD (Task Force on Climate-related Financial Disclosures) for climate risks.

2. Set Science-Based Targets

Investors are not satisfied with vague promises. Firms must:

• Commit to net-zero timelines.
• Use renewable energy in operations.
• Publish Scope 1, 2, and 3 emission data.

3. Focus on Social Impact

ESG is not only about the environment. Businesses can attract funds by:

• Promoting gender diversity at leadership levels.
• Ensuring safe and fair labor practices.
• Engaging in measurable community impact projects.

4. Strengthen Governance Structures

• Ensure independent boards.
• Improve transparency in reporting.
• Publish whistleblower and anti-corruption policies.

5. Issue Green Bonds & Sustainability-Linked Loans

Indian corporates like Adani Green, NTPC, and ReNew Power have successfully raised billions through green bonds. Mid-sized firms can also:

• Collaborate with banks that offer ESG-linked credit.
• Explore international funds with ESG mandates.

6. Leverage Technology & ESG Data Platforms

Using AI-driven ESG reporting tools or blockchain for supply chain transparency builds investor confidence.

Case Studies: Indian Companies Leading ESG

• Infosys: Achieved carbon neutrality and attracts ESG-focused IT investors.
• Tata Power: Expanding renewable portfolio, raising global green bonds.
• HDFC Bank: Issued sustainability-linked bonds tied to ESG milestones.
• JSW Steel: Investing in decarbonization to appeal to ESG-focused funds.

These examples show how aligning ESG with core strategy unlocks large-scale funding.

Challenges for Indian Businesses

• High Compliance Costs: Smaller firms struggle with ESG reporting expenses.
• Data Gaps: Lack of reliable environmental and social impact data.
• Short-Term Focus: Many companies prioritize quarterly profits over long-term ESG investments.
• Investor Skepticism: Cases of “greenwashing” reduce trust in ESG claims.

The Future of ESG Investing in India (2025–30 Outlook)

• Rise of Domestic ESG Funds: More Indian mutual funds will launch ESG-specific products.
• Green Financing Ecosystem: Banks will increasingly link loan interest rates to ESG scores.
• Government Incentives: Expect tax breaks for sustainable investments and stricter emission regulations.
• Global Supply Chain Pressure: Exporters will need ESG compliance to access European and U.S. markets.

Practical Steps for Businesses

1. Conduct an ESG audit.
2. Publish annual ESG/BRSR reports.
3. Engage ESG consultants or technology platforms.
4. Align CSR budgets with ESG impact areas.
5. Communicate transparently with stakeholders.

FAQs on ESG Investing in India

Q1: Is ESG mandatory for all companies in India?
No, currently only the top 1,000 listed companies are mandated to file BRSR, but even unlisted firms benefit from ESG adoption to attract investors.

Q2: Can MSMEs attract ESG funds?
Yes, especially in renewable energy, electric vehicles, and green manufacturing. SIDBI and global funds are now extending ESG-linked credit to MSMEs.

Q3: How are ESG funds different from normal funds?
ESG funds evaluate financial performance along with sustainability metrics, making them more long-term and risk-averse.

Conclusion

Corporate ESG investing in India is no longer optional—it is a strategic imperative. Businesses that adopt transparent, measurable, and impactful ESG practices stand to attract billions in green funds, boost brand reputation, and future-proof themselves against regulatory changes.

The pathway is clear: embrace sustainability, strengthen governance, focus on people, and communicate results effectively. Companies that act now will not only unlock green capital but also position themselves as leaders in India’s sustainable growth journey.

For more insights into business, finance, and emerging trends like ESG, explore resources on Winnerslist.in which provides curated articles and updates across multiple domains.