top of page

Sustainable and Responsible Investing in India (ESG)

In 2025, India’s sustainable and responsible investing (SRI) market surged to record highs—cumulative green and impact bond issuance reached a staggering $55.9 billion (up 186% since 2021), and dedicated ESG investing is projected to soar from $1.2 billion in annual revenue in 2024 to $4.1 billion by 2030, with a rapid 23.3% compound annual growth rate. With over Rs 131.4 billion in green bonds issued in just the first half of 2025, and a third of Indian investors identifying social impact as their top motivation, SRI is no longer a niche: it’s reshaping the Indian financial sector and setting a compelling stage for investors, institutions, and changemakers. If you’re not engaging with sustainable and responsible investing, you’re missing out on the defining movement in India’s financial future.

esg

What Is Sustainable and Responsible Investing (SRI)?


Sustainable and Responsible Investing, often called SRI, is an investment approach that weighs environmental, social, and governance (ESG) factors alongside traditional financial metrics. Rather than just chasing profit, SRI steers capital into businesses and projects that drive sustainability, social development, and ethical business practices. In India, SRI aligns closely with national priorities: climate action, environmental protection, inclusive economic growth, and transparent governance.


Why Does SRI Matter in India Today?


  • Massive Market Growth: Annual ESG investing revenue is forecast to more than triple in just six years.

  • Mainstream Momentum: 33% of Indian investors prioritize social impact; 46% are motivated by environmental restoration.

  • International Attention: India’s ESG market includes 41 global thematic funds with up to 25% Indian equity stakes expected by 2025.

  • Policy Push: SEBI now requires the top 1,000 listed Indian companies to make extensive ESG disclosures, and new taxonomies and frameworks were rolled out in June 2025 to reinforce investor confidence and curb greenwashing.

  • CSR Mandate: Companies with net worth over Rs 5 billion must allocate at least 2% of profits to CSR, channeling ever-larger sums into social and green projects.


ESG in Action in India

ESG Funds and Thematic Investing


  • Quantum India ESG Equity Fund: The country’s first open-ended ESG fund, buffering portfolios from high-risk, unsustainable companies by screening them out completely.

  • Avendus India ESG Fund: Focuses on companies making significant environmental and social contributions—Infosys and Hindustan Unilever, for example, are favored for their climate action and worker welfare leadership.


Green Bonds and Climate Finance


  • Indian Renewable Energy Development Agency (IREDA): A leader in green bonds, with a Rs 12.47 billion Tier I bond issued in 2025 to turbocharge renewable energy investments.

  • REC Limited: Also actively channels green bond proceeds into infrastructure and clean energy.

  • Market Growth: The cumulative green, social, and sustainability bond market touched $55.9 billion by July 2025.


Corporate Impact and Performance


  • Tata Steel: Cut its carbon footprint by 13% over four years, integrating newer tech and better processes.

  • Infosys: Earned global recognition for achieving carbon neutrality across its operations.

  • Hindustan Unilever: Invests heavily in community well-being, water conservation, and waste reduction, making it a favorite in ESG portfolios.


Major Trends and Data Backing SRI


  • In 2025 alone, public and private issuers floated over Rs 131.4 billion in green and social bonds.

  • Inflows into Indian ESG mutual funds and ETFs have steadily risen, and several major international institutions doubled their ESG asset allocations to the region.

  • Investor Motivation: 40% of Indian investors use SRI to manage or hedge ESG risks—recognizing that non-compliance is costly and sustainability pays off.

  • Performance: Data shows Indian ESG-integrated portfolios often outperform conventional ones due to proactive risk management, stakeholder trust, and access to new capital.


How NBFCs and Financial Institutions Are Leading SRI


  • Product Innovation: NBFCs and banks now offer “green loans,” climate-friendly financing, and impact-linked lending.

  • ESG Credit Appraisals: More institutions are integrating ESG scores into their lending decisions.

  • Green Bond Issuance: NBFCs like IREDA are at the forefront, mobilizing funds for clean energy and infrastructure.

  • Client Education: Financial firms are increasingly hosting workshops and publishing guides to help clients understand and benefit from SRI and ESG investing.


Challenges to SRI Growth


  • Liquidity: The Indian green bond market, while expanding, still faces lower “greenium” and limited secondary market liquidity compared to traditional bonds.

  • Greenwashing Risk: With the explosion of ESG-labeled products, the regulatory drive in 2025 for stronger disclosures is critical to maintain investor trust.


How Can You Get Involved?


  • Invest in ESG Fund Options: Consider thematic funds targeting sustainability leaders.

  • Request Transparency: Look for clear ESG disclosures from companies and funds.

  • Support Green Bonds: Invest in bonds funding social housing, clean energy, or green infrastructure.

  • Stay Informed: Follow monthly round-ups of regulatory, market, and product updates on responsible investing.


The Bottom Line


Sustainable and responsible investing is the fastest-growing force in Indian finance. Whether you’re an investor, NBFC, or just passionate about India’s future, SRI is your ticket to purposeful growth, reduced risk, and measurable positive impact. As regulation gets tighter, products more diverse, and public awareness skyrockets, now’s the time to align your capital with your values—and let your portfolio play an active part in shaping a better world.



bottom of page