ESG Revolution: How Sustainable Investing Is Reshaping Indian Markets

Environmental, Social, and Governance (ESG) investing in India has transformed from a niche concept to a mainstream investment strategy. The ESG investing market is projected to grow at a remarkable 23.3% CAGR from USD 1,217.9 million in 2024 to USD 4,109.6 million by 2030, reflecting a fundamental shift in how investors evaluate companies and allocate capital.

SEBI's BRSR Framework: Mandatory Disclosure

SEBI's Business Responsibility and Sustainability Reporting (BRSR) framework has made ESG disclosure mandatory for the top 250 companies, including scope 3 emissions. This regulatory push ensures transparency and standardization, enabling investors to make informed decisions based on comparable ESG metrics across companies and sectors.

• BRSR framework: Mandatory for top 250 listed companies
• Scope 3 emissions: Comprehensive carbon footprint reporting
• Standardized metrics: Enabling cross-company comparisons
• Regulatory enforcement: Ensuring compliance and transparency

ESG Fund Growth: From Niche to Mainstream

ESG fund Assets Under Management (AUM) have experienced explosive growth, rising from Rs. 2,747 crore in January 2020 to Rs. 9,753 crore by March 2024. This nearly four-fold increase demonstrates growing investor appetite for sustainable investment options and reflects the maturing ESG ecosystem in India.

Sectoral Focus: Renewable Energy and EVs

India's ESG-focused funds have seen assets surge, with particular traction in renewable energy and electric vehicle (EV) sectors. These sectors align with India's climate commitments and offer strong growth potential, making them attractive for ESG-conscious investors seeking both sustainability and returns.

• Renewable energy: Solar and wind power companies gaining investor interest
• Electric vehicles: EV manufacturers and charging infrastructure
• Clean technology: Water management, waste-to-energy solutions
• Sustainable agriculture: Organic farming and sustainable supply chains

The Greenwashing Challenge

As ESG investing gains popularity, concerns about greenwashing have emerged. Some companies may overstate their ESG credentials or engage in superficial sustainability initiatives without meaningful impact. Investors must conduct thorough due diligence, look beyond marketing claims, and rely on verified ESG ratings and disclosures.

1. Verify ESG claims: Check third-party ratings and certifications
2. Review BRSR reports: Analyze actual sustainability metrics
3. Assess materiality: Focus on ESG factors relevant to the business
4. Monitor progress: Track companies' ESG improvement over time

The Future of ESG in India

The ESG revolution in India is just beginning. As regulatory frameworks strengthen, investor awareness increases, and companies recognize the business case for sustainability, ESG investing will continue to reshape Indian markets. This shift represents not just a trend, but a fundamental evolution toward more responsible and sustainable capital allocation.

For investors, integrating ESG considerations into portfolio construction is no longer optional—it's becoming essential for long-term value creation and risk management. Companies that fail to adapt to ESG expectations may face regulatory, reputational, and financial risks, while those that embrace sustainability stand to benefit from growing investor preference and potential regulatory incentives.