India’s businesses, from small startups to big companies, are getting a lot of attention because of something called ESG investing. ESG stands for Environmental, Social, and Governance, which means investing in companies that care about the planet, treat people well, and are run honestly. In 2025, this way of investing is changing how Indian businesses get money to grow. This article explains what ESG investing is, why it’s growing, and how it’s helping (and sometimes challenging) businesses in simple words.
What Is ESG Investing?
ESG investing is when people put money into companies that do good things in three areas:
- Environmental: Helping the planet by cutting pollution, using clean energy, or saving resources like water.
- Social: Treating workers, customers, and communities fairly, like ensuring safe workplaces or supporting local people.
- Governance: Running the business honestly, with clear rules and no corruption.
In India, ESG is a big deal because the country wants to fight climate change (like aiming for Net Zero by 2070) and build a fairer, greener economy. It’s not just about doing good—it helps businesses make money in the long run too.
Why ESG Investing Is Growing in India
ESG investing is booming in India for a few reasons:
- Government Support: The government is pushing companies to follow ESG rules. For example, the Securities and Exchange Board of India (SEBI) asks big companies to share reports about their environmental and social efforts. In 2023, SEBI added new rules to track things like pollution and worker well-being, making ESG a must for businesses.
- India’s Big Goals: India has promised to cut carbon pollution by 45% by 2030 and use more renewable energy, like solar and wind. This attracts investors from around the world, including groups like the World Bank, who want to fund green projects.
- Investors Want ESG: Both Indian and global investors are choosing companies that follow ESG. By 2025, 41 international ESG funds are putting 25% of their money into Indian companies, because they believe these businesses are safer and will grow stronger.
In just four years, the money in India’s ESG funds grew from $331 million in 2020 to $1.18 billion by March 2024. That’s a huge jump!
How ESG Investing Helps Businesses Get Funding
1. More Money to Grow
Companies that follow ESG rules find it easier to get money. Investors like to fund businesses that care about the planet and people. For example:
- Green Bonds: These are loans for eco-friendly projects, like solar plants. In 2023, India raised $21 billion through green bonds, up from $1.2 billion in 2013.
- ESG Funds: Special investment funds, like the SBI Magnum Equity ESG Fund, give money to companies that score high on ESG.
- Global Support: Big organizations like the Asian Development Bank are funding Indian projects in clean energy and climate protection.
Startups like Zypp Electric, which uses electric vehicles for deliveries, are getting money because their business helps the environment.
2. Cheaper Loans and Investments
Companies that do well in ESG can borrow money at lower costs. A 2021 study of 272 Indian companies showed that those with strong ESG practices get better loan deals and higher stock prices. Banks and investors see these companies as less risky, so they charge less interest or offer better terms.
3. Attracting Big Investors
Big investors, like global firms or rich Indian families, are picking ESG-friendly companies. For example:
- Indian companies like Tata Power and Infosys are popular because they focus on clean energy and fair practices.
- Non-Resident Indians (NRIs) and global funds are investing in sectors like renewable energy and healthcare, which make up a big chunk of ESG investments.
- A 2020 survey by EY found that 72% of big investors now check a company’s ESG performance before investing, up from 32% just two years earlier.
4. Helping Startups and Small Businesses
Small businesses and startups are also benefiting:
- Startups: Investors like Indian Angel Network are funding startups in green tech, farming, and healthcare. For example, spacetech startup Pixxel raised $36 million because it aligns with ESG goals.
- Small Businesses: Many small businesses (called MSMEs) in India—92% of them—are adopting ESG to attract funding. They’re doing things like using less energy or treating workers better.
- Support Programs: Groups like Venture Catalysts help startups with money and advice to meet ESG standards.
5. Better Profits and Stability
Studies show that ESG companies often make more money and are less risky. A 2021 study found that Indian firms with good ESG practices perform better and are more stable during tough times. Companies like Unilever India, which uses sustainable materials, gain loyal customers and keep workers happy, which helps them grow.
Challenges for Businesses
ESG investing isn’t always easy:
- Confusing Data: Some companies don’t share clear ESG information, making it hard for investors to trust them. Others pretend to be eco-friendly (called “greenwashing”), which can get them in trouble. For example, in 2022, a big global firm paid $4 million for misleading ESG claims.
- Tough Rules: Following SEBI’s ESG rules can be expensive, especially for small businesses. New requirements, like tracking supply chain pollution, add more work.
- Limited Choices: Some industries, like coal or oil, struggle to get ESG funding because they harm the environment. Also, there aren’t always enough ESG-friendly companies for investors to choose from.
- Higher Costs: Some ESG funds charge more fees, which can be tough for startups or small businesses starting out.
Opportunities for Businesses
1. Standing Out
Companies that follow ESG can attract more customers and investors. For example, Unilever India’s focus on sustainable products makes it a favorite for eco-conscious shoppers.
2. New Ideas and Growth
ESG pushes companies to come up with new ideas, like making cars that can be recycled or building solar farms. Companies like Adani Green are growing by entering new green markets with ESG funding.
3. Staying Strong
ESG companies are better prepared for changes, like new environmental laws or climate challenges. Investors like them because they’re less likely to fail.
4. Doing Good
ESG funding helps businesses support India’s goals, like cutting pollution or protecting nature. For example, money for sustainable farming helps both the environment and local farmers.
What’s Next for ESG in India
ESG investing is set to grow bigger:
- More Companies Joining: Just like 90% of big U.S. companies share ESG reports, more Indian companies are doing the same.
- Government Help: The 2025–2026 budget supports ESG with plans for electric vehicle batteries and green farming.
- Better Tech: Tools like AI are helping companies track their ESG progress, making them more appealing to investors.
- Global Leader: India’s rules for green bonds and sustainability reporting make it a top player in ESG, second only to China.
Conclusion
ESG investing is changing how Indian businesses get money by rewarding those that care about the planet, people, and honest management. It’s helping startups, small businesses, and big companies get funding, save money, and grow stronger. While there are challenges like tricky rules and costs, the benefits—like attracting investors and building a better future—are huge. As India works toward a greener, fairer economy, ESG investing is helping businesses succeed while making the world a better place.
Last Updated on: Friday, July 11, 2025 12:47 pm by Chandini Naidu | Published by: Chandini Naidu on Friday, July 11, 2025 12:47 pm | News Categories: Business Saga News
About The Author
Leave a Reply