Sustainable Finance in India: A Review of ESG Investment Instruments, Policies, and Challenges

Abstract

Sustainable finance has been studied as a key pillar in the way the Indian economy is shifting to a low-carbon and inclusive one. In this paper, the author is going to review fast movement of the environmental, social, and governance (ESG) investment tools, new policy mechanisms, and issues in implementation during the period 2020-2025. It implies the role of India in maintaining its financial environment in line with sustainability objectives based on the academic and regulatory reports and the official publications by Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI). The analysis lists significant ESG products, including green bonds, ESG mutual funds, green deposits, and sustainability-linked loans, other regulatory milestones, including Business Responsibility and Sustainability Reporting (BRSR) framework and Sovereign Green Bonds.

The results indicate that the scope of sustainable finance is growing in India due to the increasing investor interest and new policy frameworks. However, the industry is burdened with such long-term challenges as inconsistency of data, disparity in ESG ratings, and a lack of financial literacy. The research paper will add to the Business 5.0 discussion by emphasizing the opportunities behind technology-based ESG monitoring, e-finance-based democratization of sustainable investment.