By Manish Goel, ET CONTRIBUTORSLast Updated: Jun 05, 2025, 02:19:00 PM IST

is no longer just a corporate or policy trend in India. From choosing electric vehicles and reusable products to supporting responsible brands, individuals today, especially the younger generation, are aligning daily decisions with environmental impact. This mindset is now extending to portfolios, with investors asking, “Can my capital create both value and values?”Green investing through ESG (Environmental, Social and Governance) is emerging as a powerful way for Indian investors to influence the country’s shift toward a more sustainable future and align long-term wealth creation with sustainability goals.

ESG investing is built on the principle that companies performing well on environmental, social, and governance parameters are likely to be more resilient and better managed. These are businesses that mitigate future risks, manage resources efficiently, and operate with stronger accountability.

Unlike exclusionary approaches that avoid certain sectors, today’s ESG investing focuses on integration, identifying firms that are adapting, innovating, and managing material risks across sectors. This is critical in a time when climate risks, social inequality, and regulatory scrutiny are no longer abstract concerns but operational realities.

India has pledged to achieve net-zero carbon emissions by 2070. Meeting this goal will require over $10 trillion in green investments across energy, transportation, infrastructure, and more.

Globally, capital is already moving in this direction. Sovereign wealth funds, pension funds, and institutional investors are embedding ESG mandates into their strategies. In India, SEBI has tightened ESG disclosure norms with the Business Responsibility and Sustainability Report (BRSR), now mandatory for the top 1,000 listed companies. This gives investors clearer visibility into corporate sustainability practices, enabling informed decisions.The Indian ESG investing space, though nascent, is showing measurable traction. The AUM of ESG-themed mutual funds has grown nearly fourfold in six years, rising from ₹2,703 crore in 2019 to ~₹11,000 crore in 2025.

While 2022–2024 saw a dip due to global rallies in fossil fuels and defence, sectors that are often excluded from ESG strategies, 2025 data indicates recovery. The number of ESG schemes and overall AUM are both climbing again, suggesting renewed investor interest.

Major fund houses, including SBI, Axis, Kotak, and Quantum, have either launched or expanded ESG offerings. Active ESG funds have outperformed Nifty 50 over three years, challenging the idea that sustainable investing means sacrificing returns.

According to the CFA Institute, 60% of Indian investors find ESG products attractive for their risk-adjusted returns, more than double the global average of 29%.India’s ESG market is expected to evolve beyond checklists and disclosures. The next phase will focus on better ESG integration into mainstream products, sector-specific benchmarks, green bonds, and digital platforms for portfolio-level ESG tracking.

For this to work, standardised definitions, credible third-party ratings, and consistent regulatory guidance will be essential. As transparency improves, retail investors will gain more confidence and clarity in aligning their portfolios with sustainability goals.

Every investment choice sends a message. By allocating even a part of their portfolio to ESG funds or responsible companies, retail investors can support clean energy, ethical practices, and inclusive growth, while staying aligned with their own long-term goals

The approach need not be all-or-nothing. Even partial portfolio allocation to ESG products can contribute to long-term financial goals while supporting real-world outcomes from reducing emissions to promoting better governance.

Green investing is no longer about choosing between returns and responsibility. It’s about understanding that the two increasingly go hand in hand. As India mobilises toward its sustainability commitments, retail investors have an active role to play in not just building personal wealth but also in directing capital toward a more resilient future.

(The article is attributed to Manish Goel, Founder and MD, Equentis Wealth Advisory Services Ltd.

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)