Can your investments really shape a better future while growing your wealth?
ESG stands for Environmental, Social, and Governance. Companies that uphold good ESG standards are better equipped to manage risks, stay resilient through crises, and create long-term value.
In 2025, Indian retail investors seem to show more interest in ESG. Financial platforms and fund houses have started rating and tagging funds with ESG labels.
The BRSR (Business Responsibility and Sustainability Reporting) mandate, initiated by SEBI, has become crucial to support ESG investing. Under this mandate, top listed companies must disclose ESG data. This reduces greenwashing, grants greater clarity to retail investors, and enhances their powers of green choice-making.
Factors Driving ESG Investing in India
Indian investors in 2025 are becoming more aware of where their money goes – not just for returns, but for real impact. These are the key factors pushing ESG investing forward:
- Climate change, pollution, and heightened environmental awareness.
- Rise of awareness after COVID-19 crisis.
- Young investors are inclined to put their money into ethical and future-friendly companies.
- SEBI’s BRSR legislation (better ESG reporting practices for listed companies) has increased the transparency for ESG reporting.
- Increase in ESG tagged funds on Indian investing platforms.
- Social media and finance creators promote responsible investing
- Global funds showing interest in Indian ESG markets
Overall, these various factors have increased the availability and visibility for ESG products in India. For new retail investors looking to begin their journey, here are some ESG-friendly options to explore in 2025:
- ESG Mutual Funds (SBI, Kotak, ICICI)
- ESG Exchange-Traded Funds (ETFs)
- Green Bonds
- Fintech platforms with ready-made ESG portfolios.
You can begin small, compare options, and create the best investment pathway for you, that is aligned to where you are financially, as well as, what you believe in.
ESG Investing for Indian Retail Investors
By following the correct steps and using the right platforms, Indian retail investors can choose to invest in funds that are aligned to long-term returns and responsible business activities.
Steps to Start ESG Investing:
Step 1. Sign up with a reputable investment platform
Start by using the following beginner friendly apps such as Zerodha, Groww, Paytm Money or ET Money. These platforms are safe, well-known and used by the majority of Indian retail investors.
Step 2. Search for “ESG” in the fund section
Via the search bar, search for terms like “ESG mutual funds” or “ESG ETFs”. Most apps currently tag the ESG funds so that they are easy enough for you to locate.
Step 3. Compare different ESG funds
Look at:
- Returns over 1, 3, and 5 years
- Risk level (low, moderate, or high)
- Fund rating (from platforms like Morningstar or Value Research)
ESG score or grade, if shown — this tells how strongly the fund sticks to ESG principles
Step 4. Choose the right fund for your values and goals
Select a fund that aligns with causes that matter to you: cold-pressed oils and granola; clean energy; clean water, women-led companies; fair employee policies, etc. Make sure it also sets your budget and time frame.
Step 5. Start with a SIP (Systematic Investment Plan)
You don’t need a large sum of cash to start investing. You can get started with as little as ₹100 or ₹500 a month. SIPs help you stay on track and stay consistent without the pressure.
Step 6. Monitor your investment
Once you have invested, you can check your app dashboard every couple weeks. You want to see:
- How your fund is performing
- If the company’s ESG score is moving in the right direction
- If there is any news or changes related to your fund you selected
Risks and Challenges in ESG Investing
While ESG investing is increasing its popularity in India, it does carry risks. Retail investors need to accept that not every fund that calls itself “ESG” is going to provide consistent strong performance or offer ethical measures.
Lack of common standards, shifting regulations and lack of access to sufficient quality data can make ESG investing burdensome for retail investors. It is important to look beyond the labels and understand the underlying quality of the investments being offered.
Major challenges to be aware of :
- Greenwashing and Disparate ratings
Some companies may suggest ESG compliance on paper but in reality don’t follow responsible practices. ESG rating agencies have different methods of ratings which also makes it difficult to accurately compare funds.
- Limited History in the Indian Market
As ESG investing is new to India. Many ESG mutual funds do not have a long-term performance history available to evaluate their dependability.
- Liquidity of Certain ESG Products
Some ESG-focused products (green bonds or thematic portfolios) could have lower trading volumes or fewer buyers in the secondary market.
- Minimal Disclosures Required for Smaller Companies
ESG data disclosures are not required by many mid-cap and small-cap firms, providing investors with relatively incomplete assessments of companies that also don’t provide adequate transparency.
The Future of ESG in India
The outlook for ESG in India is bright, with clear signs of development with growth, policy support and tech change – all catalyzing growth. In time and with more awareness, it is likely that some Indian retail investors will also adopt a more traditional ESG approach of considering ESG factors alongside risk and return to form their investment thesis.
Over the next five years, experts expect there to be a greater focus on standardization and accountability in ESG analysis and ratings. Different ESG scoring methods might become more aligned across ratings agencies, giving way to a substantive improvement in comparisons of funds and companies.
The Key Developments to Expect:
- ESG reporting which is currently required for large listed companies may be extended to mid-sized businesses for even greater transparency throughout the market.
- Investment apps will likely have ESG filters, scores, and alerts helping consumers to find and compare ESG-aligned choices easier.
- AI tools could help create better awareness of ESG risks, limit greenwashing, and track long-term sustainability trends across industries.
Conclusion: Investing for Profit and Purpose
ESG investing offers more than just financial growth. It gives Indian retail investors a way to align their money with their values. In 2025 and beyond, investing is no longer only about chasing returns but about supporting businesses that contribute to a better world. With improved data, accessible platforms, and evolving regulations, ESG is becoming a practical and powerful choice.Disclaimer: This information is for your reference and does not mean to be construed as financial advice. Investors should do their own research or engage a certified financial advisor before making any investment decisions. ESG investments do have market risks and regulatory risks.