By Amit Bhatia
India’s commitment to achieving net-zero emissions by 2070, announced at COP26, serves as a strategic anchor for the country’s long-term development in an increasingly climate-conscious world. This is a comprehensive ambition that includes reducing carbon emissions, cleaner energy transitions, enhanced energy efficiency, climate-resilient infrastructure, sustainable mobility, and a shift toward low-carbon technologies across sectors. Delivering on these goals requires more than policy reforms or technology deployment; it demands a fundamental rethinking of how businesses operate, how development is pursued, and how financial resources are mobilized. For a fast-growing economy like India, balancing economic expansion with sustainability goals is both a significant challenge and a deep responsibility.
In this context, Environmental, Social, and Governance (ESG) ratings are emerging as a key area and enabler of India’s transition. Traditionally used by global institutional investors, these ratings are now increasingly influencing corporate strategy, capital allocation, and risk assessment within Indian markets. No longer peripheral, ESG ratings are becoming central to how companies are valued, how reputation is perceived, and how sustainable long-term returns are projected. While regulatory compliance and sustainability reporting are essential first steps in building transparency, it is important to recognize that ESG ratings go further. As disclosure requirements mature and become more rigorous, these ratings—largely based on publicly available data—evolve in sophistication. When methodologically sound, ESG ratings offer a strategic lens to evaluate a company’s sustainability performance and long-term impact and value potential, helping stakeholders identify material ESG risks and emerging sectoral opportunities. To fully harness these opportunities while mitigating risks, a more nuanced approach to ESG analysis is essential. The traditional reliance on a single embedded ESG score often fails to capture the complexity of these factors. An innovative ESG framework that separately identifies and measures ESG risks and opportunities, can enable sharper analysis, better comparability, and more informed decision-making. When used well, ESG ratings can help make sure businesses are not just ticking boxes but actually meeting investor expectations and supporting India’s climate and development goals
Charting the ESG Landscape: Regulation Meets Real-World Impact
In recent months, SEBI has revised the rules governing ESG rating providers, allowing ratings to be withdrawn if a company fails to file its BRSR or lacks subscriber interest—a move aimed at improving data credibility. Rating firms operating under subscriber-pays models no longer must publish detailed rationales publicly, streamlining their reporting obligations, though mandatory disclosures remain for stock exchanges. These reforms signal that ESG is no longer symbolic: it’s held to accountability standards comparable to credit ratings.
At the same time, SEBI is reviewing ESG disclosure norms, particularly for supply chain reporting, after industry feedback suggested current requirements are onerous for smaller firms. This shift toward “optimal regulation” aims to balance rigor with practicality, ensuring transparency without overburdening businesses.
By anchoring ESG ratings in enforceable disclosure rules and by tightening withdrawal norms to preserve data integrity, India is building a framework that could meaningfully influence corporate behavior—especially in sectors where progress is most lagging.
Beyond Compliance: ESG as a Catalyst for Sustainable Investment
While regulations provide structure, true and transparent impact comes from deploying ESG ratings to guide capital and convert disclosures into climate outcomes. Consider the challenge: India must invest roughly $68 billion annually in renewables to reach its 500 GW non-fossil capacity goal by 2030 and as much as $385 billion in total over the next seven years—including resilience and grid upgrades. However, the current annual green investment is only around $13 billion.
By tracking performance year-on-year, ESG ratings help distinguish companies that are not just making promises but actually reducing their carbon emissions and making progress on other climate and societal issues. They track real progress, such as investments in cleaner technologies like carbon capture and green infrastructure. This kind of transparent, data-backed reporting builds investor confidence, lowers borrowing costs for companies doing well, and attracts international climate finance. It also allows banks and lenders to link interest rates or bond pricing to a company’s ESG performance, encouraging more responsible business practices.
These ratings become even more useful when applied to sectors like coal, steel, and cement, which are the hardest to clean up. For example, India’s steel industry now has a clear benchmark of 1.6 tonnes of CO₂ per tonne of green steel. ESG ratings that measure companies against such clear targets for risk and opportunity help turn sustainability from a broad idea into real action—and open the door to more climate-focused investments.
Conclusion
Our country’s goal to become net-zero is challenging but achievable with the right approach. ESG ratings are one of the key tools that can help track real progress. They give a clear picture of which companies are taking meaningful steps to reduce emissions and improve how they operate, and which ones are not. When these ratings are based on accurate data and supported by strong rules, they become useful for investors, regulators, and the public.
As India balances rising energy needs, rapid industrial growth, and environmental pressures, it demands an evolution in ESG ratings—moving beyond embedded, single-score systems toward innovative approaches that segregate ESG risks and ESG opportunities within a unified framework. Such ratings not only assess exposure to risks like GHG emission intensity, disaster preparedness, or workforce metrics but also capture opportunities such as renewable energy adoption, employee benefits, and ESG-linked incentives. Strengthening such forward-looking ESG systems will help India channel resources effectively, reward companies serious about change, and build a cleaner, more resilient, and globally competitive economy.
(The author is Amit Bhatia, Founder & CEO, Aspire Impact, and the views expressed in this article are his own)
