India’s regulatory framework for green finance has evolved rapidly, reflecting the country’s growing commitment to sustainable development and climate goals. This evolution is marked by a series of progressive policy measures, regulatory innovations, and institutional guidelines designed to strengthen transparency, credibility, and scale in green finance.
Strengthening ESG Disclosure and Compliance
The Securities and Exchange Board of India (SEBI) has made significant strides by expanding mandatory sustainability reporting obligations under the Business Responsibility and Sustainability Reporting (BRSR) framework. From 2025 onward, the scope of ESG disclosures intensified, with regulations requiring listed companies to provide more detailed, standardized environmental, social, and governance (ESG) data. This aims to reduce inconsistencies and improve comparability for investors while raising the bar for corporate responsibility.
The Reserve Bank of India (RBI) has also played a pivotal role by implementing stricter ESG norms for banks and Non-Banking Financial Companies (NBFCs). With the introduction of the Climate Risk Information System (RBI-CRIS) in 2025, financial institutions now have access to a centralized data platform to better assess climate-related risks and align their portfolios with green financing objectives.
Introduction of India’s Draft Climate Finance Taxonomy
One of the landmark regulatory developments is the rollout of the Draft Climate Finance Taxonomy in 2024-2025 by the Ministry of Finance’s Department of Economic Affairs. This taxonomy establishes a science-based, transparent framework to define and classify climate-relevant economic activities that qualify for green finance. By providing a common language for public and private stakeholders, the taxonomy seeks to encourage investments in credible climate solutions, minimize greenwashing, and support India’s ambition to achieve net-zero emissions by 2070.
The taxonomy outlines clear mitigation and adaptation priorities and covers diverse sectors such as renewable energy, green transport, agriculture, and sustainable infrastructure, thereby broadening the scope of eligible green projects.
Expansion of Green Financial Instruments and Market Oversight
Regulators have also promoted innovative financial products to boost green capital flows. The sovereign Green Bond framework introduced aligns with international Green Bond Principles, promoting government-backed green securities for climate-friendly projects.
SEBI’s Green Debt Guidelines standardize issuance, monitoring, and reporting of green bonds and ensure third-party verification to improve investor confidence. Furthermore, the inclusion of green activities under Priority Sector Lending by RBI facilitates easier credit access for sustainable sectors.
These regulatory efforts collectively enhance market discipline, transparency, and investor protection, fostering a robust ecosystem for green finance in India.
Ongoing Challenges and Regulatory Outlook
While the framework has strengthened, challenges persist including regulatory fragmentation, evolving global ESG standards, and the need for capacity building among market participants. India continues to work on harmonizing domestic norms with international regulations and scaling its reporting infrastructure for broader adoption.
Financial institutions and corporates that proactively align with emerging regulatory requirements, adopt rigorous ESG practices, and engage with policymakers stand to benefit from expanding green finance opportunities as India moves towards a greener economy.
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