ESG used to be just another three letter acronym in board room presentations; but that’s not true as Environmental, Social, and Governance factors have evolved in 2026. They are no longer regulatory checkboxes but powerful drivers of business value and investor confidence across India.
The Perfect Storm: Why ESG Matters Now More Than Ever
ESG landscape in India has undergone a remarkable transformation. When it was introduced, ESG needed SEBI’s Business Responsibility & Sustainability Reporting (BRSR) framework; today, the storyline has flipped and ESG is a strategic imperative. Investors are no longer looking at just ESG compliance but are evaluating how ESG strategy can create a long term value.
A note to all organizations to keep a watch as two critical regulatory milestones are converging:
- The EU’s Carbon Border Adjustment Mechanism (CBAM) is closing and Indian exporters in steel, cement, aluminium, and fertilizers are expected to report verified emissions data else they will face carbon tariffs.
- SEBI’s deadline for reasonable assurance on core BRSR metrics is coming in, so companies treating these as mere compliance exercises, will start missing the bigger picture.
ESG data narrates a compelling story. The ESG-focused funds in India have grown exponentially. Sustainable investments are now representing over 15% of total AUM. The key aspect is that companies with efficient ESG frameworks are at 20-30% lower cost of capital, better risk-adjusted returns, and premium valuations. Therefore, ESG excellence isn’t just good ethics, it’s also good business.
Five Trends Reshaping India’s ESG Investment Landscape
1. Carbon Accountability Goes Global
With CBAM moving into a definitive phase now, Indian manufacturers need to make a choice: either get carbon-smart or lose European market access. The winners in this race are just not reporting emissions but are:
- Investing in cleaner production,
- Securing green energy contracts, and
- Turning carbon reduction into a competitive advantage.
For export-dependent sectors, carbon transparency is the new currency of competitiveness.
2. Green Finance is into the Mainstream
There is a “Green Finance Revolution” with India’s commitment to net-zero by 2070. Green bonds, sustainability-linked loans, and transition financing have moved into mainstream. Companies having clear decarbonization pathways are attracting premium valuations, preferential lending rates, and first-mover advantages in emerging markets.
3. Social Impact Becomes Measurable and Material
The ‘S’ in ESG is finally getting the attention it deserves. Labour practices, supply chain transparency and community engagement are now being scrutinized more than ever. SEBI’s reasonable assurance requirements is also contributing to the increase attention in data quality. Companies are moving beyond making aspirational statements to quantifiable impact. Companies that demonstrate genuine social value – from workforce diversity to inclusive supply chains – are building brand loyalty and operational resilience.
4. Governance as the Multiplier
Strong governance is the foundation that amplifies the environmental and social efforts. Leaders in the industry are identified by independent boards, transparent reporting, robust risk management, and integrated ESG oversight. In a market where trust is currency, governance quality has a direct impact on valuation.
5. Technology as the Game-Changer
ESG is a science, and AI-powered emissions tracking, block chain for supply chain traceability, are classic examples. Those companies that leverage these tools gain competitive advantages in reporting accuracy, stakeholder engagement, and operational efficiency. The reasonable assurance requirements of SEBI demands audit-grade data and technological sophistication as the minimum criterion.
Turning ESG into your Competitive Edge
The real question not on embracing ESG. Rather, it’s about doing it strategically. The following can separate the winners:
- Integrate, not isolate: ESG isn’t a separate department. It is woven into strategy, capital allocation, and incentive structures.
- Measure what matters: The need of the hour is to move beyond generic metrics to KPIs that reflect unique business models and stakeholder priorities along with data systems ready for assurance.
For more details, you can refer to our earlier articles on “Driving Real-World ESG Results” in August 2025, “ESG Data Conundrum” in October 2025 and “AI Data and the Future of ESG Measurement” in December 2025 for insights around ESG data requirement, measurement.
- Communicate authentically: It is important to share both progress and challenge to build credibility through transparency.
- Act proactively: Addressing CBAM and SEBI requirements early, turning regulatory pressure into strategic opportunity.
- See opportunity, not obligation: Using ESG as a lens to identify new markets, enhance operational efficiency, and strengthen stakeholder relationships.
The Next Move
India is positioning itself as a Global Economic Powerhouse, it is essential for a sustainable growth, market access and investor confidence, thus, ESG excellence is no longer optional. To succeed, companies need to view ESG as a strategic framework for creating value, managing risk and building competitive advantage. The transition from compliance to competitive advantage requires a complete investment of time and must have the right vision, expertise, and the right partners. Whether you need to navigate the CBAM requirements, or prepare for reasonable assurance, or build a comprehensive ESG strategy, the time to act is now.
The fact that ESG landscape is evolving fast, Avtar helps organizations transform ESG from regulatory burden to a competitive advantage. Write to bhanukumar@avtarcc.com to move ahead because in 2026 ESG is not about keeping up – it’s about getting ahead!
