India’s Environmental, Social, and Governance (ESG) bond market is steadily coming of age. Once seen as a niche segment, ESG and green bonds are now drawing increased interest from global investors, corporate issuers, and regulators alike.
This evolving landscape is being shaped by supportive policies, a growing commitment to sustainability, and rising demand for impact-linked investments.
A market on the move According to Vineet Agrawal, Co-Founder of Jiraaf, the momentum behind ESG bonds in India is unmistakable. “Rising global investor interest in sustainable assets, coupled with a progressive domestic regulatory environment, is helping this space grow,” he says.
Regulatory pushes like SEBI’s Business Responsibility and Sustainability Reporting (BRSR) Core framework and the RBI’s green finance guidelines are nudging Indian corporates to integrate ESG factors into their capital-raising strategies.
Sectors such as renewable energy, clean mobility, and infrastructure finance are already leading the way. A case in point: Larsen & Toubro (L&T) issued its first Rs 500 crore ESG bond recently—a significant move that signals the entry of India’s biggest conglomerates into sustainability-linked financing.
“As ESG considerations become mainstream, more Indian corporates are expected to follow suit,” adds Agrawal.
Still early days in fixed income While global markets have embraced ESG investing—especially in fixed income—India is still finding its feet, says Gautam Kaul, Senior Fund Manager – Fixed Income at Bandhan AMC. “In India, we are at an early stage of the ESG investing platform. The equity side is getting more traction, but fixed income is still nascent.”
However, the signals are encouraging. Private corporations and the Government of India have started issuing ESG and green bonds. The government’s Sovereign Green Bonds (SGrBs) alone have raised close to Rs 57,697 crore through FY25.
Yet, Kaul notes that domestic demand is limited, with foreign institutional investors currently dominating the buyer side of the market.
Kaul also touches on the pricing of ESG instruments. “Is the market paying a significant premium for ESG bonds? Selectively, yes,” he says. “The greenium—or the yield differential—between green and regular government bonds is around 5 basis points. It’s modest now, but could widen as the market matures.”
A structural shift is underway The trajectory of India’s green bond market has be
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