From Policy to Profit: How Indian Businesses Can Turn Climate Action into Competitive Advantage

August 4, 2025

Contributed by: Shishir Soti, Director - Global Operations and Partnerships

India Inc. is increasingly making climate commitments — but are these strategies set to deliver meaningful progress or simply regulatory formalities?

India is among the world’s leading countries for corporate action on climate, with 127 companies having committed to science-based net-zero targets, according to a 2024 report from ICRA ESG Ratings.

Of the top 100 listed Indian companies, 51% have reported Scope 3 emissions, despite disclosures being voluntary under the Science-Based Targets Initiative’s Business Responsibility and Sustainability Reporting (SEBI’s BRSR) framework. Meanwhile, 44% of companies have conducted lifecycle assessments, a third of them externally assured.¹

But are these promising statistics all they seem? A closer look reveals that while disclosure has improved, questions remain about credibility, comparability, and impact. To date, much of India’s corporate climate action has stopped short of delivering critical transformation.

Yet the stakes couldn’t be higher. India — the world’s third-largest emitter in absolute terms — is on a steep growth trajectory. Its ambition to reach net zero by 2070 will shape not only domestic development, but also Asia’s regional transition pathways.

From Compliance Chore to Growth Strategy

In recent years, there’s been a visible shift in how sustainability is perceived by businesses in India and elsewhere. ESG performance is fast becoming a lever for market access, financing, and long-term brand value. This marks a departure from the traditional “tick-the-box” approach and reflects growing recognition that climate and corporate strategies must now work hand in hand.

There are important business reasons to accelerate change. Global supply chains are tightening sustainability criteria. The EU’s Carbon Border Adjustment Mechanism (CBAM) will impose emissions-linked tariffs on imports of carbon-intensive goods such as steel, aluminum, cement, and fertilisers. Given that the EU accounts for nearly 16% of India’s merchandise exports, Indian companies that fail to disclose and decarbonise their processes could face significant cost penalties starting 2026.²

Indian exporters — particularly in steel and aluminium — are beginning to respond.

JSW Steel, for example, has launched a USD1.3 billion programme to reduce carbon intensity, including investments in electric arc furnaces and scrap processing.
Tata Steel Europe has already started tracking and reporting product-level emissions to comply with CBAM reporting rules.
Hindalco Industries, a major aluminium exporter, has announced plans to increase low-carbon production and integrate lifecycle emissions tracking across its product lines.

Industry associations such as the Federation of Indian Chambers of Commerce and Industry and Confederation of Indian Industry have also initiated dialogue with government and EU counterparts, urging faster clarity on carbon accounting standards and advocating for a national carbon pricing framework. At the policy level, the Indian government is piloting a domestic carbon market that could eventually help Indian exporters align with CBAM and other international regimes.

But this momentum isn’t just externally imposed. Indian companies are increasingly acting internally to build sustainability into core operations and strategy.

Tata Steel has laid out an ambitious decarbonisation pathway aligned with the Science-Based Targets initiative (SBTi), piloting hydrogen-based steelmaking and low-emission technologies at its Jamshedpur facility.
Mahindra & Mahindra has introduced internal carbon pricing and achieved carbon neutrality across multiple plants, embedding sustainability into capital allocation.
Infosys, a global technology services leader, became carbon neutral in 2020 and continues to scale solar installations while integrating ESG into employee KPIs.
Godrej Consumer Products is redesigning packaging to ensure recyclability and is actively measuring biodiversity and water impacts across its supply chain.

Regulators are catching up, too. The Securities & Exchange Board of India’s Business Responsibility and Sustainability Reporting Core initiative is now mandatory for India’s top 1,000 listed firms and includes requirements for assurance on key ESG indicators. The Reserve Bank of India has published a Discussion Paper on Climate Risk and Sustainable Finance, foreshadowing the introduction of stress tests and disclosure norms for banks.³

While still uneven, this transformation points to a deeper shift; climate action is becoming a defining element of future-ready business in India.

India has an Advantage — If it Moves Fast

India sits at a unique intersection of scale, innovation, and timing. With much of its infrastructure still being built, the country has a rare opportunity to embed sustainability into its growth story – not as a retrofit, but as a foundation. The global climate transition is underway, and India has the potential to lead if investment, regulation, and innovation align quickly.

India is projected to become the world’s third-largest economy by 2030, overtaking Germany and Japan. That economic momentum offers both size and leverage. Unlike mature economies, India can build cleaner power, transport, agriculture, and finance systems from the ground up.

India’s innovation ecosystem sharpens this edge. Ranked first in Central and South Asia and 39^th globally in the 2024 Global Innovation Index, the country outperforms in areas like Information and Communication Technology services and knowledge diffusion. Its startup ecosystem is the world’s third largest, and increasingly oriented towards climate solutions like solar-plus-storage, precision agriculture, decarbonised logistics and green fintech.⁴

A broader boom in environmental tech, from carbon capture to solar innovations, is underway. Funding surged from USD225 million in 2018 to USD1.5 billion in 2023. Policy accelerants, such as the Department of Promotion of Industry and Internal Trade (DPIIT) with GEAAP, and major events like India Energy Storage Week are building the system for sustainable growth.

Still, the country faces a green-tech gap compared with China, which dominates global supply chains for solar panels, EV batteries, and wind components. But India is beginning to close this gap. Government-backed production-linked incentives have catalysed a wave of domestic manufacturing in solar PV, battery storage, and green hydrogen. In 2024, India’s investments in renewable energy jumped about 83% year-on-year, reaching USD16.5 billion. And early signs suggest that India’s cost curve for green manufacturing is now becoming regionally competitive.

Clean Energy: Rapid Scaling, but Gaps Remain

India has the world’s largest integrated power grid. The country added more than 16 gigawatts (GW) of solar and wind capacity in the first half of 2025 alone, with renewable power output growing 24.4% year-on-year, the fastest in three years.⁵ With 209 GW of installed non-fossil capacity, India ranks fourth globally in renewable energy.

Yet, coal still accounts for more than 70% of electricity generation. Even though renewable energy prices are among the lowest in the world, infrastructure bottlenecks and financing constraints are slowing down deployment and grid integration.⁶

According to Moody’s estimates, India will need to invest USD385 billion in renewable capacity, transmission, and distribution by 2030. That means an average of USD55–60 billion annually, compared with about USD13 billion currently.⁷

Potentially, this is India’s leapfrog moment. With the right capital and policy alignment, the country can build low-carbon, climate-resilient systems in energy, mobility, manufacturing, and food, and avoid becoming locked-in to high-emissions infrastructure.

ARE’s Role & Perspective

Regional Lens: India’s Influence on Asia-Wide Capital Flows

At Asia Research and Engagement (ARE), we believe that capital alignment is the missing link between climate ambition and real-world transition. Closing that gap – making environmental risk material for corporates and corporate progress meaningful for investors – is the key focus of our work.

We see India’s rising influence as an opportunity to accelerate capital-aligned climate transformation across Asia. India has emerged as both a magnet and engine for regional investment, shaping capital flows across Asia.

FDI Leadership in South Asia: India continues to dominate South Asia, attracting USD 28 billion in foreign direct investment (FDI) in 2023, the 15th-highest globally. India attracted almost half of the international private equity investment in developing Asia, with greenfield projects totalling about USD 110 billion in 2024, about 30% of Asia’s total.⁸
Asia Attracts USD 605 billion in FDI: Developing Asia drew 40% of global FDI in 2024 – USD 605 billion in total, and India was the top South Asian destination.⁹
Regional Portfolio Magnet: Nearly 42% of Asia-focused global fund managers are now overweight India, pushing the country ahead of Japan as Asia’s most-preferred market.¹⁰
Shifting Supply Chains: The “China+1” strategy prompted Japan to redirect USD 6 billion in investment into India in 2023 — double the total invested in China. India, Vietnam, and Singapore collectively attract around 40% of intra-Asian greenfield projects.

India is not an isolated case – it is Asia’s bellwether. When Indian corporates and investors shift on climate, the ripple effects are felt across the region, from steel and energy in Southeast Asia to digital infrastructure and sustainable food systems in South Asia. As India’s economy grows and its innovation ecosystem deepens, the country is becoming a critical hub for climate-aligned investment, clean technology deployment, and new business models that can scale across emerging markets.

But unlocking this potential is not guaranteed. India needs a coherent framework that brings together long-term capital, clear policy signals and scalable innovation. It must close its clean energy financing gaps, strengthen ESG accountability, and build pathways for climate-tech ventures to grow beyond pilot stage. If it succeeds, India won’t just meet its own climate goals, it will shape how the broader region transitions.

For sustainable finance actors, this is not a market to watch it is a market to engage with. The choices made today by investors, corporates, and policymakers will determine whether India becomes the engine of a just and thriving net-zero Asia.

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