India ESG rules: SEBI disclosures, green incentives, M&A guide

Environmental, social and governance (ESG) standards bind businesses at a corporate and operational level. The concept is now no longer a buzzword but a business imperative. ESG frameworks encourage companies to manage their environmental risks, foster social responsibility and maintain accountable governance structures.

Although India has no unified ESG legislation, the government encourages the adoption of ESG norms through legislative, regulatory and policy measures. These include securities directives, company law and environmental and labour regulations.

India accelerates green hydrogen credits

The administration is promoting its Green Hydrogen Mission to decarbonise the economy, reduce dependence on fossil fuel imports and position the country as a leader in green hydrogen technology and markets. The programme is implemented in phases. Phase I, from 2022 to 2026, focuses on creating demand through incentives. It concentrates on steel production and heavy-duty mobility industries by undertaking pilot projects. Phase II, from 2026 to 2030, extends the use of green hydrogen to all sectors, including railways and aviation, subject to viability and market demand.

2023’s Green Credit Programme aims to go beyond mere regulatory compliance by promoting afforestation, water conservation and sustainable development. It encourages voluntary environmentalism by offering tradeable credits. These create positive environmental action within a framework administered by the Ministry of Environment, Forest and Climate Change. They are bought and sold on a digital platform, enabling the monetisation of sustainability efforts and offsetting environmental obligations.

India strengthens electric mobility, ESG

The Faster Adoption and Manufacturing of Hybrid and Electric Vehicles, or FAME, scheme is the flagship programme of the Ministry of Heavy Industries, promoting electric mobility through buyer incentives and ecosystem support. It is designed to reduce fuel consumption, urban pollution and vehicular emissions while speeding up the transition to sustainable transport.

The Securities and Exchange Board of India (SEBI) requires the top 1,000 listed companies to issue business responsibility and sustainability reports. From June 2025, the SEBI strengthened the ESG framework by mandating detailed disclosures, third-party verification and alignment with recognised international standards. This increases investor confidence and reduces the risk of greenwashing. The SEBI requires listed companies to disclose ESG information on key upstream and downstream value-chain partners. This imposes accountability for ESG risks outside the company’s own operations. Such commercially prudent measures are designed to mitigate the risk of supply chain disruption and prepare for greater regulatory scrutiny.

ESG due diligence drives value

When adopting ESG policies, companies usually carry out ESG gap assessments. They then formulate policies that will manage risk, meet rising regulatory and investor expectations and strengthen long-term financial and reputational performance. Monitoring teams oversee the implementation of such policies. The process is not merely good public relations, but adds value and makes the business more investor-attractive.

Before an investor or acquirer sinks funds into an entity, they now carry out vital ESG due diligence as well as making the usual legal, tax and finance enquiries. Advisers can identify problems to avoid reputational damage, operational inefficiency, regulatory penalties and payments when a deal collapses. ESG risk assessment is now essential when structuring transactions. Buyers and investors may negotiate contractual protections for identified risks, such as conditions precedent, specific representations and indemnity. With robust ESG frameworks operating in Europe and parts of the US, companies from these jurisdictions expect equivalent standards in India and for local companies to comply with them. They will draft contracts accordingly.

Compliance with ESG frameworks is not merely a legal obligation; it builds trust and value. Entities treating ESG as a driver of strategic value rather than compliance rhetoric show stronger resilience, more stable stakeholder relationships and better prospects for sustainable growth. Companies with better ESG metrics are assessed as lower risk and deserving of future investment. They may benefit from better access to capital and lower borrowing costs.

Jayesh Kothari is a partner, and Pooja Khanna is an associate partner at DSK Legal. Rishita Mallareddy, an associate, also contributed to the article