Driving ESG Excellence: The Transformative Role of Sustainable Finance in Indian Banks – Challenges, Opportunities, Impact

Abstract

The Indian banks have been constantly evolving toward the adoption of ESG practices through sustainable finance, which is further accelerated by responsible investment and lending practices. The paper discusses the transformative impact that sustainable finance has on Indian banks, focusing on challenges, opportunities, and overall impact. These include regulatory uncertainties, inhomogeneities of ESG metrics, and exorbitant costs to transition to sustainable models. Notwithstanding these challenges, there are huge opportunities that rest with sustainable finance, such as new market tapping, luring ESG-focused investors, and risk management. The impact is enormous, and it changes the business model, brings transparency, and increases a culture of sustainability. While Indian banks facilitate the country's transition toward a low-carbon economy, their pledged commitments to ESG become indispensable in realizing wider sustainable development goals. In the ultimate analysis, sustainable finance acts as the prime mover for ESG excellence in the banking sector in India.