India gains favour with global investors on returns, ESG momentum

India ​is maturing as a market ​in which foreign investors who take into account environmental, ​social and governance (ESG) factors are confident in dedicating more of their portfolio to, according to fund managers at the Indian Venture and Alternate Capital Association conclave ‌in Mumbai, who ⁠cite ⁠the economy's scale, improving return outlook and advancing ESG standards as key differentiators.

India's market ​regulator SEBI has been expanding the scope of ESG-related regulations for over ​a decade, making detailed Business and Sustainability Report disclosures mandatory for the country's top 1000 listed companies since 2023.

"India is clearly earning ​its space in terms of allocations from global ⁠investors," said ‌Ralph Keitel, head of Fund Investments at Zurich-based ​responsAbility Investment, ​speaking to Reuters at the conclave.


"Fifteen to 20 ⁠years ago, India was a great space, but returns ​took longer," Keitel said. Now he sees a ​stronger near-term case as well.

Investors also said the country's appeal rests on its relative resilience at a time when global allocations are being reassessed across China, the United States and other emerging markets.

India's economy is projectedto grow 6.5% in both fiscal years 2024-25 ‌and 2025-26, according to the International Monetary Fund.

"Besides risk mitigation, ESG impact - having (a) good impact on communities adds ​value," Neha ​Grover, South Asia ⁠Lead for Private Equity at IFC told Reuters. Grover added that India has become one of the most consistent emerging markets for profitable exits, ​supported by a strengthening initial public offering (IPO) pipeline.

ResponsAbility Investment's Keitel also pointed to climate-related opportunities as a core area of interest, citing sectors such as mobility and solar panels. As incomes rise, environmental pressures tend to intensify, he added.