Sustainability Insights: Can India's Sustainable Finance Market Boost Corporate Interest?

India’s sustainable bond market remains structurally shallow. Higher rates and hedging costs reduce offshore issuance incentives, leading corporate issuers to favor alternative funding channels. The trend underscores a growing mismatch between market activity and India’s estimated $250 billion annual climate financing needs, as well as social infrastructure gaps.

After peaking in 2023–2024, sustainable bond issuance in the country declined to about $2 billion in 2025, comprising 62% green bonds and 38% social bonds. S&P Global Ratings believes that this low issuance reflects a shift in funding preferences, rather than a lack of demand, with labeled bonds no longer offering a clear advantage relative to other borrowing options. Targeted tax incentives could deepen India’s sustainable bond market by improving after-tax returns, broadening the investor base beyond public sector banks and supporting lower-cost funding for eligible issuers. Without such measures, India's energy transition is likely to depend more on equity financing, commercial bank loans and conventional unlabeled corporate debt than on direct corporate labeled bond markets.