CMA Arjya Priya Sinha – [2025] 180 taxmann.com 61 (Article)
1. Abstract
Recent years have witnessed a paradigm shift in financial markets as sustainability imperatives are mainstreamed into legal and regulatory frameworks. The emergence of green finance, supported by national and international statutes, has created new pathways for resilient growth, efficient capital deployment, and climate mitigation. This article offers a detailed legal and analytical exposition on the sustainability mission, focusing on the statutory basis, regulatory mechanisms, fiduciary responsibilities, and real-world case studies relevant to India and the global context.
2. Introduction – Regulatory Genesis and Context
Climate change, resource depletion, and widening social inequalities have rendered sustainability a top agenda item for legislators, regulators, and market participants. The financial sector’s historic orientation towards short-term returns is now challenged by statutory reforms that mandate the integration of ESG principles in lending, investment, and capital market activities. SEBI’s Business Responsibility and Sustainability Reporting (BRSR) framework, the EU Taxonomy, and the ISSB’s disclosure guidance are emblematic of a new era where compliance is not optional but obligatory, and failure to comply entails regulatory sanctions and reputational damage.
Legal reforms are grounded in international treaties such as the Paris Agreement and SDGs, with domestic implementation through sector-specific circulars and guidelines. India, as a signatory to global climate agreements, has adopted statutory changes mandating disclosures and due diligence from financial institutions and listed entities.
3. Statutory Foundations of Green Finance
3.1 Definitions and Scope
Green finance is defined in regulatory parlance as the mobilisation of funds for projects which directly contribute to environmental objectives, including but not limited to renewable energy, waste management, water conservation, and pollution abatement. The statutory scope extends beyond climate risks to encompass social and governance factors, as reflected in the BRSR framework, which covers twelve mandatory ESG parameters for companies listed on Indian exchanges.
3.2. Domestic Legal Framework
SEBI’s BRSR mandate, effective from FY 2022-23 for top 1000 listed entities, obligates granular disclosures on sustainability metrics, policy formulations, stakeholder engagement, risk management, and measurable targets. RBI circulars further require commercial banks and NBFCs to undertake environmental risk assessments as part of their credit appraisal processes. The Companies Act, 2013 includes CSR provisions compelling certain companies to allocate budget for social and environmental initiatives, reported under Section 135.
3.3 International Norms and Cross-jurisdictional Application
International standards, notably the EU Taxonomy, ISSB guidance, and the Global Reporting Initiative (GRI), provide benchmarks for harmonisation. Indian regulators reference these norms, with cross-border listings and borrowings increasingly requiring Indian companies to comply with global ESG standards, independently certified and periodically audited.
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