Socially Responsible Investing (SRI) In India: Evolution, Drivers, Challenges, and Future Prospects

Abstract

Socially Responsible Investing (SRI) in India has evolved significantly, transitioning from its ethical and religious roots to a more comprehensive approach integrating Environmental, Social, and Governance (ESG) criteria. This study traces the historical journey of SRI in India, identifying its key drivers, challenges, and future prospects of this investment approach. The growth of SRI in India can be attributed to various factors, including regulatory support, institutional investor demand, risk management benefits, alignment with corporate strategies, and international commitments. However, the Indian SRI landscape faces several challenges, such as data and disclosure issues, a lack of awareness and understanding among investors, the perception of underperformance, definitional ambiguity, and limited product depth. Despite these challenges, the performance analysis of SRI funds and ESG indices in India demonstrates their competitive returns, particularly during market volatility, dispelling the notion of a compromised financial performance. The Indian SRI ecosystem, comprising regulators, corporations, asset managers, and investors, is evolving but remains less developed than global standards. This study highlights the need for a cohesive SRI framework, enhanced ESG disclosure standards, and the integration of ESG factors into corporate strategies and investment decision-making processes. Recommendations for various stakeholders emphasize the importance of regulatory reforms, investor education, and innovation in promoting the growth of SRI. While the future of SRI in India appears promising, realizing its potential requires concerted efforts from all stakeholders to address existing challenges and foster a conducive environment for sustainable investment. Further research is needed to examine the long-term performance of SRI funds, investor behaviour, and the impact of SRI on corporate sustainability in India.