Kerala Aims for Net Carbon Neutrality by 2050 Under New State ESG Policy

Kerala’s Pinarayi Vijayan government on Wednesday approved a new Environmental, Social, and Governance (ESG) Policy aimed at promoting green investments in the state. The policy seeks to achieve net carbon neutrality by 2050 and transition the state to 100% renewable energy by 2040.

The policy is being called the first of its kind by an Indian state government.

"This framework integrates sustainability, inclusivity, and governance into the state’s industrial growth model, aligning with global commitments such as the UN SDGs and India’s COP26 goals," the state government said in a statement.

Under the policy, the government will provide, 100% reimbursement of capital investment for five years on ESG-compliant projects, a 10% green subsidy on fixed capital investment (up to ₹50 lakh), and concessional loans through Kerala State Industrial Development Corporation (KSIDC) for ESG-compliant machinery and technologies.

Additionally, ESG-compliant local companies will receive a 20% margin in government procurement. Support for ESG-linked entrepreneurs includes extended entrepreneurship schemes, startup incubation programs with mentorship, accelerators, networking opportunities, and workshops on ESG adoption. The policy also facilitates market access through partnerships with corporates and agencies prioritising ESG procurement, and offers subsidised financing for existing industries to transition to ESG compliance within five years.

The KSIDC has been designated as the nodal agency for policy implementation. It will monitor ESG adoption, publish annual progress reports, and support industries in transitioning. An ESG reporting system aligned with national (BRSR) and international standards (GRI, SASB, TCFD) will be developed, along with ratings and awards for ESG-compliant initiatives and a digital e-portal.

A review mechanism will collect annual stakeholder feedback and ensure the policy, valid from June 2025 to 2030, is continuously updated with sector-specific sub-policies.

The policy also focuses on investing in renewable energy projects, including solar parks, floating solar, wind farms, hydro plants, and biomass projects, while promoting public-private partnerships, R&D, and workforce training. For MSMEs, it adopts the Zero Defect, Zero Effect (ZED) philosophy, providing subsidies, quality certifications, and market access under the “Made in Kerala” brand.

The government said the ESG Policy aims to position Kerala as India’s leading destination for ESG-compliant investment and promote a sustainable, responsible future by integrating environmental, social, and governance practices.