The Government of Kerala has introduced an environment, social, and governance (ESG) policy that integrates environmental considerations with industrial development, governance, and social responsibility.

The ESG policy presents a framework for sustainable development, responsible business practices, and transparent reporting, and positions Kerala as a state transitioning into a 100% renewable energy-based state by 2040 and achieving net carbon neutrality by 2050.

The policy is designed for a five-year term commencing from October 2025.

The state government’s focus on renewable energy entails a multifaceted approach aimed at addressing various aspects. This includes efforts to increase renewable energy production, thereby lowering emissions of greenhouse gases and other pollutants, alongside initiatives to enhance energy efficiency for electricity production at lower costs.

Additionally, the government is committed to supporting community development through the provision of training and education opportunities, fostering both skill development and local engagement.

Investments in research and development are prioritized to enhance technology within the renewable energy sector, aiming to make it more cost-effective and sustainable in the long term. A crucial component of these efforts involves creating job opportunities within the renewable energy industry, contributing to economic growth and prosperity.

The policy notes that renewable energy sources such as solar, wind, hydro, and biomass are pivotal in environmental sustainability efforts because they reduce greenhouse gas emissions and combat climate change.

It lists planned infrastructure that includes solar parks, floating solar installations, rooftop solar systems, wind farms, small hydroelectric plants, and biomass energy facilities. It highlights the role of public-private partnerships in innovation, technology transfer, and knowledge exchange.

Institutional Collaboration

The policy outlines collaboration across state entities to promote environmental objectives.

Kerala State Industrial Development Corporation will monitor and implement ESG policies and facilitate green financing. Kerala State Pollution Control Board will be in charge of awareness, policy development, and monitoring of industries’ environmental performance.

The Kerala Sustainable Urban Development Project will integrate ESG practices into urban planning, waste management, and energy efficiency. The Department of Environment and Climate Change will mandate ESG compliance for clearances and enforce environmental standards.

Branding Kerala as an ESG State

The policy presents Kerala as the first state in India to introduce an ESG policy. It frames a branding program, “KERALA – Pioneer ESG State,” that aligns with the ambition to transition towards carbon neutrality and a 100% reliance on renewable energy sources.

It sets out advertising and marketing campaigns, branding and certification for ESG-compliant products, procurement preference for certified firms, a dedicated e-platform to identify ESG-compliant products and services supported by special barcodes, and incentives and subsidies for businesses that adhere to ESG standards.

Incentives for Environmental Compliance

The policy lists incentives that include a tax credit with 100% reimbursement on capital investment for five years for ESG initiatives and green subsidies of 10% on fixed capital investment for ESG compliance up to ₹5 million (~$56,966).

Concessional loans will be provided through the Kerala State Industrial Development Corporation for machinery purchases aimed at the ESG objective. A purchase preference margin of 20% will be given in public procurement for ESG-compliant enterprises.

Assistance will be provided through MSME clinics for detailed project reports with ESG measures. Funding support will be extended to help existing players convert to ESG compliance within five years from the policy notification date.

The Kerala State Electricity Regulatory Commission has estimated that an investment of ₹522.38 billion (~$6.01 billion) would be required by 2030 to upgrade energy infrastructure and integrate renewable energy sources effectively in the state.

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