Kerala makes ESG central to State Industrial Policy, announces incentives for compliance

The Kerala State government has announced a comprehensive Environment, Social and Governance (ESG) Policy for all its industries to position the State as India’s first destination that fully integrates ESG compliance into its growth model.

The comprehensive incentive structure aligned with ESG adoption includes 100% reimbursement of tax on capital investment for five years, 10% subsidy on fixed capital investment (up to Rs 50 lakhs), 20% margin in government procurement for ESG-compliant local enterprises and subsidised financing for existing industries to transition into ESG compliance within five years. Kerala State Industrial Development Corporation (KSIDC) has been asked to provide low-cost loans for ESG-compliant machinery and technologies under the policy.

.

The departments of Industries, Environment, Finance, and Social Justice will coordinate to implement ESG regulations, subsidies, and awareness programmes, an official statement from the government said.

The Policy emphasises the adoption of renewable energy, ESG adoption of MSMEs and institutional collaboration. On the renewable push, the policy talks of 100% renewable energy by 2040 and carbon neutrality by 2050 by prioritising fresh investments in solar parks, floating solar, wind farms, hydro plants, and biomass projects. Public-private partnerships and R&D will be encouraged, alongside workforce training and awareness campaigns, the statement said. The policy also adopts the Zero Defect, Zero Effect (ZED) philosophy for MSMEs—emphasising flawless manufacturing with minimal environmental impact. MSMEs will be supported with subsidies, quality certifications, and access to new markets under the “Made in Kerala” branding.

The policy also talks of a simplified yet comprehensive ESG reporting system that is aligned with national (BRSR) and international standards (GRI, SASB, TCFD) for Kerala-based entities. Companies will be encouraged to disclose ESG metrics through this state-specific framework, ensuring transparency and comparability, the policy states.

Industries will be rated by SEBI-regulated ESG rating providers, and exemplary performers will be recognised at the state and national levels. A digital e-portal will be developed to display ESG ratings and awardees, fostering investor confidence, the policy says.

KSIDC has been designated as the nodal agency for policy implementation. KSIDC will monitor ESG adoption, publish annual progress reports, and support industries in transitioning. A review mechanism will ensure annual feedback from stakeholders and alignment with SEBI and national BRSR guidelines. The policy will remain valid for five years (June 2025–2030), with continuous updates and sectoral sub-policies to adapt to evolving needs.