ESG for transformational affordable housing

In India, the concept of Environmental, Social, and Governance (ESG) became popular in the year 2021 when Security and Exchange Boards of India (SEBI) mandated business responsibility and sustainability reporting (BRSR) for the top 1000 listed companies. Environment, Social and Governance are the three facets that characterise sustainable and responsible investing for any organisation. The rise of ESG standards in construction industry is expected to create a resilient and successful marketplace with long-term benefits for all stakeholders through a coordinated attempt to reduce the negative impacts on the environment.

In the year 2022, a noticeable rise in the participation of Indian companies in Global Real Estate Sustainability Benchmark (GRESB)1, a global ESG benchmark and reporting framework for listed property companies, developers, investors that finance directly in real estate was observed. This is a significant indicator of the onset of ESG trend. Post pandemic, homeowners have realised the importance of well-lit and ventilated houses with better indoor environment and air quality. Green housing focuses on ensuring improved indoor environment for occupant wellbeing and safety in addition to resource efficiency and waste management. A huge demand for green housing is expected in the coming years. ESG, not only emphasises on eco-friendly or green housing, but also considers the influence of such projects on the community, covering a wide array of aspects on governance, diversity and gender responsiveness. All of these are very important considerations for the design of a house, both from the builder as well as homeowners’ perspective.

India’s updated Nationally Determined Contributions (NDCs) to the United Nations Convention for Climate Change (UNFCCC) and the recently announced Panchamrit Plan emphasise reducing our overall emissions intensity and improving the energy efficiency of the economy. This may be achieved over time by taking appropriate measures through schemes and programs across many sectors, including sustainable mobility and housing.2 The national goal of “Housing for All” strategically focused on minimising the housing shortage, which can only be attained through ensuring sustainably built affordable housing.3 The building sector accounts for 38% of the total global energy-related CO2 emissions.4 The overall energy consumption in the Indian building sector accounts for 37% (i.e. 213 mtoe) of our total annual primary energy consumption.5 Hence, the role of ESG, especially the environmental aspect of it, forms an essential part of construction industries role in the development of affordable housing.

The ESG framework for construction projects is developed in similar lines to the green building certification requirements, making green buildings a subset of it. The following are the key ESG parameters considered for any construction project:


ESG provides a holistic strategy to enable a builder to gain understanding on the negative environmental and social impacts of their housing projects. For example, construction waste generated on site must be segregated and disposed of in a responsible manner. Additionally, safety signages should be displayed in the local language of the construction workforce and mandating usage of PPE for them.

It also enables the typically first-generation developers in the affordable housing segment to strengthen their corporate governance policies. For example, maintaining regularised wages and working hours for construction workers on site. Provision of a creche facility at the construction site to educate the construction worker’s children along with enforcing relevant policies to strengthen the prohibition of child & forced labour practices.

Infusing the concepts of ESG to create best practices for the construction sector will further help in achieving India’s climate target to reduce Emissions Intensity of its GDP by 45 % by 2030. This will further be a small step towards achieving India’s long-term goal of reaching net zero by 2070.2

So far India's climate mitigation actions have been mostly financed from domestic resources. However, to address the challenge of climate change and achieve the Nationally Determined Contributions (NDC), there is a need for new and tailor-made funding required. Such funding opportunities are now coming in form of green bonds and climate finance from Development Finance Institutions to Indian banks and Non-Banking Financial Companies (NBFCs).

The role of ESG is crucial to achieve the targets under India’s Panchamrit plan. To achieve this, real estate investors and lending companies should ensure that financing is aligned with positive and measurable climate, social and environmental co-benefits.

The article is authored by Anushma Malpani, Green Value Partner, IIFL Home Loans. All views expressed are personal.