What could have driven this shift? Multiple factors are in play, but perhaps the most important is the political situation in the United States. President-elect Donald Trump has been quite clear that he does not see any need for any further climate action, and will likely roll back some of the efforts made by his predecessor, Joe Biden. But ESG had become divisive politically well before Mr Trump’s election. One of his associates, former pharmaceuticals entrepreneur Vivek Ramaswamy, designed his entire public persona around attacking ESG investing as “woke capital”. Multiple states run by the Republican Party, including large and influential ones like Florida and Texas, have tried to legislate against ESG as far as they can. The government in Texas, an oil-rich state, has even sued ESG investors, claiming they are part of a conspiracy against the fossil-fuel industry. In the US, in fact, the high point of ESG investing was during the pandemic; money has been ebbing out of these funds in North America for about two years.
This is not great news for India and other developing countries, which have been hoping to increase the level of concessional private finance available for their green transition and for sustainable development. There are good reasons to be concerned that India’s own delays have caused it to miss the boat here. The government and regulators have been warned for over five years that it is necessary to put in place a proper taxonomy that defines and clarifies sensible green investing in India. A few committees have been formed, but bureaucratic inaction and crossed connections between multiple regulatory authorities have meant that not much has emerged. Billions of dollars in long-term investment have passed this country by as a result. India’s knee-jerk desire to reinvent the regulatory wheel — rather than, for example, simply building on existing taxonomies developed in the European Union and even in peer nations like Indonesia and Sri Lanka — has affected prospects . Not only will the guidelines for ESG investors emerge delayed but there is every reason to fear they will not be interoperable with those in the rest of the world. Simple and harmonised regulations and definitions are required to ease the flow of capital. There is still interest in sustainable investing, but India will have to work harder to cultivate it now. The government recently unveiled the taxonomy of green steel and more such efforts will be needed. Some new changes, including those at the recent climate summit in Azerbaijan, have opened up additional paths for concessional private finance. The government will need to invest time, energy, and attention in attracting sustainable private capital.
 "ESG")
