India Ratings and Research (Ind-Ra) opines governance (G) factors led, even as the overall impact of Environmental (E), Social (S), and G factors on credits was minimal across the 338 issuers rated/reviewed in 2025. Eight entities had a G factor which was ‘Relevant’, followed by three for E factors and none for S factors.
G Factors Remain Dominant: Eight entities had a G factor which was ‘Relevant’, indicating that it either has minimal impact or is being actively managed. For the eight entities, G factors such as ‘Management Strategy’, ‘Group Structure’, ‘Governance Structure’, and ‘Financial Transparency’ were ‘Relevant’, indicating that these ESG issues were one of the key rating drivers for these entities in conjunction with other factors. Management Strategy was found ‘Relevant’ in five credits due to delays in project implementation, differences among promoter groups, and consistently weak financial and operating parameters. Group Structure was found ‘Relevant’ in four credits where there is high related-party transactions. Financial Transparency was found ‘Relevant’ in two credits due to delay in financial disclosures.
E Factors Remain Minimally Relevant to Credits except for Three Entities: The report highlights that E factors were largely ‘Minimally Relevant’ to the credit ratings in 2025. Overall, the exposure to E factors was not a material rating driver to the entities except three. An E factor namely ‘GHG Emissions and Air Quality’ is the key rating driver for all three two entities. GHG Emissions and Air Quality was found ‘Relevant’, given the adverse impact to margins and cash flows from increased environmental compliance costs.
S Factors Yet to Show Any Relevance to Credit: No credit ratings were driven by S factors in 2025. Emerging data breaches and privacy concerns, along with rising labour unrests customer welfare, product safety and consumer preferences drive investor decisions, making S factors increasingly important in the longer term.
ESG Issues Could Become Relevant in Medium Term: The impact of ESG issues on credit ratings remained low in 2025, with only 11 entities among the 338 reviewed having ESG issues as a factor which was ‘Relevant’ to the credit rating. However, Ind-Ra expects ESG issues to take the centre stage in the long term and play an increasing role in impacting the credits, given the enhanced focus towards sustainability and meeting the net-zero targets.
