10 things to know if you are looking to raise sustainable finance (SF)

With sustainability shaping capital flows, firms are turning to sustainable finance

In brief

• Sustainable finance is fast emerging as a mainstream avenue for capital raising.
• Investors may be ready to deploy capital; however, companies’ commercial readiness and sustainability maturity are essential to attract credible interest.
• Companies must be strategic in determining the end use of the financing and/or impact to be created and align their financing frameworks with recognized global standards such as ICMA, CBI, and SEBI guidelines.

Companies across sectors, from manufacturing and energy to technology and infrastructure, are exploring green and social bonds as well as sustainability-linked instruments, to fund decarbonization and resilience initiatives. Yet, the pathway to securing such finance is complex. It requires a structured assessment of market expectations, internal preparedness, clarity on impact to be created and alignment with regulatory frameworks.

EY teams’ insights from client engagements and ongoing market research indicate that organizations that invest time in planning their sustainability finance (SF) approach are more likely to access diverse investors, negotiate better terms and sustain credibility over time.

1. Know your requirements
   Begin with an internal self-assessment to define your sustainability objectives, financing needs and expected outcomes. Clarify what portion of your strategy can be supported through sustainable instruments and enable alignment with your broader ESG commitments and targets. A good sustainable finance framework should be positioned between the intersection of the company’s strategic sustainability and business priorities.
   
   
2. Market and policy assessment
   Study prevailing policies, regulatory incentives, and market gaps. Understanding investor appetite, sectoral trends, and evolving global taxonomies will help position the proposition more effectively.
   
   
3. Peer benchmarking
   Examine how peers have successfully raised sustainable finance—what structures they adopted, what challenges they faced, what targets and KPIs they committed to, and which instruments proved most attractive to investors. Such benchmarking helps in designing a credible and competitive approach.
   
   
4. Instrument selection
   Evaluate options such as green bonds, social bonds, sustainability-linked loans, and transition bonds. Each comes with distinct requirements for fund use, impact reporting, and verification. The right fit depends on the sustainability and capital strategy.
   
   
5. Develop an SF Strategy and Framework
   Build a robust sustainable finance framework aligned with global principles such as ICMA and the Climate Bonds Initiative (CBI) standards, while adhering to SEBI guidelines if applicable. Clearly outline the governance, use of proceeds, project eligibility criteria, KPIs/targets, their independent verification process and impact measurement and reporting methods.
   
   
6. Engage with the ecosystem
   Sustainable finance thrives on collaboration. Engage early with financial institutions, peers, sustainability experts, second party opinion providers to validate the approach and identify potential partners.
   
   
7. Be investor-ready
   Demonstrate a clear investable pipeline backed by credible data. Investors usually look for scalability, technological feasibility and market readiness. Transparent governance and disclosure practices build confidence and help unlock funding.
   
   
8. Transaction structuring
   Design your financing structure to balance financial and impact outcomes. Pay attention to factors like tenor, pricing, risk-sharing mechanisms and interest rate incentives linked to ESG performance.
   
   
9. Measure and report impact
   Establish a credible impact measurement and verifiable reporting system aligned with international standards. Transparent disclosures not only fulfil investor requirements but also enhance reputation and stakeholder trust.
   
   
10. Think beyond the deal
    Sustainable finance is not a one-time exercise; it is a journey of continuous improvement. Build internal capacity, review frameworks periodically, and stay updated with evolving norms to maintain market relevance.

This article has been co-authored by Joslyn Chittilapally, Director, CCaSS, EY India.