ESG SCORES: THE HIDDEN KEY TO UNLOCKING GREEN BUSINESS LOANS

• Publish on Jul 21, 2025
• Read Time 5 mins

If you’re applying for a green loan, your ESG score could make all the difference.

At Ecofy, we’re not just funding businesses; we’re financing the future. A greener, more responsible, and more resilient one. That’s why we look beyond balance sheets and turnover trends.

One of the biggest signals of long-term sustainability? Your ESG score.

What is an ESG score?

Let’s break it down.

ESG stands for Environmental, Social, and Governance. These three pillars tell the story of how responsible and future-ready your business really is.

• Environmental: How your business impacts the planet. From energy consumption to waste reduction, and carbon footprint.
• Social: How you treat your people, including employees, communities, suppliers and customers.
• Governance: How your business is run: transparency, ethics, decision-making, and compliance.

An ESG score is typically calculated by a third party and offers a snapshot of how your business performs across these categories.

Why does ESG matter in a green loan application?

When you apply for a green business loan, your ESG score becomes an integral barometer of loan worthiness to lenders. It’s a key measure of green loan eligibility. ESG scores help us understand:

• Are you truly sustainable?
  Green finance is designed to back businesses that are driving environmental or social impact. A credible ESG score tells us that your commitment is real and not just a mention in your mission statement. It demonstrates measurable progress and responsible practices.
  Companies with strong ESG credentials are seen as more future-proof and aligned with the needs of a low-carbon economy.
• Can your business manage risk better?
  Businesses with strong ESG scores are often more resilient to regulatory shifts, climate risks, and economic volatility. These businesses integrate responsible practices into their operations.
  From robust supply chains to employee retention, ESG performance reveals how well your company can withstand and adapt to change.
• Will you qualify for better terms?
  Across global financial markets, ESG-aligned businesses are accessing capital faster, often with better terms. In India, as green financing scales up, lenders are increasingly using ESG scores to evaluate not just risk, but also impact.
  Your score could be the deciding factor between approval and delay. Or between standard and preferential interest rates.

What makes a ‘good’ ESG score?

There is no universal benchmark, but here’s what typically defines a strong ESG profile:

• Low environmental impact and emissions
• Fair and inclusive workplace policies
• Clear, transparent governance and ethical leadership
• Community involvement and responsible sourcing

You don’t need to be perfect. You need to be intentional.

How can you improve your ESG score?

Improving your ESG score doesn’t require a complete business overhaul. Small, consistent steps go a long way.

• Track your impact: Start measuring key metrics like energy use, emissions, employee well-being, and board diversity
• Report responsibly: Integrate ESG metrics into your annual reports or sustainability statements
• Make ESG part of your strategy: Infuse sustainability into how you hire, source, and deliver
• Engage third-party platforms: Sites like Synesgy can help assess and benchmark your ESG performance

Building ESG into your business strengthens your brand, improves employee engagement, and makes you a stronger candidate for green finance in India.

Why ESG Scores Are Rising in Importance

The IIM Bangalore White Paper on Green Finance in India highlights that ESG-aligned lending can help reduce systemic financial risks while channeling capital towards impactful innovation.

Whether your requirements are solar financing, EV-2W, EV-3W finance, SME business loans for sustainable packaging, or lending green for ethical agriculture, your ESG score is fast becoming central to credit evaluations. Even EV finance companies are now expected to show ESG alignment as part of regulatory compliance.

According to the McKinsey Quarterly report on Does ESG Matter & Why, more than two-thirds of respondents say their organizations have achieved broad impact from their ESG efforts in the past three years, and 43 percent report that their organizations have captured financial value from their ESG investments over that span.

ESG is more than a score. It’s your business DNA.

If you’re applying for a green loan, take a moment to understand your ESG score. It may just be your strongest case for financing.

FAQs

1. What qualifies as a ‘good’ ESG score?
   There’s no universal benchmark, but a strong ESG profile typically includes:
   • Low environmental impact and resource efficiency
   • Fair, inclusive workplace practices
   • Transparent governance and ethical decision-making
2. Can small businesses have strong ESG scores too?
   Absolutely. ESG is not about size; it’s about intent and integrity. Small steps like reducing energy use, improving employee well-being, or publishing transparent practices can build a strong ESG foundation.
3. How can I improve my ESG score?
   Here are some simple ways to start:
   • Track key impact metrics (e.g., emissions, employee diversity, governance policies)
   • Publish ESG progress in reports or on your website
   • Integrate ESG into your strategy from hiring to sourcing to delivery
   • Use third-party tools like Synesgy to assess and benchmark your performance
4. Where can I get my ESG score evaluated?
   There are several credible third-party platforms, like:
   • Synesgy
   • CRISIL ESG Evaluations
   • Sustainalytics
   • MSCI ESG Ratings
   These tools can help you measure, improve, and present your ESG efforts credibly to lenders like Ecofy.
5. Is an ESG score mandatory for a green loan with Ecofy?
   While not always mandatory, a credible ESG profile significantly strengthens your loan application. It demonstrates that your business isn’t just claiming to be green — it’s proving it through action and accountability.