ESG Investment Benchmarks versus Green Energy Companies in India: A Comparative Analysis

Abstract

Environmental, Social, and Governance (ESG) investing and the renewable energy sector have both gained substantial momentum in India in recent years, supported by regulatory reforms, growing institutional participation, and the country's expanding clean-energy targets. While a number of studies have examined ESG investing and green energy stocks separately, few have directly compared the two as alternative sustainable-investment avenues within the same empirical framework. This study addresses that gap by comparing the performance of four major Indian ESG benchmark indices (NIFTY100 ESG, NIFTY100 Enhanced ESG, NIFTY100 ESG Sector Leaders, and BSE 100 ESG) with ten listed Indian green energy companies over the five-year period January 2021 to December 2025. Using daily closing price data, the study computes annual returns, CAGR, descriptive return statistics, Beta, Sharpe Ratio, Jensen's Alpha, simple moving averages, and Pearson correlation, and tests four hypotheses using independent-samples t-tests, Levene's test, and correlation significance tests. The results show that ESG benchmarks delivered stable, moderate returns (13.79%–15.35% annually) with low volatility (13.86%–14.05%), while green energy companies delivered substantially higher but far more dispersed returns (13.07%–77.94% annually) with volatility two to five times higher. The difference in volatility between the two groups was highly significant (Levene's test, p < 0.0001), and daily returns of most green energy companies were significantly and positively correlated with ESG benchmark returns (p < 0.0001), though differences in mean returns and Sharpe ratios between the groups were not statistically significant. The findings suggest that ESG benchmarks and green energy stocks are not substitutable investment options but instead offer complementary risk-return profiles, supporting a combined allocation strategy for sustainability-oriented investors in India.