India's financial regulators can harmonize climate action with social justice by implementing policies that account for both environmental concerns and the equitable distribution of resources.

India is embarking on an ambitious energy transition with a focus on decarbonisation, and the nation's financial regulators are playing a crucial role in supporting this endeavour. The Securities and Exchange Board of India (Sebi) and the Reserve Bank of India (RBI) are leading the charge, advancing Environmental, Social, and Governance (ESG) norms, green finance, and disclosure standards to facilitate a smooth and equitable transition.

The RBI's draft climate disclosure framework calls on financial institutions to disclose climate risks and undertake stress testing. However, it does not yet classify just transition factors as a material financial risk. To strengthen the framework, socio-economic impacts of the climate transition, sector-wise exposure to carbon-intensive industries, and financing strategies for economic diversification in vulnerable regions should be included.

Sebi has created a sustainable finance ecosystem through regulatory instruments like the Business Responsibility and Sustainability Report (BRSR), green debt securities, ESG funds, and the Social Stock Exchange. The RBI's move to recognise sovereign green bonds as eligible for the statutory liquidity ratio has increased their uptake. The Social Stock Exchange can become a powerful tool for financing non-profit and social enterprises working on just transition-aligned initiatives.

Only 30% of Indian banks have integrated climate risk frameworks. To address this gap, the priority sector lending mechanism can be expanded to support projects in transitioning coal-dependent regions. The RBI's green deposits programme can be fine-tuned to include projects delivering social co-benefits. The RBI should also recognize just transition as a financial risk category and conduct sector-specific impact studies.

The RBI should issue targeted sovereign green bonds dedicated to just transition goals. Aligning BRSR with global just transition frameworks, such as the International Labour Organization’s guidelines, would enable investors to assess not just how companies are decarbonising, but also how they are supporting workers and communities in this process.

Social risks from the energy transition are not yet fully integrated into India's financial risk frameworks. Collaboration between regulators, financial institutions, and public agencies is essential to build a financing ecosystem supporting workers, strengthening community resilience, and driving equitable economic transformation. Indian financial regulators collaborate internationally with partners such as family offices and global investment firms, including those from Asia and Europe, to integrate Just Transition principles into financial management.

Clean energy projects focusing on retraining fossil fuel workers or investing in rural livelihoods can help align environmental goals with social outcomes. The social impacts of the energy transition need stronger integration into financial regulation to ensure a just transition that protects workers, communities, and vulnerable sectors. Future editions of the climate risk and sustainable finance survey could track banks' policies to finance sectors aligned with just transition objectives.