The Impact of Green Financing on the Cost of Capital of Indian Corporations

Abstract Green financing has become an increasingly important source of funding for projects that support environmental sustainability, including renewable energy, energy efficiency, clean transportation, and pollution prevention. This paper examines how green financing may affect the cost of capital of Indian corporations, with attention to the cost of debt, cost of equity, and weighted average cost of capital (WACC). The study uses a descriptive and analytical approach based on academic literature and institutional publications, including material from the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI), and the Government of India. The analysis identifies possible channels through which green financing can affect capital costs: investor demand, improved disclosure, environmental-risk management, and access to specialised funding. It also considers limitations such as verification expenses, market liquidity, credit quality, and greenwashing concerns. The review indicates that lower financing costs are possible but not guaranteed; the effect depends on issuer characteristics and market conditions. Because no original company-level dataset or survey responses were supplied, the paper does not present invented regression estimates or respondent statistics. It recommends that future research compare matched green and conventional debt issues and test changes in firms’ WACC using transparent company-level data. An explicitly labelled illustrative dataset is included to demonstrate possible tables and regression reporting; these values are synthetic and are not empirical evidence.