Two Systems, No Bridge: CSR, Urban Climate Risk, and India's Missing Convergence Architecture
In India, companies are mandated under Section 135(5) of the Companies Act, 2013, to spend at least 2% of their average net profits from the three preceding financial years on Corporate Social Responsibility (CSR) activities. This requirement applies to companies with a net worth of ₹500 crore or more, a turnover of ₹1,000 crore or more, or a net profit of ₹5 crore or more during the immediately preceding financial year.
Between FY 2019-20 and FY 2023-24, a total of over 1,44,159 crores in CSR capital was generated annually in India, with a substantial contribution from our cities that primarily provide land and labour. However, the cities that support the CSR economy are the same cities now facing the wrath of changing climate in the form of extreme heat and flooding, yet not even a fraction of this capital has been routed towards making these cities climate-resilient. This is not a problem of funding but a problem of how our policies are designed.
The Paradox Of Proximity
Indian Tier-2 cities such as Patiala, Jamshedpur, Patna, and Indore are facing a silent climate crisis, ranking highest in the specific contribution of urbanisation to the Urban Heat Island (UHI) effect, which turns these growing centres into "virtual ovens". Daytime temperatures in these urban areas are often 1–9°C higher than those in the surrounding rural areas. Beyond heat, cities like Gorakhpur face annual monsoon flooding that affects millions, while hilly Tier-2 cities like Dharamshala are increasingly prone to flash floods and landslides.
The institutional and fiscal reality of Urban Local Bodies (ULBs) makes adapting to these exposures nearly impossible from within. Municipal revenues in India have stagnated at a shockingly low level of roughly 1% of GDP, compared to 7.5% in Brazil and 6% in South Africa. Annual budgetary investment in the urban sector is only 1.5–1.7% of GDP, falling far short of the Asian average of 5.7%.
"Climate change" is notably excluded from the 12th Schedule of the 74th Constitution Amendment Act, which lists the normative functions of ULBs. Without a legal mandate, city officials view climate action as an additional burden rather than a core responsibility.
There is a severe scarcity of specialised skills in regional climate projections, leaving cities to rely on paperwork adaptations such as Heat Action Plans that often remain standalone advisories rather than mandatory policy directives.
While cities struggle for funds, the CSR corpus in India generates an average of ₹28,831.81 crores from nearly 16,000 eligible companies. However, the distribution of this capital reveals geographic and thematic bias.
Despite the urgency of urban resilience, CSR spending is characterised by "SDG cherry-picking," in which firms prioritise high-visibility, low-risk sectors such as Education (34.19%) and Health (20.59%) over Environmental Sustainability (7.06%) and Sustainable Cities (SDG 11), which receive minimal attention.
CSR capital disproportionately follows the urban-industrial footprint of corporate headquarters rather than developmental urgency. For example, Maharashtra consistently receives the highest funding (₹1,632 crore in 2020–21), while high-risk, high-poverty states like Bihar receive less than one-fifth of that amount (₹304 crore).
Crisis and capital occupy the same physical geography, yet a failure in governance design separates them. Large industrial hubs like Surat have experienced massive economic losses from climate events, such as the ₹16,000 crores loss in the 2006 floods. Yet, CSR remains institutionally isolated from citywide resilience initiatives such as AMRUT 2.0 or the Smart Cities Mission.
This separation ensures that even when companies operate in high-risk zones, their mandated social capital is funnelled into safe categories like scholarships, while the city's hydrological and thermal integrity continues to collapse. The current system consistently confuses planning with protection, leaving Tier-2 cities as the primary victims of a design that generates massive capital in their name but denies them the ability to claim it for survival.
Two Systems, No Bridge
The financing and implementation of India’s flagship urban missions, specifically the Smart Cities Mission (SCM) and AMRUT, are defined by significant capital shortfalls and a reliance on private sector windows that remain institutionally isolated from the country’s massive CSR capital pool. This disconnect is increasingly characterised as a governance design failure rooted in legal omissions and siloed planning. A stark contrast exists between the investment required for urban transformation and the actual budgetary allocations.
While the Smart Cities Mission has initiated 7,742 projects with a total investment of ₹1,81,500 crore, these funds are insufficient to cover the broader resilience needs of over 4,000 statutory towns. To bridge these gaps, missions utilise the Public-Private Partnerships (PPP) model. Examples include Nashik’s DBFOT (Design, Build, Finance, Operate, and Transfer) model for smart streetlights and Indore’s PPP-led Bio-CNG plants. However, these opportunities are often project-specific and struggle to attract long-term private capital for non-brandable resilience infrastructure.
Despite the existence of thousands of crores in annual CSR capital, there is a total institutional isolation between corporate social spending and urban mission planning. Urban governance is described as a "siloed and fractal arrangement" in which different departments work in isolation each other, failing to integrate CSR resources into city-wide resilience strategies. Another major barrier is the redirection of CSR capital toward central government-endorsed funds such as the PM CARES Fund, which saw a 6.3-fold increase in contributions between 2014 and 2021. This centralisation risks undermining local development autonomy and bypassing the specific needs of ULBs.
There has even been a structural disconnect through the omission of an item in Schedule VII of the Companies Act of 2013. Even though CSR obligations for the items in Schedule VII are mandated by Section 135, the scope of these obligations is broad enough to enable companies to rationally allocate their CSR funds to more visible and risk-free areas, such as health and education, rather than to urban resilience.
Why The Bridge Was Never Built
However, it is not only about bridging CSR capital with urban climate resilience in India. The problem is rooted in five major design flaws that prevent the mandatory nature of CSR legislation from ensuring systemic safety.
In particular, a legal framework regulating CSR requires the relevant companies to allocate 2% of their annual net income to various social initiatives. However, this legal requirement contributes to the formation of short-term attitudes towards CSR and climate resilience that are inherently incompatible. Indeed, while other fields of activity have an evident impact and thus attract more attention, environmental investments have a more indirect effect and are therefore perceived differently.
CSR committees frequently operate under a culture of institutional mimicry where they imitate institutionally safe and low-risk strategies, primarily in education and healthcare, to avoid regulatory ambiguity and ensure reputational gain. This "SDG cherry-picking" allows firms to bypass the technical complexity of climate action. Most CSR committees and implementing NGOs lack the multidisciplinary domain knowledge (e.g., climate geoscience, urban planning, and hydrology) needed to design scientifically-informed resilience projects. Without this expertise, firms opt for paperwork adaptations that are easier to report but provide no real-world protection.
While the Companies Act encourages companies to give preference to the local area around their operations, this creates sharp subnational disparities in funding. CSR capital disproportionately follows the urban-industrial footprint of corporate headquarters (e.g., Maharashtra received INR 1,632 crore in 2020–21), while states with higher climatic risks and lower institutional capacity, such as Bihar, receive less than one-fifth of that amount. This misalignment ensures that high-risk urban zones in Tier-2 and Tier-3 cities remain chronically underfunded because they lack the necessary corporate clustering.
Even with the diversion of CSR capital towards climate change projects, most ULBs are unable to meet the financial requirements for such ventures and may lack the capacity to identify and manage climate-related projects. ULBs are currently struggling with a lack of technical expertise in data analysis and systems integration, and due to the absence of any law mandating action on climate change, they consider building their resilience a burden.
Evaluation of CSR in India continues to be input-based, focused on expenditure numbers rather than systemic impacts. A resilient impact may include reducing local temperatures by 1.5°C through expanded tree canopies or improved flood drains. These impacts take time to materialise and are often hard to identify in a typical CSR form. Since they cannot be quantified every year, companies tend to focus on SDGs which are easy to quantify and brand. This expenditure-centric model conflates financial compliance with actual social impact, leaving the long-term metrics of climate resilience unrecorded.
CSR alone cannot build this bridge. While India’s CSR mandate generates a massive pool of capital annually, it is a mere fraction of the capital required. Emerging economies need an estimated $147 billion annually for city-level adaptation, yet South Asian cities received only $0.7 billion in 2021-22, meeting only 4% of the actual demand. Urban resilience building constitutes a partially constructed bridge that lacks an overarching institutional architecture which combines public finance, private windows, and statutes. CSR can contribute to achieving such an outcome, but CSR cannot replace the broader paradigm shift required to secure Indian cities.
Fixes For The Missing Bridge
To bridge the structural chasm between India’s mandatory CSR capital and the urgent needs of urban climate resilience, three systemic fixes are required to move beyond the current governance design failure.
The problem begins with a single legal omission. Amending Schedule VII to include "urban climate resilience" as an explicit, stand-alone category would remove the compliance ambiguity that currently blocks well-intentioned firms. This provides the necessary regulatory clarity to transition CSR from a passive compliance obligation into a structured tool for building a city’s hydrological and thermal integrity. It would empower CSR committees to internalise climate risks without fearing regulatory audits.
A formal administrative channel for co-financing would allow CSR funds to support the climate-resilience components of AMRUT 2.0 projects. To move beyond an expenditure-centric model, this mechanism would mandate geo-tagged outcome reporting on the Ministry of Corporate Affairs (MCA) portal. This ensures that corporate spending translates into verifiable resilience outcomes, such as a measured reduction in local heat intensity or improved groundwater recharge.
Additionally, establishing City-level CSR Coordination Councils, institutionally housed under the National Institute of Urban Affairs (NIUA) or State Finance Commissions, would act as institutional brokers. These councils would align corporate CSR intent with the specific needs identified in City Resilience Strategies and Heat Action Plans. By creating a "synergy across all climate actions," these councils bridge the gap between policy planning and on-ground implementation, similar to the multi-stakeholder model used by the Surat Climate Change Trust.
The Netherlands' Delta Programme offers the most instructive international precedent for what a formal private sector-urban climate finance interface can look like in practice. While its core financing runs through a central government Delta Fund, the Programme systematically channels private capital into resilience through public-private covenants, including a Climate-Proof Construction Covenant in Zuid-Holland, signed by sixty private developers and investors, shared resilience mandates for private infrastructure managers who own vital national functions, and municipal financial incentives for businesses undertaking green-blue interventions on their own premises. Dutch cities participating in the 100 Resilient Cities network further leveraged over $655 million in non-governmental capital for concrete resilience projects. The lesson for India is not replication but principle: formal governance architecture, covenants, mandates, and institutional platforms can route private capital toward urban climate resilience without requiring it to be labelled as such. A CSR-AMRUT convergence mechanism would do precisely this.
What the Bridge Is For
The argument here is not about corporate charity. It is about routing capital generated in cities back toward those cities that need it most. Although Nagpur, considered one of the hottest cities in India, provides considerable CSR due to its industrial and pharmaceutical belt, its cooling facilities, urban green cover, and drainage systems continue to suffer from under-investment in successive city budgets. Patna’s flooding occurs in a manner that no longer alarms people, whereas Bihar, one of India’s climate-riskiest states, receives about one-fifth of Maharashtra’s allocation. Jamshedpur's thermal stress and urban flooding are in part consequences of the industrial activity that simultaneously generates the CSR that its companies report annually. In each of these cities, the capital and the crisis occupy the same district boundaries. What separates them is not intent, it is design.
The three governance fixes proposed here are not expensive to build. They require regulatory clarity, an administrative interface, and an institutional broker. What they require most is the political will to treat urban climate resilience not as a charitable afterthought but as a governance mandate, and to recognise that India's cities are not asking for corporate generosity. They are asking for access to what is already being generated in their name.
Written By: Ritika Singh Thakur Edited By: Arunanshu Sarkar
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