Tatsat Chronicle Magazine

Lip Service: Indian Banks Are Woefully Underprepared To Deal With Climate Change Risks

A recent survey revealed that the majority of Indian banks do not have policies in place or the capacity to implement green financing, despite major announcements by the government in the past few years. As risks associated with climate change increase, the banking sector finds itself precariously placed to deal with the challenges
August 31, 2023
Photo: Pixabay

While serious statements promising steps to mitigate climate change and curb the emission of greenhouse gasses (GHG) are regularly delivered at international conferences on climate change, real movement on this front can only come when government policy is backed by the financial framework to push economic activity firmly in the direction of lower emissions. Banks, which finance business projects, therefore are the ones who are best placed to ensure, through activities financed by them, that GHG emissions meet the Paris Agreement goals.

India made a commitment at last year’s Glasgow Climate Meet that its target was to reach net-zero emissions by 2070 but its banks have shown slow progress in incorporating climate risks in their policy or work towards net-zero. According to a report released this month by voluntary organisation Climate Risk Horizons (CRH), the Indian banking sector as a whole remains largely unprepared to deal with the impacts of climate change.

For example, only 11 out of the 34 Indian Banks, that figure among the top 1,000 companies by market capitalisation listed on the Bombay Stock Exchange (BSE), had made significant progress in assessing material risks they face from the climate crisis.

Forward movement on incorporation of climate risks in business policies has been made only by a few banks and that too after prodding by the Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI). Most banks don’t have any policy regarding fossil-fuel use, emissions limits, climate scenario analysis, which could pose a serious threat to their asset base.

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Kalyan Chatterjee

The writer has been a media professional for 38 years. He was the former HoD of the Amity School of Communication, Amity University.