REPORT OF THE SURVEY ON CLIMATE RISK AND SUSTAINABLE FINANCE

ACKNOWLEDGEMENTS

The Sustainable Finance Group in the Department of Regulation, Reserve Bank
of India, gratefully acknowledges the support of all the participating banks in
submitting the filled-in survey in a timely and comprehensive manner in spite of the
disruptions brought about by the COVID-19 pandemic in January 2022.

Executive Summary

The Sustainable Finance Group (SFG) in the Department of Regulation (DoR), Reserve Bank of India
(RBI), carried out a survey1 in January 2022 to assess the status of climate risk and sustainable finance in leading scheduled commercial banks2 The responses indicate that although banks have begun taking
steps in the area of climate risk and sustainable finance, there remains a need for concerted effort and further action in this regard. The feedback from the survey will help in shaping the regulatory and supervisory approach of the RBI to climate risk and sustainable finance.

REPORT OF THE SURVEY ON CLIMATE RISK AND SUSTAINABLE FINANCE JULY 2022

Climate risk and sustainable finance has caught the attention of regulators, national authorities and
supra-national authorities across the world. The Intergovernmental Panel on Climate Change (IPCC)
Report of August 20219 highlighted the changes being observed in the Earth’s climate in every region
across the whole climate system. The Report states that emissions of greenhouse gases from human activities are responsible for approximately 1.1°C warming since 1850-1900, and finds that, averaged
over the next 20 years, global temperature is expected to reach or exceed 1.5°C warming. Subsequently,
the recent Conference of the Parties (COP26) Summit held at Glasgow in November 2021 saw several
countries committing to wide-ranging climate action. The recent IPCC Report and the COP26 Summit
have, therefore, enhanced the focus on climate change.

Methodology

Coverage of the Survey

This chapter discusses the methodology adopted for the survey. In the beginning of January 2022,
the survey was sent to 34 scheduled commercial banks comprising public sector banks, private sector
banks and foreign banks having a major presence in India. The banks were provided three weeks to
furnish their responses12. The feedback from the survey provides a comprehensive picture of the
approach, risk management, level of preparedness, etc., with respect to climate risk and sustainable
finance.

Methodology (Internal) All the surveyed foreign banks and most private sector banks have developed an ESG strategy. Public sector banks and the remaining private sector banks could do the same. All the surveyed foreign banks and most private sector banks have either taken measures or have plans to decrease the absolute emissions arising from their own operations, increasing the proportion of renewable energy in their total sourced electricity, etc. Public sector banks and the remaining private
sector banks could also do the same. In an effort to advance sustainability in their own operations, public and private sector banks could announce definitive plans to reduce greenhouse gas emissions from their own operations—of their buildings, branches and data centres—by taking a suitable year as a baseline and reviewing the progress annually. All the surveyed foreign banks and about half of the private sector banks have included KPIs on climate risk/sustainability/ESG in the performance evaluation of their top management.

All the surveyed foreign banks have introduced green deposits or loan products to tap opportunities arising from climate change within their overseas markets and selectively in India. Two foreign banks,
public sector bank and 3 private sector banks have also introduced green deposits in India. Some of the foreign banks have begun offering SLLs to their corporate customers in India as this product has seen significant growth in other jurisdictions. Foreign banks have initiated discussions with their corporate borrowers on reducing emissions. Public sector and private sector banks could also look at suitable initiatives to help their corporate borrowers transition to net-zero emissions.

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