Reserve Bank of India (RBI) on Wednesday issued a discussion paper on climate risk and sustainable finance, and sought suggestion/feedback and comments by September 30.
The RBI also released the results of a survey undertaken in January to assess approach, level of preparedness and progress made by leading scheduled commercial banks in managing climate risk. The survey covered 12 public sector banks, 16 private sector banks, and 6 foreign banks in India. According to the survey, most banks consider climate-related financial risks to be a material threat that underscores climate change as an emerging financial risk for them.
However, board-level engagement on climate risk and sustainable finance is seen insufficient. A majority of the surveyed banks have not quantified their portfolio which is susceptible to climate-related risks, the RBI said. The discussion paper bats for capacity building in banks with regard to financial implications of climate risk and allied aspects.
It said that a few of the surveyed banks have not yet analysed the potential sources of climate-related risks, underscoring the need for building awareness in this regard, the central bank said. In this connection, foreign banks have taken the lead by integrating climate-related risks into their overall risk management frameworks.
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