India‘s banks and financial institutions are ‘failing to recognise and integrate climate risks into their business model’, instead largely treating sustainability as a compliance issue, Bengaluru-based think tank Climate Risk Horizons has said.
According to the fourth edition of Climate Risk Horizons’ banking report, some 92% of the 35 Indian banks included in its assessment – with a combined market capitalisation of around INR 50 trillion – now disclose Scope 1 and Scope 2 emissions.
In addition, 63% obtain third-party verification for their emissions, and most have board oversight of climate risk.
Industry pressure
However, Climate Risk Horizon argues that much of this progress has been driven by pressure from the Reserve Bank of India (RBI) rather than by wholesale integration of climate risk into financial decision-making.
“Banks are making slow progress and most of it is being driven by RBI regulations,” commented Anusha Das, lead author of the report. “But the next step is just as important – banks need to understand more specifically how climate change is affecting their portfolios and overall financial health, and integrate that learning into their business behaviour.”
Top performers
Yes Bank, Union Bank of India and Punjab National Bank were identified as the strongest overall performers, the study found, while just five banks currently disclose financed emissions, which account for the majority of a bank’s total climate impact. Elsewhere, just six have a net zero target in place.
Just two banks, State Bank of India and Punjab National Bank, were found to include Scope 3 emissions in their net zero goal, while Federal Bank and RBL Bank were the only banks with clear coal phase-out commitments – however Union Bank of India has also made a more limited pledge in this area, without a defined timeline.
“The economic impacts of physical climate risks such as floods, heat, and drought are worsening,” added Sagar Asarpur, co-author of the report. “Climate risks cannot be treated as peripheral sustainability concerns. They affect borrower cash flows, collateral quality, and portfolio stability.
“Indian banks now need to integrate adaptation and resilience into transition planning and support investments that strengthen resilience on the ground.” Read more here.
