Most of the Indian financial sector does not account for the impact of climate risks on their balance sheets or in their lending decisions, nor does Reserve Bank of India (RBI) require them to do so. While frontrunning banks, asset managers and development finance institutions are starting to include climate impacts in their risk assessments, the lack of consistent methodologies, high cost of reporting and complicated review procedures make it challenging.

ODI, auctusESG and Climate Bonds Initiative are working together to enable improved monitoring and reporting of climate-related financial risks in India. This initiative is generously funded by UK PACT (Partnering for Accelerated Climate Transitions). The project is very timely given that the Reserve Bank of India has just joined the Network of Central Banks and Supervisors for Greening the Financial System.

Our partnership has two strands:

1. We are offering training to risk assessment and credit lending staff in Indian banks to equip them to consider climate risks in their financial decisions. This includes introducing staff to ESG investment terminology, demonstrating how to apply ESG principles in financial assessments and explaining the standards of the Taskforce for Climate-related Financial Disclosure (TCFD).
   
   
2. We are quantifying bank lending and bond issuance to fossil fuel industries across India to assess bank exposure to stranded assets & non-performing loans. With this evidence base, we are examining regulatory options available to the Reserve Bank of India to enable improved supervision and market discipline to manage these climate-related financial risks.