Navigating climate risks: India's financial sector gears up for transparency with RBI's draftGuidelines
RBI.
To achieve India’s ambitious growth objectives and fulfil India’s Nationally Determined Contributions, green finance is imperative. Climate risk disclosure frameworks work in complement with policymaking to support India’s net-zero target and are also pivotal in guiding companies and investors to navigate the opportunities and risks posed by climate change.
The introduction of the disclosure framework is a laudable first step, signalling a concerted effort towards addressing climate risks and fostering climate action within the financial sector. These disclosures are poised to accelerate the evolution of Environmental, Social, and Governance (ESG) considerations in financial markets. Modelled on global standards like the Task Force on Climate-related Financial Disclosures (TCFD), they promise interoperability of data (especially relevant for companies operating globally) and reduce operational burdens for banks. Moreover, they foster a level playing field not only for comparison within the domestic financial system but also internationally.
The disclosure framework offers a forward-looking perspective, enabling a sectoral view of financial flows with a focus on climate risks. This can catalyse the shifts required, such as bolstering risk mitigation mechanisms like insurance and credit rating, as well as promoting the growth of green financial instruments like green bonds.
While the coverage of the framework is broad, it is encouraging that key financial institutions like National Bank for Agriculture and
