New report finds that most Indian banks have not yet factored climate change into business strategies.
India’s banking sector is not prepared to address related challenges and tackle the financial impacts of climate change, a new climate risk report has found.
According to a report from a local research and advisory group, Climate Risk Horizons, major banks in India are not fully equipped to adapt to climate change, and they have yet to incorporate climate-related financial risks into their day-to-day decision-making and business strategy.
The report ranks the 34 biggest banks in India (including ICICI Bank, Kotak Mahindra Bank, Bank of India, State Bank of India and Punjab National Bank). It finds that, with the exception of a few, most Indian banks have not yet factored climate change into their business strategies, despite the “rosiest projections” indicating “significant economic challenges for the Indian economy.”
None of the banks surveyed have a long-term net-carbon zero target year with an implementation plan covering direct GHG emissions, indirect emissions through electricity or energy purchased, and those attributable to its supply chain or vendors.
Only two banks (Yes Bank and HDFC Bank) have defined targets for scope 1 and 2 emissions. State Bank of India meanwhile only has a long-term carbon neutral target year but does not identify the scope of emissions.
Two lenders, Federal Bank and Suryoday Small Finance Bank, have an exclusion policy that precludes loans for new coal power plant construction or extension plans.
The research assessed the banks based on publicly available information against ten categories, for a total of 20 points. According to the research, 29 of the banks received less than 10 points, which “should be seen as a blinking red warning light”.
The ranking also shows that public sector banks are lagging behind private banks.
Large, media-savvy public and private sector banks such as State Bank of India, Union Bank, ICICI Bank also had very poor rankings, which the report said is “extremely worrying for investors, and something that the regulators (the RBI and the SEBI) must address.”
The RBI has urged lenders to monitor the impact of companies exposed to fossil fuels on their asset quality as the economy transitions to greener energy. India has pledged to be net-carbon zero by 2070.
Currently, fossil fuels account for 62 percent of the nation’s power generation.