The RBI has plans to establish an ‘on-tap’ cohort on climate change risks and sustainable finance.
Sanjay Malhotra, Governor, RBI, disclosed the update while addressing a policy seminar on climate change risks and finance. He emphasized the role of technology and finance in low-carbon economy transition, highlighting innovative solutions through Regulatory Sandbox and Hackathon initiatives in the fintech sector.
The Reserve Bank is also finalizing draft guidelines on climate-related financial risks and developing a guidance note for regulated entities, following public consultation in February 2024.
Mr Malhotra noted that various jurisdictions are implementing climate-related disclosure standards, with international organizations like the International Sustainability Standards Board (ISSB) promoting this process.
The Basel Committee on Banking Supervision has released a consultative document on climate-related financial risk disclosures, aiming to integrate climate risk considerations into the Basel framework’s Pillar III disclosure requirements, he said.
According to Mr. Malhotra, India has accelerated its transition to a low-carbon economy by including renewable energy projects under priority sector lending.
He discussed the different lending policies adopted by central banks in emerging and developing economies, varying from asset-neutral to directed lending.
He highlighted that India’s priority sector lending guidelines facilitate credit flow to renewable energy projects. “We have included financing for small renewable energy projects—such as solar, biomass-based, windmills, micro-hydel plants, and non-conventional energy-based public utilities like street lighting systems and remote village electrification—under priority sector lending.”
He spoke about the central bank’s commitment to reducing climate change risks in the financial system by fostering capacity building and promoting green and sustainable finance.
He said that green lending for sustainable finance faces higher credit risk with emerging technologies, necessitating regulated entities to develop expertise and technical know-how to assess risks associated with financing such projects.
It must be noted that the RBI launched the Reserve Bank Climate Risk Information System (RB-CRIS) in October to address data limitations in climate-related financial risk modeling.
“This repository aims to bridge data gaps by providing standardized datasets, including hazard data, vulnerability data, and exposure data for physical risk assessment, as well as sectoral transition pathways and carbon emission intensity data for transition risk assessment. Work on this repository is currently underway, and we expect to launch it later this year,” the RBI Governor said.
