RBI to banks: having a climate risk reduction policy

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MUMBAI: Most banks have decided to gradually reduce their advertising to companies emitting too much carbon in the coming years, according to a survey by the Reserve Financial Bank of India (RBI). Banks should nevertheless align their climate-related monetary disclosures with an internationally accepted framework to improve comparability and consistency of disclosures with their global counterparts, RBI mentioned.
The central bank on Tuesday called for board-approved coverage on dealing with local weather threats. In line with the RBI’s dialogue document, such coverage was desired as the current engagement at board level on the local weather threat is insufficient. In addition, in a third of the banks, responsibility for monitoring local weather initiatives was not yet assigned. Only a few banks have included local weather threat, framework and sustainability among the many key indicators of senior management effectiveness.
The RBI’s dialogue document calls for the board to play a crucial role in determining climate-related hazards and alternatives. The central financial institution also asked lenders to assess monetary risks arising from local weather risks. “The financial threat emanating from local weather and environmental degradation must be assessed and addressed throughout overall business strategy and food demand. The food hazard appetite of regulated entities may include risk disclosure limits and monetary risk thresholds that the regulated entity is willing to take,” the RBI said in the dialogue document.
The document comes in the wake of commitments made by India at the COP26 summit in Glasgow. India has pledged to increase its non-fossil power capacity to 500 GW and assemble half of its energy needs from renewable energy by 2030. It could also be a commitment to achieve “web zero” by 2070 by matching emissions with steps to neutralize them. While many banks around the world have introduced their deadlines for web zero and advertise polluting industries like coal, Indian banks need only set such targets.
The RBI mentioned that lenders can find out the alignment of their climate-related monetary disclosures with the constraints of the TCFD (process power on climate-related monetary disclosures) of the Monetary Stability Board, which is increasingly recognized as an acceptable basis for climate-related monetary disclosures. monetary disclosures.

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