Sustainable financial management push

India sustainable financial management

In a move that aligns with global climate risk mitigation, the Reserve Bank of India (RBI) has asked banks in the country to promote sustainable financial management and embed environmental, social and governance (ESG) policies across their lending portfolio. The central bank issued the statement after it found that banks in India were falling behind internationally accepted principles with respect to responsible financial activity. The bank, in a previous survey, found that “concerted effort and further action” was still needed from banks.

The RBI issued guidelines asking regulated lenders to align their climate-related financial disclosures with that of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures.

Due to the lack of standards, banks in India have been unable to fall in line with formal definitions and international quantification methods that indicate the extent of climate change. In 2020, banks reported climate risks close to USD84 billion, a figure that plummeted to less than half the following year.