In a discussion paper on ‘Climate Risk and Sustainable Finance’, RBI India ,reserve Bank of India) said it intends to formulate a strategy based on global best practices on mitigating the adverse effects of climate change, learning from participation in standards-setting bodies and other international fora.
The thrust of the strategy will include a comprehensive guidance for appropriate governance for all RBI regulated entities (REs); It calls for strategies to effectively manage climate change risks and risk management frameworks from a micro-prudential approach.
In addition, the central bank has proposed financial disclosure and reporting related to climate risk for RE, capacity building and voluntary initiatives.
On a voluntary basis, REs should set targets for increasing funding for green projects in the short, medium and long term for certain sectors.
“In order to make banking processes greener by making them more eco-friendly, REs may consider converting their branches to green branches by eliminating the use of paper in their operations,” the discussion paper said. ,
RBI has invited comments on the discussion paper by 30 September.
According to the discussion paper, REs may consider ways and means to encourage the adoption of e-receipts.
In addition, REs may prefer to convert all their data centers to green data centers by switching to renewable energy for sourcing power for the data centers and implementing the guidance provided by established frameworks such as the Green Data Center Rating System .
In the discussion paper, RBI also said that on sensitizing India’s financial sector to the importance and benefits of green finance and capacity building to address the challenges posed by climate change, and on creating awareness about climate risk and sustainable finance. Special emphasis is required. ,
In order to meet the capacity building requirements, the discussion paper also suggested that Indian Banks’ Association (IBA)Different) may constitute a working group on capacity building in the areas of climate risk and sustainable finance.
RE’s Board of Directors will have a key role to play in identifying climate-related and environmental risks as well as opportunities and assessing the actual and potential impact of these risks on their strategies and plans.