“Still Unprepared” Report

August 7, 2023

In 2022, India experienced extreme weather events impacting the nation on a staggering 314 out of 365 days. As climate change accelerates, the urgency to address climate risks becomes paramount, especially for major Indian banks. A recent analysis conducted by Bengaluru-based think tank Climate Risk Horizons titled “Still Unprepared” sheds light on the preparedness of India’s banking sector in confronting climate risks.

Analyzing Indian Banks’ Climate Preparedness

Climate Risk Horizons’ report is based on an assessment of India’s 34 largest banks, which together have a combined market capitalization of Rs 29.5 trillion. The study evaluated the banks’ capacity to measure, manage, and mitigate climate risks amid the increasing impact of extreme weather events.

Top Performers in Climate-Risk Preparedness

Among the Indian banks assessed, three have emerged as top performers in climate-risk preparedness. Yes Bank, HDFC Bank, and Axis Bank demonstrated notable efforts to address climate-related concerns and enhance their resilience.

Public Sector Banks’ Lagging Green Financing

The analysis highlights a concerning trend among public sector banks regarding financing for the renewable energy sector. These banks accounted for less than eight percent of the total financing for renewable energy projects. Despite India’s commitment to its climate policy, the public banking sector has not adequately supported the country’s energy transition.

Carbon-Intensive Exposure of State Bank of India (SBI)

State Bank of India (SBI), the country’s largest bank, was found to have the highest exposure to carbon-intensive sectors, mainly dominated by coal-related activities. This raises concerns about the bank’s vulnerability to climate risks associated with such investments.

Essential Steps to Counter Climate Risks

The report outlines key steps that banks must take to counter climate risks effectively. These include proactive disclosure of green financing, adopting a common reporting format, implementing transition plans to phase out fossil fuel financing, and incorporating climate scenario analyses in their risk assessment processes.

Addressing the Lack of Support in Sundarbans Delta

The Sundarbans delta, a climate-vulnerable region, has been battered by climate-triggered cyclones and extreme weather events since 2019. Despite significant economic losses, the banking sector has provided limited support due to the absence of a structured fiscal policy on climatic issues.

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