There is a need to mainstream green finance and find ways to integrate environmental impact into commercial lending decisions, said RBI Deputy Governor Mr. Rajeshwar Rao.
Tackling climate risk in the financial sector should be the joint responsibility of stakeholders, as this would affect the resilience of the financial system in the long run, he said.
Rao made the comments during a speech at CAFRAL’s virtual conference on green and sustainable finance recently.
“As the risks, opportunities and financial impact resulting from climate change vary from jurisdiction to jurisdiction, this poses unique considerations for emerging economies like India.
“The challenge ahead is to mainstream green finance and think about ways to integrate environmental impact into commercial lending decisions while simultaneously balancing the needs of credit expansion, economic growth and development. social, ”Rao said.
He noted that the global understanding of the systemic impact of climate change on the economy and the financial system as well as its impact on financial stability is evolving and, as a result, the responses of central banks and supervisors around the world. whole have also developed.
“The private and public sectors need to build on our early progress, both by recognizing what we know and by urgently filling in the gaps around what we don’t know,” Rao said.
He added that the impact of climate risk transcends national borders and continents.
“Let us be aware that even countries that are not major contributors will also be affected in the same way by these risks. We are all in the same boat,” he said.
Climate-related financial risk refers to the assessment of risks based on the analysis of the probabilities, consequences and responses to the impact of climate change.
So, climate-related financial risks may arise not only from climate change, but also from efforts to mitigate those changes, Rao said.
A report from the Indian government’s Ministry of Earth Sciences released last year concluded that since the mid-twentieth century India has seen an increase in average temperature, decrease in monsoon rainfall, increase in temperatures extremes, droughts and the increase in intensity and frequency of severe cyclones.
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Posted on: Monday, September 20, 2021, 8:35 p.m. IST