Financial regulators planning to implement transparency regulations for banks and financial entities regarding climate-related issues

India's Reserve Bank of India Introduces Climate Disclosure Regulations for Banks

The Reserve Bank of India (RBI) has announced new regulations that require banks and financial organizations to disclose their borrowers' total emissions, categorized by asset class and industry. This move is part of India's commitment to achieve net-zero carbon emissions by 2070.

The regulations aim to make banks more resilient to environmental threats by incorporating climate risk into financial decision-making. Banks will be required to reveal climate-related risks in their loan portfolios, along with mitigation plans and goals, starting from the fiscal year 2028.

The RBI's strategy also involves regular stress tests to assess the effects of extreme weather disasters on borrowers and the economy. This approach is designed to help banks better manage and control risks associated with climate change.

Major banks in India are responding to the RBI's 2024 draft standard disclosure framework by issuing tenders to hire climate consultants. The methodology for evaluating climate risks involves examining the impact of extreme climate occurrences and transition risks on borrowers' ability to repay debt.

The RBI's actions align with India's plan to direct funds towards climate-friendly industries for the 2025 United Nations Climate Change Conference (COP30) in Brazil. The program promotes accountability and openness in the financial sector, making it more resilient to climate threats.

The RBI will release a guidance note mandating that banks conduct regular stress tests to assess the effects of extreme weather disasters on borrowers and the economy. The climate disclosure rules are not expected to have an immediate impact on loan pricing.

India is set to unveil an updated national emissions-reduction target and has recently revealed a draft framework to facilitate this change. The RBI's actions advance India's long-term sustainability objectives, establishing the country as a leading actor in the worldwide battle against climate change. The RBI aims to redirect cash into sustainable sectors and support the country in meeting its climate objectives.

However, the search results do not provide specific names of banks that have collaborated with climate consultants to manage climate risks in their loan portfolios or have already issued tenders for such services. Nonetheless, the RBI's climate disclosure regulations require banks to report on their adherence to upcoming regulations by 2028.

In conclusion, the RBI's introduction of climate disclosure regulations marks a significant step forward in India's fight against climate change. By requiring banks to report on their climate-related risks and exposures, the RBI is promoting transparency, accountability, and resilience in the financial sector. This move is expected to help India achieve its long-term sustainability objectives and establish itself as a leading actor in the worldwide battle against climate change.