Will focus on climate-related risks, says Reserve Bank of India

RBI on Wednesday said it is committed to integrating climate-related risks into financial stability monitoring as well as exploring use of climate scenario exercises to identify vulnerabilities in the central bank-supervised entities.

On Monday, the Reserve Bank of India (RBI) published its 'Statement of Commitment to Support Greening India's Financial System NGFS', coinciding with the 2021 United Nations Climate Change Conference (COP26).

The apex bank joined the Central Banks and Supervisors Network for Greening the Financial System (NGFS) as a Member on April 23, and aims to learn from as well as contribute to global efforts on green finance.

NGFS has reiterated its willingness to contribute to the global response required to meet the objectives of the Paris Agreement, and, to that end, NGFS will expand and strengthen the collective efforts towards greening the financial system.

Against this backdrop, RBI, on Wednesday, also emphasised that it was committed to building awareness about climate-related risks among regulated financial institutions and spreading knowledge about issues relating to climate change and methods to deal with them accordingly.

In a statement, RBI said it broadly supports the NGFS declaration.

"We commend the co-ordination efforts of NGFS in defining, promoting, and contributing to the development of best practices in climate finance through sharing experiences and best practices for climate risk management in the financial sector," it said.

Specifically, RBI, keeping in view the national commitments, priorities and complexity of the country's financial system, is committed to integrating climate-related risks into financial stability monitoring, according to the statement.

Further, the central bank said it was committed to "exploring how climate scenario exercises can be used to identify vulnerabilities in RBI supervised entities' balance sheets, business models and gaps in their capabilities for measuring and managing climate-related financial risks".

Launched at the Paris One Planet Summit on December 12, 2017, NGFS is a group of central banks and supervisors willing to share best practices and contribute to the development of environment and climate risk management in the financial sector while mobilising mainstream finance to support the transition towards a sustainable economy.