Rbi: Insufficient involvement of bank management in environmental issues: RBI survey

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Reserve Financial Institution survey found senior management involvement at banks on local weather risks and sustainable finance issues was ‘insufficient’ and lenders wanted to step up initiatives on environmental issues .

Local climate danger and sustainable finance have captured the attention of regulators, national and supranational authorities around the world.

The August 2021 report of the Intergovernmental Panel on Local Weather Evolution (IPCC) highlighted the observed changes in local Earth weather in every area throughout the local weather system.

The Climate Risk and Sustainable Finance Survey, conducted in January this year, identified 34 major deliberate commercial banks, including 12 public sector banks, 16 private sector banks and 6 major foreign banks in India, it said on Wednesday. the RBI.

“The responses show that while banks are beginning to take action on climate risk and sustainable finance, concerted effort and further action is needed on this issue,” he said.

The results show that there is insufficient participation at the board level in local weather risk and sustainability finance issues, and responsibility for overseeing local weather risk and sustainability-related initiatives has not yet been identified. attributed to almost a third of the banks surveyed.

Moreover, only a few banks have included key performance indicators (KPIs) on local climate hazard, sustainability, environment, social and governance (ESG) in their top management’s performance analysis.

Almost all banks did not have a separate or vertical corporate unit for sustainability and ESG-related initiatives.

The RBI mentioned that virtually all banks surveyed recognized the urgency of the issue, and most noted climate-related monetary hazards as a big threat to their business.

Additionally, many of the banks surveyed have decided to steadily reduce their advertising to excessive carbon emitters/polluters over the next few years.

Few banks have both raised new capital to develop inexperienced credit rating and funding or set a goal of increasing lending and funding in sustainable finance. Most banks have launched a number of mortgage products to take advantage of alternatives resulting from local climate change.

In addition, a number of banks have launched inexperienced deposits to lend to environmentally friendly companies.

The survey also noted that almost all banks do not align their climate-related monetary statements with an internationally accepted framework.

The RBI has insisted that banks should put in place a mechanism at board or senior management level to oversee and scale initiatives related to local climate hazard and sustainability.

“They could consider KPIs associated with local climate hazard, sustainability and ESG as part of their senior management’s effectiveness analysis,” he said.

He also mentioned that banks could consider raising new capital to develop inexperienced credit and financing, or set a goal of increasing lending and financing in sustainable finance.

The RBI calls on banks to provide you with a means to reduce emissions from their own operations.

In line with India’s commitment at the COP26 summit, banks can heed the commitment of a timeline to move towards zero web emissions.

“The suggestions from the survey will help shape the RBI’s regulatory and supervisory strategy on climate risk and sustainable finance,” the central bank said.

In May 2021, RBI established a Sustainable Finance Group (SFG) to guide local weather risk and sustainable finance regulatory efforts and initiatives.

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