The Reserve Bank of India (RBI) is committed to integrating climate-related risks into financial stability monitoring. It is looking at exploring the use of climate scenario exercises to identify vulnerabilities in the central bank-supervised entities.
The central bank, on Monday, published its Statement of Commitment to Support Greening India’s Financial System, which coincided 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. It 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 end, NGFS will expand and strengthen the collective efforts towards greening the financial system. Against this backdrop, the RBI on Wednesday also emphasized 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.
The 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 mobilizing mainstream finance to support the transition towards a sustainable economy.
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. Keeping in view the national commitments, priorities and complexity of the country’s financial system, the central bank is committed to integrating climate-related risks into financial stability monitoring.
Furthermore, the RBI 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”.