SBI steps up climate risk tracking after RBI nudge

Mumbai, Jun 18, 2024

SBI has started watching the weather more intently from the current financial year. The country's largest lender is incorporating climate change risks into its lending framework and has set up a Climate Change Risk Management Committee to enhance governance and resilience to climate-related risks.

The climate change panel will provide strategic guidance and oversight to the bank to ensure that climate considerations are integrated into SBI's risk management framework, Dinesh Khara, chairman of SBI, said in the bank's sustainability report.

RBI has been nudging banks to ascertain the impact of climate change risks on their loan books. The central bank had earlier indicated that the loan book could be impacted by borrowers suffering losses due to weather events and taking a hit in their businesses as companies tighten their environment goals.

In a letter to stakeholders, Khara said that the bank achieved a significant milestone by setting up a dedicated 'horizontal business unit' for ESG and climate finance this year. The unit will enable the bank to achieve its net zero goal by 2055 and aims to facilitate a minimum of 7.5% of the bank's domestic loan portfolio being 'green' by 2030.

"Climate risk, which has emerged as an important area of concern, has gathered considerable traction among regulators since last year... A robust risk management framework for addressing climate risk is under process," said Khara. "The onset of El Nino Southern Oscillation in 2023 disrupted the spatial and temporal pattern of Indian monsoon with implications for agriculture and allied sectors. This warrants proactive identification and the mitigation of risk in the current financial year, particularly on the climate front where regulatory guidance may come into force in FY25," he added.

[The Times of India]