{"id":20086069,"date":"2022-04-06T12:30:00","date_gmt":"2022-04-06T07:00:00","guid":{"rendered":"https:\/\/www.thethirdpole.net\/?p=86069"},"modified":"2022-04-13T12:32:01","modified_gmt":"2022-04-13T07:02:01","slug":"india-banks-unprepared-climate-breaking-points","status":"publish","type":"post","link":"https:\/\/dialogue.earth\/en\/climate\/india-banks-unprepared-climate-breaking-points\/","title":{"rendered":"India\u2019s banks unprepared for climate breaking points"},"content":{"rendered":"\n<p class=\"has-drop-cap\">India has always been a land of brutal but predictable weather. Now, the climate crisis is expected to change that, with increasingly erratic heat and water extremes unleashed at unusual times, or even simultaneously. While the country has proved to be <a href=\"https:\/\/www.nrdc.org\/sites\/default\/files\/india-heat-resilient-cities-ib.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">a model<\/a> of disaster preparedness in the past, the rising probability of highly disruptive compound weather events \u2013 known as \u2018black swans\u2019 \u2013 represents an unprecedented risk to the economy at large. And despite the mounting warnings from experts, India&#8217;s big banks appear to be turning a blind eye to climate risk.\u00a0<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-climate-scorecard-for-india-s-banks\">Climate scorecard for India\u2019s banks&nbsp;<\/h2>\n\n\n\n<p>A recent <a href=\"https:\/\/climateriskhorizons.com\/research\/Unprepared.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">analysis<\/a> offers a rare glimpse into how India&#8217;s largest commercial banks think about climate change. It finds that they are both underestimating risks to their investors and neglecting the urgency of cutting their own emissions. Researchers at the think tank <a href=\"https:\/\/climateriskhorizons.com\/\" target=\"_blank\" rel=\"noreferrer noopener\">Climate Risk Horizons<\/a> examined publicly available information on the 34 largest banks on the Bombay Stock Exchange, representing USD 354 billion (INR 26.81 trillion) as of March 2021.\u202f\u00a0<\/p>\n\n\n\n<p>They found that none of the banks analysed had a comprehensive plan to reach net zero which targeted the full scope of its emissions. These include those produced directly through the bank\u2019s activities, such as heating or emissions from vehicles used for routine operations (known as \u2018scope 1\u2019); indirect emissions related for example to energy consumption (known as \u2018scope 2\u2019); and those generated up and down the value chain, such as the climate risk exposure resulting from lending for carbon heavy investments (or \u2018scope 3)\u2019. Only two of the banks analysed have plans to address scope 1 and 2 emissions by the end of this decade.\u202f<\/p>\n\n\n\n<a class=\"wp-block-cd-related-news alignright block--related-news loading\" data-post-id=\"20081770\"><div class=\"block--related-news__image\"><\/div><div class=\"block--related-news__content\"><span class=\"block--related-news__heading\">Recommended<\/span><span class=\"block--related-news__title\"><\/span><\/div><\/a>\n\n\n\n<p>There has been \u201cvery little movement\u201d on most of the 10 criteria the study assessed, says Ashish Fernandes, CEO at Climate Risk Horizons and an author of the study. \u201cEspecially on things like fossil fuels exclusion policies, net zero targets, and long-term scenario analysis for their portfolio.\u201d\u202f&nbsp;<\/p>\n\n\n\n<p>Of the banks analysed, only two \u2013 Federal Bank and Suryoday Small Finance Bank \u2013 have chosen not to finance the construction of new coal power plants or the extension of existing ones, the analysis finds, while Federal Bank has promised it will stop supporting oil and gas exploration. None of the banks analysed have undertaken assessments to understand how climate change may affect their portfolios and, in turn, their investors.\u00a0<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-black-swan-events\">Black swan events<\/h2>\n\n\n\n<p>\u2018Black swans\u2019 are low-probability, high impact events that according to the UN Intergovernmental Panel on Climate Change (<a href=\"https:\/\/dialogue.earth\/en\/climate\/what-is-the-ipcc\/\" target=\"_blank\" rel=\"noreferrer noopener\">IPCC<\/a>) are going to <a href=\"https:\/\/www.ipcc.ch\/report\/ar6\/wg1\/downloads\/report\/IPCC_AR6_WGI_Full_Report.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">become more frequent<\/a> as global warming increases. These could include heat waves, agricultural drought or heavy rainfall of unprecedented intensity. <a href=\"https:\/\/www.ipcc.ch\/report\/ar6\/wg1\/downloads\/factsheets\/IPCC_AR6_WGI_Regional_Fact_Sheet_Asia.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">South Asia in particular<\/a>, the IPCC says, will face greater heat and humidity stress throughout the 21st century, as well as more severe rains during the monsoon season.\u202f\u00a0<\/p>\n\n\n\n<div class=\"wp-block-cd-pullout-stat alignleft undefined block--pullout-stat\"><p class=\"block--pullout-stat__title\">43<\/p><div class=\"block--pullout-stat__content\"><p>of the world\u2019s 100 most climate-vulnerable cities are in India<\/p><\/div><\/div>\n\n\n\n<p>\u201cThese issues are extremely complicated, but banks need to start looking at it because they do have economy-wide implications. You&#8217;re talking about extremely large banks,\u201d Fernandes says. \u201cGod forbid, there&#8217;s a black swan event in India, or maybe two or three smaller black swan events that affect different sectors in a row,\u201d such as a heat wave occurring during crop growing season, combined with a failed monsoon. \u201cYou\u2019d have knock on effects not just on agriculture, but on the rural economy at large for the following years.\u201d\u202f&nbsp;&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-economy-wide-threats\">Economy-wide threats&nbsp;<\/h2>\n\n\n\n<p>\u201cIf you look at the climate projections for India, it&#8217;s pretty clear that within the next couple of decades no sector is going to stay untouched<strong>,<\/strong>\u201d says Fernandes. \u201cTake energy or large infrastructure, there are going to be impacts.\u201d The severity of these impacts for India\u2019s banks will depend on their specific investments, for example \u201cif a bank&#8217;s portfolio is overly reliant on coal, or on large hydro in the Himalayas\u201d. The construction sector will surely be affected, he says, and there are going to be significant impacts on agricultural businesses as well.\u202f&nbsp;<\/p>\n\n\n\n<p>Failing to identify climate risks is particularly problematic for India and the South Asian region at large, given its high vulnerability. The UK consultancy Verisk Maplecroft <a href=\"https:\/\/www.maplecroft.com\/insights\/analysis\/asian-cities-in-eye-of-environmental-storm-global-ranking\/\" target=\"_blank\" rel=\"noreferrer noopener\">ranked<\/a> 576 of the world\u2019s largest cities based on their exposure to environmental and climate-related risks. It found that Asia is home to 99 of the 100 most vulnerable cities, of which 43 are in India<strong>.<\/strong> While Jakarta topped the list, Delhi ranked second, followed by Chennai, Agra and Kanpur in third, sixth and tenth place respectively.\u202f\u00a0<\/p>\n\n\n\n<div class=\"wp-block-cd-pull-quote block--pull-quote\"><div class=\"block--pull-quote__wrapper\"><blockquote class=\"block--pull-quote__quote\">India\u2019s state-owned enterprises haven&#8217;t, in my view, embraced climate action to the scale and speed that the world needs<\/blockquote><cite class=\"block--pull-quote__cite\">Balasubramanian Viswanathan, IISD<\/cite><\/div><\/div>\n\n\n\n<p>\u201cThe Indian government <a href=\"https:\/\/dialogue.earth\/en\/climate\/beyond-net-zero-2070-india-climate-pledges-explained\/\" target=\"_blank\" rel=\"noreferrer noopener\">lags significantly<\/a> on climate action, and national greenhouse gas reduction targets are not consistent with restricting global warming to within 2 degrees Celsius compared to pre-industrial temperatures,\u201d says Rory Clisby, a senior analyst with Verisk Maplecroft, \u201cso it is not surprising that both private and federally-owned Indian banks are also dragging their heels on climate risk reporting<strong>.<\/strong>\u201d Investors and customers will increasingly ask these questions, he says, even if regulators don\u2019t \u2013 and will move business to jurisdictions with more robust regulation if they don\u2019t get the right answers.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-lessons-for-india-s-public-energy-giants\">Lessons for India&#8217;s public energy giants&nbsp;<\/h2>\n\n\n\n<p>The need for more incisive climate action and disclosure doesn\u2019t just apply to banks, but to most public sector energy giants too, says Balasubramanian Viswanathan, a policy adviser with the think tank International Institute for Sustainable Development (IISD). <strong>\u201c<\/strong>India\u2019s state-owned enterprises are huge entities, and they are some of the biggest financiers,\u201d he explains. They also invest in each other: for example, the State Bank of India is a major shareholder of Coal India Limited, the government-owned coal mining and refining giant.\u202f&nbsp;<\/p>\n\n\n\n<p>\u201cThese companies haven&#8217;t, in my view, embraced climate action to the scale and speed that the world needs and [the rest of the world] is heading towards,\u201d he says. They are currently expanding their clean energy portfolio, Viswanathan says, but when it comes to decarbonising their fossil assets \u201cthere is no plan for thinking beyond coal\u201d<strong>.<\/strong>\u202f<\/p>\n\n\n\n<a class=\"wp-block-cd-related-news alignright block--related-news loading\" data-post-id=\"20082221\"><div class=\"block--related-news__image\"><\/div><div class=\"block--related-news__content\"><span class=\"block--related-news__heading\">Recommended<\/span><span class=\"block--related-news__title\"><\/span><\/div><\/a>\n\n\n\n<p>Some of India\u2019s biggest private conglomerates such as <a href=\"https:\/\/www.businessinsider.in\/science\/environment\/news\/from-mukesh-ambani-to-gautam-adani-indias-billionaires-and-big-corporations-made-huge-promises-this-year-to-fight-climate-change\/slidelist\/88208860.cms#slideid=88209146\" target=\"_blank\" rel=\"noreferrer noopener\">Reliance and Adani<\/a> have laid out decarbonisation plans. Reliance plans to achieve <a href=\"https:\/\/www.ril.com\/ar2020-21\/natural-capital.html\" target=\"_blank\" rel=\"noreferrer noopener\">net zero by 2035<\/a>, and Adani aims to become the world\u2019s <a href=\"https:\/\/www.livemint.com\/companies\/news\/gautam-adani-s-70-billion-pledge-now-includes-greenest-data-centers-11636693056884.html\" target=\"_blank\" rel=\"noreferrer noopener\">largest renewable energy producer<\/a>, with a $70 billion investment by 2030. They are doing so by setting out long term plans and building capacity, including acquiring or teaming up with specialised operators in the fields of <a href=\"https:\/\/www.livemint.com\/companies\/news\/adani-group-ties-up-with-canada-s-ballard-for-hydrogen-fuel-cells-in-india-11645461907159.html\" target=\"_blank\" rel=\"noreferrer noopener\">hydrogen<\/a>, <a href=\"https:\/\/www.livemint.com\/companies\/news\/reliance-industries-bill-gates-others-to-invest-144-million-in-battery-storage-company-11628568352392.html\" target=\"_blank\" rel=\"noreferrer noopener\">batteries<\/a> and more.\u202f\u00a0<\/p>\n\n\n\n<p>On the other hand, other public financial institutions and energy giants are still focusing on short term goals such as avoiding energy shocks and strengthening security, and fossil fuels are still seen as a quick fix for these issues, says Viswanathan. But time is running out.\u00a0\u00a0<\/p>\n\n\n\n<p>A key reason why India\u2019s banks and public institutions should act now to address climate risk, Viswanathan says, is that <strong>\u201c<\/strong>at the moment they have a very strong balance sheet, and are able to raise a lot of capital at favourable interest rates<strong>\u201d<\/strong>. But as investors&#8217; perspectives on these companies change due to their fossil-intensive assets, they will not be able to raise capital as easily, and planning for an energy transition will become much harder.\u00a0<\/p>\n\n\n\n<p><em>This article was first published by <\/em><a href=\"https:\/\/lightson.news\/c\/the-climate-breaking-points-looming-over-indias-big-banks\" target=\"_blank\" rel=\"noreferrer noopener\"><em>Lights On<\/em><\/a><em><\/em>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>New analysis has found India&#8217;s large lenders and state-run energy giants are doing little to reduce their mounting climate exposure<\/p>\n","protected":false},"author":3907,"featured_media":20086096,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[761],"tags":[519,17073,544,547],"hashtags":[],"country":[20000111],"class_list":["post-20086069","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-climate","tag-climate-impacts","tag-energy-transition","tag-finance","tag-fossil-fuels","country-india"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.0 (Yoast SEO v26.0) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>India\u2019s banks unprepared for climate breaking points | Dialogue Earth<\/title>\n<meta name=\"description\" content=\"New analysis has found India&#039;s large lending banks and state-run energy giants are doing little to reduce their mounting climate exposure\" \/>\n<meta name=\"robots\" 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The cyclone killed at least 84 people across India and Bangladesh. 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