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BFSI Chronicle, 11 Edition September 2022
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report highlighted that the climate crisis is affecting since the middle of the twentieth century, India has
every region in the world in multiple ways. It witnessed a rise in average temperature, a decrease in
provides new estimates of the chances of crossing the monsoon precipitation, a rise in extreme temperature,
global warming level of 1.5°C in the coming decades droughts, and sea levels, as well as increase in the
and warns that unless there is an immediate, rapid, intensity and frequency of severe cyclones. There is
sustained, and large-scale reduction in greenhouse compelling scientific evidence that human activities
gas emissions, limiting planet-warming to close to have influenced these changes in the regional climate.
1.5°C or even 2°C will be beyond reach. Given the profile of the event, it will be worthwhile to
deliberate a bit further on the interlinkages between
A report by the Ministry of Earth Sciences, climate-related risks and financial institutions.
Government of India released in 2020 concluded that

Nature’s Fury or Man-Made Disaster?
“It is difficult to decide whether Bengaluru is
witnessing nature’s fury or a man-made disaster,
but it’s devastating impact is out there for all of
us to see. Environmental and Climate Risks have
long been overlooked in city planning and, despite
such disasters, it is yet to be mainstreamed in our
masterplan” says Lubaina Rangwala, Programme
Head – Urban Development at World Resources
Institute (WRI).

These climate trends and events have a direct bearing environmental costs or engage in activities which
on the economy and financial system including are likely to cause environmental harm, sometimes
banks. Uncertainty around the severity and timing of collectively referred to as ‘high-emitting sectors’. Such
climate and environment-related impact is a source a trend may result in a loss of funding or an increase
of financial risk and may have a bearing on the safety in financing costs for high-emitting entities which
and soundness of individual financial institutions/ ultimately generates viability concerns around such
entities and in turn the stability of the overall financial entities. Another important dimension for financial
system. It, therefore, becomes incumbent on financial entities is the reputational impact. Reputational
institutions to manage the risks and opportunities concerns arise when customers financed by financial
that may arise from environmental degradation and institutions carry on business activities which have
a changing climate. an adverse environmental impact. These risks have
already started manifesting and are impacting the
Globally many investors have already started to economy and financial system.
move away from firms which generate greater

At a conceptual level, “green finance” can be defined as financing
investments that deliver environmental benefits in the broader context
of environmentally sustainable development. These environmental
benefits include, for example, reductions in air, water, and land pollution,
reductions in greenhouse gas emissions, and improved energy efficiency.
Such a definition is directionally clear whilst allowing for different
technical interpretations by countries.

The Institute Of Cost Accountants Of India

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