Professional Documents
Culture Documents
Climate Risk
Climate Risk
Climate Risk
A.Nanda
A.Nanda
Guest
Guest faculty
Faculty, IIBFIIBF
15th December
4th May 20232023
14-Dec-23
Climate risk is real
Annual Report 2022, India Meteorological Department
• India recorded 756 instances of natural disasters (landslides, storms, earthquakes, floods,
droughts, etc.) since 1900, with a total of 402 and 354 events recorded during 1900-2000 and 2001-
2021 respectively
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Triple Planetary Crisis
The triple planetary crisis refers to the three main interlinked issues
that humanity currently faces:
Climate change,
Pollution
Biodiversity loss.
Each of these issues has its own causes and effects and each issue
needs to be for a viable future on this planet.
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Climate Change
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"Considering the
damage already
done to the
environment, we
are rapidly
approaching a point
of no return where
nature will dictate
the course.”
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Sector-wise composition of GGE Emission
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The Paris Climate
Agreement 2015
The Paris Agreement is the
first-ever universal, legally
binding global climate change
agreement, adopted at the
Paris climate conference
(COP21) in December 2015
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The Sustainable Development Goals (SDGs)
1. The SDGs were set up in 2015 by the United Nations General Assembly
(UN-GA) and cover the period 2015-2030.
2. The 17 SDGs are a collection of global goals designed to be a "shared
blueprint for peace and prosperity for people and the planet, now and
into the future" (UN, 2022).
3. They are focused on ending poverty and hunger, fighting inequality and
tackling climate change, with the broad objective of creating a just and
Physical Transition
Risk Risk
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Physical Risk
It refers to the economic costs and financial losses resulting from the
increasing frequency and severity of :
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Climate change, Dr. Sattar says, “is playing a role in
permafrost degradation.” As it weakens, soil and
snow lose their grip on each other. Avalanches
follow, sometimes causing floods even without a
GLOF, such as those that inundated the state of
Uttarakhand in 2021.
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Heavy rains and landslides
have killed more than 60
people in the northern Indian
states of Himachal Pradesh
and Uttarakhand, as
devastating flooding hits the
region during the monsoon
season
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A Complete Breakdown Of India’s Drought Crisis Affecting
11 States, 266 Districts
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Meanwhile, experts have told this reporter
that climate change was causing the
wettest days to become wetter and hottest
days to become hotter in Odisha.
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Transition Risks
It refers to the risks arising from the process of adjustment
towards a low-carbon economy.
Transition Risk
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Credit Risk
Climate risk drivers can impact household, corporate, or sovereign
income and/or wealth.
Specifically, physical and transition risks can alter or reveal new information about
future economic conditions or the value of real or financial assets, resulting in
downward price shocks and an increase in market volatility in traded assets.
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Liquidity Risk
Climate risk drivers may impact banks’ liquidity risk directly, through
their ability to raise funds or liquidate assets, or indirectly through
customers’ demands for liquidity.
• There may be a sharp increase in precautionary demand for
liquidity by financial institutions, households and corporates
• If households and corporates affected by physical risks need
liquidity to finance recovery and other cash flow needs, they
may withdraw deposits or draw on credit lines.
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Operational and Reputational risk
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Unique Characteristics of Climate Related Risks
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RBI Broad Guidelines of Reserve Bank of India on
Climate Risk Management
All Banks are expected to have
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Some best practices to measure Climate Related Risk
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Risk Monitoring
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Risk Management and Mitigation
Banks may carry out substantial measures to mitigate or refrain from climate-related risks
that are not in accordance with their risk appetite. These measures can be developed in
response to the Bank’s own assessment of the climate-related risk concentrations. These
mitigation measures may include:
1. Customers in sectors which are highly vulnerable to emerging climate risk may be
subject to tenor limitations.
2. Customers with real estate collateral that do not meet minimum sustainability criteria
may be subject to a lower loan-to-value limit.
• Accelerating transition to an
environmentally sustainable economy
through financial products and
services
• Aligning financing with environmental
and social priorities
• Engaging with clients and customers
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Green Banking
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Green Financing
Green Deposit
Green bonds
Green bonds are the bonds issued by any sovereign entity, inter-
governmental groups or alliances and corporates with the aim that
the proceeds of the bonds are utilised for projects classified as
environmentally sustainable. India started issuing green bonds since
2015.
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Green Housing Loan
People are becoming more conscious of the impact their homes have on the
environment and are actively seeking ways to reduce their carbon footprints.
This shift in mindset has led to an increasing demand for green home loans in
India.
Green buildings are those which have implemented strategies to enhance the
efficiency of buildings and minimize their impact on the environment and human
well-being.
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Green Car Loan
The largest public sector bank, the State Bank of India (SBI) encourages
people to apply for EVs through their Green Car Loan scheme for
reducing their carbon footprint.
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Barriers to change
Mob 9831562357
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