Despite the growing threat of climate change to financial stability, most Indian banks are still ill-prepared to integrate climate-related risks into their operations, according to a new report by Climate Risk Horizons (CRH).
Titled “Unprepared”, the report evaluates 35 of India’s largest scheduled commercial banks by market capitalisation on the Bombay Stock Exchange (BSE), representing a combined market cap of ₹4.58 lakh crore as of March 2024. The sample includes 11 public sector banks, 18 private sector banks, and six small finance banks.
The findings reveal that only a small number of these banks have made meaningful progress in key areas such as climate risk management, emissions disclosure, and divestment from coal-related assets.
Just seven banks disclosed their Scope 1, 2, and 3 emissions, highlighting a significant lack of transparency and accountability across the sector.
“The Indian banking sector faces major hurdles in aligning with international climate commitments,” the report notes. While some banks have begun adopting frameworks such as the Partnership for Carbon Accounting Financials (PCAF) and Sustainable Development Goals (SDGs), most still lack robust climate strategies, green finance portfolios, and climate risk integration in lending decisions.
On a more positive note, the report observes that climate scenario analysis and risk management are gradually gaining attention. However, it emphasizes the urgent need for stronger regulatory guidance and capacity building to support the banking sector’s transition to sustainability.
The report also urges the Reserve Bank of India (RBI), the government, and industry stakeholders to take decisive action to accelerate the shift toward green finance.
Although many banks are initiating sustainable finance conversations, the absence of detailed activity lists limits the ability to independently assess their progress. Moreover, most institutions fail to disclose the value of their sustainable financing efforts.
Five banks have announced net zero targets, but without clearly defined emissions reduction pathways, making it difficult to gauge the credibility and progress of their commitments.
Lastly, while more banks are now seeking third-party verification for their emissions data, the report concludes that substantial improvements are still necessary to meet global standards.
