RBI guideline on climate risk disclosure – a pragmatic step for India - Hindustan Times

RBI guideline on climate risk disclosure – a pragmatic step for India

May 01, 2024 04:01 PM IST

This article is authored by Samhita R, managing partner, STS Global, co-founder and CEO, Resilience AI.

On February 28, 2024, the Reserve Bank of India (RBI) issued a groundbreaking draft guideline titled "Disclosure Framework on Climate-related Financial Risks, 2024" that will require banks and other regulated entities (REs) to make comprehensive disclosures on their climate risk management practices. The guideline recognises four thematic pillars, each requiring baseline and enhanced disclosure. The enhanced disclosure of strategy thematic pillar requires REs to disclose how and when the climate scenario analysis was carried out, pertaining to climate scenarios and its associated physical and transition risks.


The guideline addresses the climate crisis with a resilience view, encompassing both mitigation and adaptation, as climate resilience gap poses the most emerging risk that is expected to have major financial stability implications. A standardised disclosure framework to foster transparency, enable better risk assessment, and facilitate more efficient allocation of capital is put in place.

This announcement was made a week before United States’ Securities and Exchange Commission voting to approve new climate risk disclosure rules, while narrowing mitigation disclosures and adding adaptation pertaining to capitalised costs, expenditures expensed, charges, and losses incurred because of severe weather events and other natural conditions. This is a significant shift that will require many companies to include information about their emissions along with the other physical and transition risks that US businesses must detail to the public.

The RBI’s guidelines are in sync with scientific learnings that with the increasing number of climate induced disasters, building and empowering adaptation, by government, private enterprises, and communities, is imperative for India. India has burgeoning metropolises that are not the best planned. When faced with a crisis do the custodians of large cities, operators of more than 1,500 global capability centres with more than 1.5 million workforce and owners of nearly 250,000 manufacturing plants, have the tools to identify the imminent risks to these cities and setups, in terms of vulnerable populations.

As India continues to break highest temperature record every year, nearly 15 states have more than one heatwave day, of which nine have more than 10 heat wave days, Rajasthan, Madhya Pradesh, Himachal Pradesh, Gujarat, Jammu and Kashmir, Haryana, Delhi NCR, Uttar Pradesh, Jharkhand. The states of Odisha and southern West Bengal have wet bulb temperature of around 29 degrees Celsius, impacting the coastal livelihood such as salt and workforce in factories. The fire incident in landfills of Bhalswa in 2022 due to extreme heat was a struggle to extinguish. Delhi, India’s Capital, and Maharashtra sees a minimum of two major fires every year in vulnerable areas where unregulated industries are or in the slums and shanties that are made of highly inflammable materials.

While forest fires are anthropogenic, scarcity of water and rising temperature will see an increase in large forest fires. Per the Forest Report 2023 report, the frequency of large forest fires in India has increased between 2021-22 and 2022-23. Fire breakout due to rising temperature has led to loss of rare trees and patta land in Kodaikanal forest of Tamil Nadu and loss of pine plantation in Uttarakhand.

The WWF study 2017 outlines the reason for increase in forest fires in Indonesia as the huge plantations of natural rubber on former Indonesian rainforest sites. India is home to nearly 9 lakh hectare of rubber plantation in Kerala, Tamil Nadu, Tripura, Assam, and Meghalaya. Kerala and Assam are tropical rainforests. Natural rubber is also the raw material for tyres, whose export increased by nearly 50% in 2023. The ministry of agriculture, forestry and fisheries’ General Directorate of Rubber (GDR) issued four-point fire prevention guidelines to rubber plantation owners in January 2023.

Climate behaviour is no longer anticipatory. Cyclone Biparjoy, which was predicted to primarily affect Gujarat, affected Rajasthan with higher intensity and damage. Similarly, extreme temperature events leading to heat wave declared as a disaster and increase in recurring climate event intensity such as floods and earthquake magnitude.

This raises the red flag underscoring the need for an end-to-end system that covers physical and transition risks, with climate financial risk determination at the intersection of climate and built environment, bundled with digitised planning and actions and scalable adoption.

India’s technology sector has been in the forefront of climate mitigation such as carbon accounting. Today it is imperative to work at the intersection of technology and adaptation--decoding the complex and unpredictable nature of climate and building climate resilience is the future resolve.

Important steps are creating awareness about climate resilience gap, adaptation deficit and cost of inaction. Looking for solutions that could systematically solve for climate resilience gap for organisations, both public and private, by complementing their climate mitigation investment with an automated climate adaptation system – are an urgent priority.

The RBI’s guidelines will put into place the importance of early climate impact systems to protect communities and companies small and large.

This article is authored by Samhita R, managing partner, STS Global, co-founder and CEO, Resilience AI.

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