Business
Banks to disclose climate change strategy by FY26 | India Business News – Times of India
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Mumbai: Banks and large finance companies will have to disclose their governance, strategy, and risk management structures to manage climate change risks by FY26, according to RBI.
The draft disclosure framework on climate-related financial risks was released by the central bank on Wednesday. The framework includes definitions for key terms related to climate-related financial risks and is applicable to various financial institutions, including scheduled commercial banks, urban cooperative banks, financial institutions, and non-banking financial companies.
Foreign banks operating in India must also make specific disclosures related to their operations in country.While larger banks listed in the document are mandated to adopt the guidelines, others have the option to voluntarily adopt them. Regulated entities must disclose governance information, including structure overseeing climate issues, responsibilities outlined in policies, competency development, communication processes, and management oversight.
They are also required to disclose climate-related information pertaining to their strategy, including issues affecting prospects, short-, medium-, and long-term horizons, specific challenges, and the impact on the business model.
Risk management disclosures include the assessment of climate-related financial risks, including credit, market, liquidity, and operational risks. This encompasses methodologies for evaluating the impact of climate-related risk drivers on credit risk management systems, market risk positions, liquidity risk profiles, and operational risk.
Starting from FY28, regulated entities must disclose targets for mitigating and adapting to climate-related financial risks, along with metrics used to measure progress. This includes the objective of the target, the metric used for setting it, the related period and base period, any milestones or interim targets, and validation by a third party if applicable.
The draft disclosure framework on climate-related financial risks was released by the central bank on Wednesday. The framework includes definitions for key terms related to climate-related financial risks and is applicable to various financial institutions, including scheduled commercial banks, urban cooperative banks, financial institutions, and non-banking financial companies.
Foreign banks operating in India must also make specific disclosures related to their operations in country.While larger banks listed in the document are mandated to adopt the guidelines, others have the option to voluntarily adopt them. Regulated entities must disclose governance information, including structure overseeing climate issues, responsibilities outlined in policies, competency development, communication processes, and management oversight.
They are also required to disclose climate-related information pertaining to their strategy, including issues affecting prospects, short-, medium-, and long-term horizons, specific challenges, and the impact on the business model.
Risk management disclosures include the assessment of climate-related financial risks, including credit, market, liquidity, and operational risks. This encompasses methodologies for evaluating the impact of climate-related risk drivers on credit risk management systems, market risk positions, liquidity risk profiles, and operational risk.
Starting from FY28, regulated entities must disclose targets for mitigating and adapting to climate-related financial risks, along with metrics used to measure progress. This includes the objective of the target, the metric used for setting it, the related period and base period, any milestones or interim targets, and validation by a third party if applicable.
