Industry leaders highlight the critical need for financial institutions to proactively address climate risks and integrate sustainability into their core strategies

Byline: Sambhav Kumar 

In recent years, India has intensified its focus on sustainable finance to support its ambitious climate goals. In 2023, the government issued its first green sovereign bond, raising USD 1 billion at a reduced cost of capital compared to traditional financing methods. This move signifies a strategic shift towards mobilizing resources for green infrastructure and renewable energy projects.

To further streamline sustainable investments, the Indian government is drafting a taxonomy for sustainable finance, expected to be released by the end of March 2025. This classification system aims to align economic activities with national climate objectives, enhance transparency, and mitigate greenwashing. Such initiatives are crucial as India seeks to attract both domestic and international capital to meet its estimated requirement of USD 10.1 trillion by 2070 for achieving net-zero emissions.

Talking about green investments for high-impact industries, Industry leaders underscored the importance of data-driven decision-making, robust risk assessments, and capacity building to effectively channel investments towards high-impact green initiatives.

Leena Pillai, Assistant General Manager, ESG and CSR, ICICI Bank, addressed the bank’s approach to integrating ESG, particularly climate risk, into its lending framework. She highlighted the science-driven nature of climate risk assessment and the need for robust data and models.

“Climate is deeply grounded in science,” Pillai stated. “We have been evaluating and looking at these data repositories… trying to understand how to look at emissions, how to look at various proposals, what are the key nuances that one needs to look at from a climate perspective.” She also stressed the importance of capacity building within the bank to effectively manage climate-related risks.

Raakhee Kulkarni, Managing Director- ESG and Impact, GEF Capital Partners, shared insights into the private equity firm’s approach to climate finance. Given their focus on climate mitigation and adaptation, Kulkarni emphasised the importance of pre-investment assessments.

“Essentially, for us, we look at climate from really a pre-investment kind of a focus,” she explained. “Looking at both physical risk and transition risk for every investment that we do as part of the DD process.” She underscored the necessity of understanding supply chain vulnerabilities and engaging with experts to evaluate potential risks.

Ravindra Singh Negi, Chief Risk Officer at Bank of Baroda, while addressing the question on the Eye Cap framework, stated, “Incorporating climate risk is essential. Banks engage specialised models to assess these risks, but decision-making and pricing are also influenced by market competition. As a result, the renewal portfolio is expected to grow.”

Priyadarshini K S, Sustainable Finance Lead – Commercial Banking at HSBC, elaborated on the bank’s sustainability commitments, saying, “HSBC remains an active member of the Net Zero Alliance, reaffirming our commitment to achieving net zero emissions by 2050. This long-term vision continues to guide our sustainable finance initiatives.”

While moderating the seventh edition of BW Sustainable World Conclave, Chandni Khosla, Board Advisor, Sustainability and Sustainable Finance stated, “We have to make our balance sheets resilient. We have to make the allocation of capital resilient.”