Reserve Bank of India consultation on Climate Change: Many a slip ‘twixt cup and the lip!

https://illuminem.com/illuminemvoices/a9c523b0-82f3-4268-a8df-26b86fafa023

September 23, 2022

My response to the Reserve Bank of India consultation on Climate Change.

Major Wall Street banks have threatened to leave United Nations climate envoy Mark Carney’s financial alliance over legal risks, according to the Financial Times. So in these flip flop times, from COP26 when everyone rushed to follow him as he played the pied piper – to COP27 – when the biggest of fossil fuel financiers are reportedly ready to abandon GFANZ and jump the ship.

World Bank President David Malpass came under heavy criticism earlier this week, according to Reuters, after he declined to say whether he accepts the scientific consensus on global warming, rekindling concerns about the bank’s lack of a deadline to stop funding fossil fuels. After dodging questions on climate, Malpass told CNN ‘I’m not a denier’.

The scrutiny is on and will get more intense. Not just for banks but all financial institutions. The systemic risk that they pose collectively will only get exacerbated by the systemic nature of climate risk. It disregards geographical or political boundaries; who emits how much GHG; intergenerational implications; and ironically the Global South ends up paying a disproportionate price.

“RBI’s waking up to Environment risk or climate change is a most welcome move, even if the initiative is perhaps a decade too late”, says Dr. V. Raghunathan – renowned author, former banker and an expert on behavioural finance. “But of course, better late than never”. Perhaps it’s also time for RBI and other financial services regulators “to close hands, given the many cross pollination” between various sectors, as Raghunathan puts it.

I draw in some world-wide good practices. Needless to mention, more than the implications of Climate Change on balance sheets of financial institutions, it is the adverse impact of the money pipeline on environment and society that really matters. RBI’s solo performance is too late in the day. It is time for a concerted rapid action.

However, it does not stop here. There is hope in the form the ‘Bridgetown Agenda’ – Barbados’ PM Mia Mottley’s efforts towards building a global coalition to make financial system fit for climate action. Designed to reform the World Bank and the International Monetary Fund (IMF), institutions set-up at the end of World War II and still dominated by the US and Europe.