Banks Lead Funding for Green Projects as RBI Pushes for Climate Risk Disclosure

Banks in India, including State Bank of India, Axis Bank, ICICI Bank, and HDFC Bank, are stepping up to fund green projects as the Reserve Bank of India (RBI) introduces norms for lenders to disclose their actions on climate risk.

RBI has set a glide path for detailed disclosures starting from FY25 to ensure better understanding and management of climate-related financial risks. Lack of adequate information about these risks can lead to mispricing of assets and capital misallocation.

State Bank of India, the largest lender in the country, aims to achieve carbon neutrality by 2030 and has adopted environmental, social, and governance (ESG) criteria to rate borrowers. Other banks like Axis Bank and HDFC Bank are also integrating ESG assessments into their credit policies and financing renewable energy projects.

ICICI Bank has developed sector-specific checklists to assess ESG and climate-related risks for borrowers in sectors like power, transportation, cement, and steel.

Federal Bank aims to grow its green financing book to ₹13,000 crore by 2025 and has introduced green deposits to finance renewable energy, green building, smart agriculture, and water or waste management projects.

RBI had earlier highlighted the need for “intensive capital mobilization” to address climate change, estimating that India requires $17.77 trillion to transition to a net-zero economy by 2060.

Overall, these initiatives by banks signify a concerted effort to align with sustainable development goals and support the transition to a greener economy.