Extreme weather events put $84 bn of Indian bank debt at risk
NEW DELHI: An increase in extreme weather events such as floods, droughts and cyclones risk souring debt worth more than Rs 6.19 trillion ($84 billion) at India’s biggest financial institutions.
That’s according to leading nonprofit environmental disclosure platform CDP. State Bank of India, the country’s largest lender, HDFC Bank, IndusInd Bank Ltd. and Axis Bank Ltd. are among the institutions that reported climate risks to CDP in 2020, it said in its annual report released Wednesday.
The banks flagged exposure to environmentally sensitive businesses including cement, coal, oil and power. They also listed the effects of cyclones and floods on loan repayments in farming and related sectors. Lenders accounted for 87 per cent of the total risk, valued at about $97 billion, across 67 top Indian companies that responded to CDP, Bloomberg reported.
“Climate is the biggest risk to businesses in the long run. Financial institutions are beginning to understand it,” said Damandeep Singh, New Delhi-based director of CDP India.
“As investors look at funding companies based on environmental, social and governance disclosures, we’ve seen many more companies report climate change risk.”
The potential harm to agriculture echoes concerns raised by India’s central bank about the impact of climate change on farming, a sector that employs more than half of its citizens. At the same time, the world’s third-biggest emitter of greenhouse gases is relying on coal to help drive its postCovid recovery.
The dirtiest fossil fuel could remain its dominant energy source in the coming decades.
CDP, which gathered the data on behalf of 515 investors with $106 trillion in assets, said it received responses from 220 small and large Indian companies.
State Bank of India, which is facing concerns from shareholders and investors over its proposal to help fund the controversial Carmichael coal mine in northern Australia, valued its total climate risk at Rs 3.83 trillion. The bank said it may “indirectly face reputational risks, should it be involved in lending to environmentally sensitive projects which may have significant public opposition.” SBI didn’t respond to a request seeking comment.