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Sustainable Finance's Coverage Of Climate-Related Social Risks

By Outlook Planet Desk October 30, 2021

Given their leadership role, the WWF urged the central banks and supervisors to take a stronger public stance on the need to respond to environmental and social challenges.

Sustainable Finance's Coverage Of Climate-Related Social Risks
Sustainable Finance's Coverage Of Climate-Related Social Risks.
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While central banks and banking supervisors across the world are developing their strategies and starting to take concrete measures to address climate-related risks, broader environmental and social risks are significantly less well covered, the latest report from the World Wide Fund for Nature (WWF) said on Friday.

It is part of the first Sustainable Financial Regulations and Central Bank Activities (SUSREG) report launched by the WWF, months after its publication of the SUSREG framework and related online tracking tool in April 2021.

As a global science-based conservation organisation, WWF engages with financial sector stakeholders across the world, working to ensure that the financial system fully accounts for climate and nature-related risks and drives sustainable practices throughout the rest of the economy. The report is an important pointer ahead of the COP26, the annual climate change summit, as climate finance is a major concern, especially in the developing world. COP26 will start on October 31 at Glasgow in the United Kingdom.

The report looks into the findings of the assessment of measures taken and progress made by central banks, banking regulators and supervisors to integrate environmental and social considerations in their mandates and activities. It covers 38 countries, including India and most members and observers of the Basel Committee on Banking Supervision. Together, they account for more than 90 per cent of global GDP, 80 per cent of total GHG emissions and 11 of the 17 most biodiversity-rich countries, a release from the WWF said here.

"Regulations and supervisory expectations are now starting to be rolled out globally, with 35 per cent of the assessed jurisdictions mandating banks to develop and/or strengthen their climate, environmental and/or social risk management practices. From a central banking perspective, environmental and social considerations are not yet fully integrated in key monetary policy measures, such as asset purchases, collateral frameworks, or refinancing programs, with only 22 per cent of the relevant central banks having some of these measures in place, and none of them fully satisfying the related SUSREG indicators," the report found out.

Earlier this year, India's Reserve Bank of India (RBI) joined and is now working closely with the Network of Central Banks and Supervisors for Greening the Financial System (NGFS). "The RBI is committed to fostering a more sustainable and resilient financial system in its jurisdiction."

"The initial focus would be on integrating climate-related risks by building awareness of such risks. The RBI is actively participating in various committees and following the developments from standard setting bodies like the Basel Committee on Banking Supervision (BCBS) and Financial Stability Board (FSB) on climate risk and would be guided on its policies accordingly," the RBI said on its plans to integrate climate, environmental and social considerations in its activities and mandates.

Terming the RBI joining the NGFS as a "significant and positive step," Secretary General and CEO, WWF India, Ravi Singh said, "We expect that central bank and financial supervisors will take prompt action to commensurate with the challenges we are facing, to support an orderly and just transition towards a resilient, sustainable and low-carbon economy."

Given their leadership role, the WWF urged the central banks and supervisors to take a stronger public stance on the need to respond to environmental and social challenges.

"This would support more ambitious action from governments and send the right signals to financial institutions, notably over upcoming regulatory and supervisory changes. In this critical decade of action, ambitious intervention and international coordination will be the key to success," the release said.


--IANS

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