Skip to main content

Draft Disclosure framework on Climate-related Financial Risks

Reserve Bank of India (RBI) has released draft disclosure framework on climate-related financial risks.

What are climate-related financial risks?

Climate-related financial risks means the potential risks that may arise from climate change or from efforts to mitigate climate change, their related impacts and economic and financial consequences.

What is the need for climate-related financial risk management?

Given the increasing threat of climate change and the associated physical damage, changes in market perception and the transition towards more environment-friendly products and services, the impact of climate change on regulated entities (REs) is inevitable. The REs also play an important role in financing the transition towards an environmentally sustainable economy. Climate-related risks are expected to have implications on financial stability as well.

It is therefore imperative for the REs to implement a robust climate-related financial risk management policies and processes to effectively counter the impact of climate-related financial risks.

To whom shall the disclosure framework on climate-related financial risks be applicable?

The guidelines shall be applicable to the following entities –

Foreign banks shall make disclosures specific to their operations in India. Adoption of the guidelines is voluntary in case of REs other than those listed above.

What are the thematic pillars of disclosure?

The disclosures by the REs shall cover the following four thematic areas (Pillars) –

  • Governance – It should detail the governance processes, controls and procedures used by the RE to identify, assess, manage, mitigate, monitor and oversee climate-related financial risks and opportunities.
  • Strategy – It should detail the RE’s strategy for managing climate-related financial risks and opportunities. 
  • Risk Management – It should detail the RE’s processes to identify, assess, prioritize and monitor climate-related financial risks and opportunities, including whether and how those processes are integrated into and inform the RE’s overall risk management process. 
  • Metrics and Targets – The disclosures on metrics and targets should detail the RE’s performance in relation to its climate-related financial risks and opportunities, including progress towards any climate-related targets it has set, and any targets it is required to meet by statute or regulation. 

What are other guidelines for disclosure on climate-related financial risks?

  • The REs shall disclose the information on a standalone basis and not consolidated basis. 
  • The disclosures must be included and disclosed as a part of the RE’s financial results / statements on its website.

From when shall the disclosure framework on climate-related financial risks be applicable?

The glide path for detailed disclosures by the REs on the areas of “Governance”, “Strategy”, “Risk Management” and “Metrics and Targets” are as under –

 

 Governance, Strategy, and Risk Management Metrics and Targets
SCBs, AIFIs, Top and Upper layer NBFCs FY 2025-26 onwards FY 2027-28 onwards
Tier IV UCBs FY 2026-27 onwards FY 2028-29 onwards

References

Reserve Bank of India. (2024, February 28). 'Draft Disclosure framework on Climate-related Financial Risks, 2024'. Retrieved from https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=4393

Reserve Bank of India. (2024, February 28). 'RBI invites comments on the “Draft Disclosure framework on Climate-related Financial Risks, 2024”'. Retrieved from https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=57408


Follow at - Telegram   Instagram   LinkedIn   X   Facebook

Labels:

Comments

Post a Comment

Popular Posts

Credit Facilities – Lending against Gold and Silver Collateral

Reserve Bank of India (RBI) has issued directions on credit facilities offered by various regulated entities. This article summarises the directions applicable to lending against gold and silver collateral. To whom are the directions applicable? The directions are applicable to the following Regulated Entities (REs) – Commercial Banks  Small Finance Banks (SFBs) Local Area Banks (LABs) Regional Rural Banks (RRBs) Primary (Urban) Co-operative Banks (UCBs) Rural Co-operative Banks – State Co-operative Banks (StCBs) Central Co-operative Banks (CCBs) Non-Banking Financial Companies (NBFCs) for all layers – Deposit taking NBFC (NBFC-D) NBFC-Investment and Credit Companies (NBFC-ICC) NBFC-Factor  NBFC-Micro Finance Institutions (NBFC-MFI)  NBFC-Infrastructure Finance Company (NBFC-IFC)  Infrastructure Debt Fund-NBFC (IDF-NBFC)  Housing Finance Company (HFC)  To whom are the directions partially applicable? The prudential regulations are not applicable to ‘NBFCs-B...
Post a Comment
Read more

Guidelines on Money Changing Activities (Updated as on May 06, 2026)

Reserve Bank of India (RBI) has updated the guidelines on money changing activities. What are the guidelines for appointment of agents / franchisee? RBI had permitted Authorised Dealers (ADs) Category - I, ADs Category - II and Full Fledged Money Changers (FFMCs) to enter into agency or franchisee agreements at their option for the purpose of carrying restricted money changing business i.e. conversion of foreign currency notes, coins or travellers' cheques into Indian Rupees (INR).  A franchisee can be any entity which has a place of business and a minimum Net Owned Funds of ₹10 lakh.  Franchisees can undertake only restricted money changing business. Franchisees of AD Category - I / AD Category - II / FFMCs functioning within 10 kms from the borders of Pakistan and Bangladesh may also sell the currency of the bordering country, with the prior approval of RBI.  Other franchisees of AD Category - I / AD Category - II / FFMCs cannot sell foreign currency. An authorised pers...
Post a Comment
Read more

Credit Facilities – Digital Lending Guidelines

Reserve Bank of India (RBI) has issued directions on credit facilities offered by various regulated entities. This article summarises the directions applicable to digital lending. To whom are the directions applicable? The directions are applicable to the following Regulated Entities (REs) – Commercial Banks  Small Finance Banks (SFBs) Local Area Banks (LABs) Regional Rural Banks (RRBs) Primary (Urban) Co-operative Banks (UCBs) Rural Co-operative Banks – State Co-operative Banks (StCBs) Central Co-operative Banks (CCBs) All India Financial Institutions (AIFIs) regulated by RBI – Export Import Bank of India (EXIM Bank) National Bank for Agriculture and Rural Development (NABARD) National Housing Bank (NHB) Small Industries Development Bank of India (SIDBI) National Bank for Financing Infrastructure and Development (NaBFID) Non-Banking Financial Companies (NBFCs) for all layers – Deposit taking NBFC (NBFC-D) NBFC-Investment and Credit Companies (NBFC-ICC) NBFC-Factor  NBFC-Micro...
Post a Comment
Read more

Credit Facilities – Finance to Non-Banking Financial Companies (NBFCs)

Reserve Bank of India (RBI) has issued directions on credit facilities offered by various regulated entities. This article summarises the directions applicable in respect of finance to Non-Banking Financial Companies (NBFCs). To whom are the directions applicable? The directions are applicable to the following Regulated Entities (REs) – Commercial Banks  Small Finance Banks (SFBs) Primary (Urban) Co-operative Banks (UCBs) All India Financial Institutions (AIFIs) regulated by RBI – Export Import Bank of India (EXIM Bank) National Bank for Agriculture and Rural Development (NABARD) National Housing Bank (NHB) Small Industries Development Bank of India (SIDBI) National Bank for Financing Infrastructure and Development (NaBFID) What are the conditions on finance to NBFCs? Commercial Banks and SFBs The bank shall extend need based working capital facilities as well as term loans to NBFCs registered with the RBI and engaged in infrastructure financing, equipment leasing, hire-purchase, l...
Post a Comment
Read more

Regulations for Authorised Persons

Reserve Bank of India (RBI) has issued a revised framework for authorisation of any person as an Authorised Person under the Foreign Exchange Management Act (FEMA), 1999. Who can act as an Authorised Person? No person shall act as an authorised person without obtaining an authorisation from the RBI. A person seeking authorisation as an authorised person may apply to the RBI through the PRAVAAH portal (https://pravaah.rbi.org.in) to the regional office concerned of the RBI under whose jurisdiction the registered office of the applicant is established. RBI shall consider applications for fresh authorisation under 3 categories, namely, Authorised Dealer (AD) Category-I, AD Category-II and AD Category-III. Which entities are eligible to act as an Authorised Person? Category Eligible entities AD Category-I A bank licensed by the RBI. AD Category-II A bank licensed by the RBI or a Non-Banking Financial Company (NBFC) registered with the RB...
Post a Comment
Read more