Financial institutions play a central role in an economy and therefore they are instrumental in determining the progression of a country’s sustainable development. Banks, insurance companies, pension funds, asset managers and other financial actors shape environmental, social and governance (ESG) outcomes through lending, investment and other financial decisions.

Given the urgent challenge posed by climate change, India is on its path to improve the climate consistency and resilience of its financial system. This can be evidenced through national actions such as the Indian Ministry of Finance’s status as a founding member of the International Platform on Sustainable Finance, which is currently in the process of creating a national sustainable finance taxonomy. The Reserve Bank of India has also joined the Network of Central Banks and Supervisors for Greening the Financial System in 2021, demonstrating its commitment to scaling green finance and climate action. Additionally, the Indian Banks’ Association that represents nearly 250 public and private sector banks is a member of the Sustainable Banking and Finance Network.

Many Indian financial institutions have also begun exploring opportunities to reduce the carbon intensity of their portfolios and exposure to climate risks. These efforts build on the extensive experience of addressing other ESG priorities such as gender equality and social inclusion. However, there is no comprehensive evidence on the state of knowledge or common practices that are applied by Indian banks towards ESG or climate risk management.

The aim of this landscape analysis is to map the current knowledge of risk management and credit-lending teams in participating institutions and document the gaps in knowledge of ESG and climate risk management. This first-of-its-kind assessment outlines how 10 front-running Indian financial institutions handle ESG issues in credit decisions and balance sheet risk assessments.

This research has been undertaken by ODI, auctusESG and Climate Bonds Initiative, generously funded by the UK Partnering for Accelerated Climate Transitions (PACT) India programme by the UK government’s Department for Business, Energy and Industrial Strategy. This programme, through the UK’s International Climate Finance, works in partnership with countries with high emissions reduction potential to support them to implement and increase their ambitions for tackling climate change.