Regulators across financial markets in the world, including the Reserve Bank of India (RBI), acknowledge that climate-related financial risk is a potential threat to stability. Hence, all financial regulators have a clear interest -- in some cases, even an obligation -- to assess the impacts of the climate crisis on the financial system and incorporate related considerations into their regulatory frameworks to protect regulated entities. However, there is no unanimity of views, exposing the financial system to climate risks and limiting national ambitions on mobilising capital for climate action.

Over the last few years, RBI has used moral persuasion and rhetorical appeal to get regulated entities to consider the climate crisis impacts in lending and risk management. These are evident in draft climate-related disclosure guidelines, several meetings and workshops it has organised, acknowledgment of the climate crisis in RBI publications and speeches of the leadership, to influence the behaviour of banks and non-banking financial companies (NBFCs). However, RBI is yet to make disclosure frameworks, supervisory practices concerning climate impact, and monetary measures expected of its regulated entities clear. Some banks have set up environmental, social, and........

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