Reserve Bank of India to Roll Out ISSB Rules Soon
- Muhammad Ahmad
- Dec 4, 2024
- 2 min read
Deputy Governor M. Rajeshwar Rao highlights climate risk and sustainability priorities in finance at ISAS International Conference
Shri M. Rajeshwar Rao announced RBI's readiness to adopt ISSB standards
Final ISSB-aligned guidelines for climate risk disclosures are to be issued soon.
RBI aims to foster a robust ecosystem for sustainable finance in India.
Climate risks and their impact on financial stability remain a top priority.
The Reserve Bank of India (RBI) will soon implement new climate risk disclosure guidelines aligned with the International Sustainability Standards Board (ISSB). Deputy Governor Shri M. Rajeshwar Rao announced this during his keynote address at the International Conference organized by the Institute of South Asian Studies (ISAS) at the National University of Singapore (NUS), held in New Delhi on November 29, 2024.
He emphasized the urgent need for financial institutions to prepare for climate risks, highlighting how these risks impact economic stability. The ISSB standards aim to create a unified framework for reporting environmental, social, and governance (ESG) factors, helping align India’s regulatory practices with global norms.
The ISSB's climate disclosure framework addresses two main risks
Physical Risks: Arising from natural disasters and climate variability, which can disrupt financial stability.
Transition Risks: Linked to the economic shift toward sustainability, which involves technological upgrades, consumer behavior shifts, and regulatory changes.
The RBI’s forthcoming framework will require banks and financial entities to report Scope 1 (direct emissions), Scope 2 (indirect emissions from energy use), and Scope 3 (value chain emissions) metrics. This data will be crucial for investors and regulators to assess institutions' resilience to climate risks.
Deputy Governor Rao stated, "The ISSB rules are critical in ensuring transparency and comparability in climate risk disclosures. They will empower the financial system to build competencies and mitigate emerging risks." He noted that a phased approach to implementation, starting with pilot programs at select institutions, will ensure an orderly transition.
India's vulnerability to climate risks, including the potential for GDP losses of 3-10% by 2100 due to climate-related impacts, makes these measures essential. Shri Rao urged financial institutions to proactively engage with the new framework, building resilience while promoting sustainable economic growth.
He concluded with a call to action, emphasizing the need for enhanced transparency, capacity building, and public-private collaboration to address both mitigation and adaptation challenges in sustainable finance.