In January 2009, a roundtable discussion for CEOs of financial institutions, convened by The Climate Group, concluded that there was an imminent need for engagement with the Indian Banks’ Association (IBA) and a larger cross section of banks to raise awareness on climate change. This report emerged from a meeting in late 2009, when The Climate Group initiated dialogue with the banks operating in India to discuss the most effective ways to tackle climate change.
The Climate Group and the IBA agreed to produce a report outlining best practice in the finance industry in India and recommend action that banks can take to accelerate a low carbon economy. Working with PricewaterhouseCoopers, a survey was carried out to gather this information.
Amongst the report’s most important conclusions are:
- A small number of banks are initiating change
There is a small group of banks in India that are leading the sector in tackling climate change and that recognize the commercial advantage this will provide. Energy efficiency is one key focus, with an estimated market worth more than US$15 billion by 2015.
- Taking advantage of policy
The action being taken by banks is no longer limited to reducing operational emissions – it is focused on taking advantage of domestic and international climate change policy and frameworks, such as the Clean Development Mechanism (CDM) and India’s National Action Plan on climate change, to open new markets.
- Success means tackling climate change
Four banks rated climate change as ‘very important’ and in the ‘Top Ten Priorities Critical to Success’. However, public sector banks are less involved in voluntary initiatives and appear to be postponing action until regulation is in place.
- Leadership role
Seven of the eight banks believe that commercial lending banks in India can play a leadership role in the business community in addressing the challenges of climate change. Banks indicate that integrating sustainable development into the organization’s policies and management approach improves morale of employees and provides a strong and confident long-term relationship with stakeholders.
- Financial incentives
Banks are increasingly aware of the opportunities that are available to stimulate investment – such as through low carbon funds. However, the correct financial incentives are essential to make this a reality and the banks need to proactively engage with the Government in India to ensure that the right incentives are in place.
This report is intended as a resource for illustrating the existing scope of climate change activities by banks.