Is only agriculture sector at risk?

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Is only agriculture sector at risk?

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• RBI on Indian agriculture: In the 2020 Annual Report, the RBI expressed deep concern about India's increasing vulnerability to climate change, and impact on agriculture sector. It is clear that climate change will impact the economy much more deeply than even the pandemic. India is fifth most vulnerable globally.
• Many sectors at risk: Climate change will impact housing, transportation, forestry, fisheries and tourism as rising instances of storm and flood appear. It will impact hospitality, construction and manufacturing due to rising heat and humidity. 
• Role of the RBI: It wants to provide solutions in the emerging scenario, by offering the right ESG principles - Environment, Social and Governance principles. All corporates will get standard disclosure formats, and will have to build in the ESG assessments in financial stability working.
• Green investments: Central banks worldwide are trying to build monetary and financial stability policies that encourage green investments. They have formed "The Network for Greening the Financial System" with 69 members. 
• The Indian case: India is aggressively pursuing green energy goals but needs to look at green recovery from Covid-19. RBI, and others worldwide, realise that climate change risks may destabilise entire financial systems. As on date, India isn't mobilising investments on the scale that's needed to achieve climate goals.
• Greenwashing: It refers to making false claims of environmental compliance. It's a challenge in green financing, as much as confusing multiple definitions are. India needs to have an unambiguous definition for green financing now. Right tracking of flows to green sectors will allow right policy formation, and regulations. Proper definition can speed up green financial products and services for all. 
• International initiatives: EU's green taxonomy and China's green bond catalogue help scale up green projects. India needs to use elements from all of these, to develop a set of principles. A market-led collaborative approach can help. And Indian govt. needs to make policies and regulations too.
• Challenges: The first-mover firms will face costs of measuring climate risks and even higher cost of capital. And that transparency will hurt more than help (assuming other firms keep silent). So for the noble goal of going green, the repercussions can be complex for the well-meaning companies. (analysts will rate the shares down, for example)
• Systemic risk: There is the broader risk that if banks and NBFCs, pension funds, mutual funds ignore climate change risks, then suddenly they may experience loss in asset values. 
• Summary: The time has come for finding and disclosing climate risks. The government has to realise that "all" entities must be required to disclose climate risks together.

Read more on - Polity | Economy | Schemes | S&T | Environment

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