Indian Banks Treat Climate Risk as Compliance Exercise, Report Finds

A new analysis by Bengaluru-based think tank Climate Risk Horizons finds that 35 Indian banks with a combined market capitalisation of around Rs 50 trillion are making slow progress on climate risk integration, with most action driven by Reserve Bank of India regulation rather than strategic recognition of climate threats. The report's fourth edition evaluates the banks across ten criteria including climate scenario analysis, board-level oversight, coal policy, emissions disclosure and net zero targets.

According to the analysis, 92 per cent of Indian banks now disclose Scope 1 and 2 emissions, 63 per cent obtain third-party verification, and most have board oversight of climate risk — progress from earlier assessments. However, only five banks disclose financed emissions, which represent the majority of a bank's total climate impact. Only Federal Bank and RBL Bank have published clear coal phase-out commitments. Only six of the 35 banks have a net zero target, and only State Bank of India and Punjab National Bank include Scope 3 emissions in their net zero goal.

Yes Bank, Union Bank of India and Punjab National Bank emerged as leading performers. The report identifies a clear divide between banks making strong progress and those moving slowly. While 34 banks report some form of board-level oversight, only 22 demonstrate how this oversight affects credit decisions or portfolio alignment. Only five banks provide comprehensive sector-wise disclosures of sustainable lending, and while 14 banks report conducting climate scenario analysis or stress tests, none disclose the resulting impacts on capital or assets — limiting the practical utility of those exercises.

Lead author Anusha Das said banks need to understand specifically how climate change affects their portfolios and integrate that learning into business behaviour, rather than treating disclosures as a procedural requirement. Co-author Sagar Asarpur said physical climate risks including floods, heat and drought affect borrower cash flows, collateral quality and portfolio stability and cannot be treated as peripheral sustainability concerns. The report calls for broader Scope 3 disclosures, commitments to halt new coal financing with clear phase-out timelines, and increased investment in climate data and internal assessment capacity.

Key figure — Rs 50 trillion combined market capitalisation