08 Nov RBI integrating Climate related risk into Financial Stability (GS 3, Economics, The Hindu, Indian Express)
News/Context: The Reserve Bank of India (RBI) published its ‘Statement of Commitment to Support Greening India’s Financial System – NGFS’, coinciding with the 2021 United Nations Climate Change Conference (COP26). The apex bank (RBI) joined the Central Banks and Supervisors Network for Greening the Financial System (NGFS) as a Member on April 23, and aims to learn from as well as contribute to global efforts on green finance.
The commitment of RBI to integrate climate-related risks into financial stability monitoring and to explore use of climate scenario exercises to identify weakness in the central bank-supervised entities is appreciable. RBI in a statement said that it supports broadly the declaration of Network for Greening the Financial System (NGFS). “We commend the co-ordination efforts of NGFS in defining, promoting, and contributing to the development of best practices in climate finance through sharing experiences and best practices for climate risk management in the financial sector,” it said.
“Specifically in respect of the national commitments, complexity and priorities of the country’s financial system, RBI is committed to integrate climate-related risks into financial stability monitoring,” according to the statement.
Further, the central bank said that it was committed to “look into how climate scenario exercises can be used to identify loopholes in RBI supervised entities’ business models, their balance sheets, and gaps in their abilities for managing and measuring climate-related financial risks.”
Launched at the Paris One Planet Summit on December 12, 2017, NGFS is a group of central banks and regulators seeking to share best practices and contribute to the evolution of environment and climate risk management in the financial sector while deploying mainstream finance to support the adaptation towards a sustainable economy.
Climate Change and Macroeconomic transitions: It has been analysed in the major weather related events in India since 1901, shows that the extreme events incidence has increased in the last two decades, with increasing temperature levels and more volatile precipitation pattern. As per the empirical findings, macroeconomic impact of climate change on certain indicators of real economic flow and particularly on food inflation has been statistical is significant for India. Climate change and the related shift in the weather pattern along with an increase in average world temperature has emerged as a key risk to macroeconomic outlook for both developed and developing economics. The United Nation has noted that ‘the climate change is the defining issue of our time and we are at a defining moment’. India too has seen significant changes in climatic behaviour in the recent period.
The cumulative level of greenhouse gas emissions has increased with the increase in world population. As per International Energy agency (IEA), 2,299 million tonnes of carbon dioxide (CO2 ) by india in 2018, a rise of 4.8 per cent over the previous year.
The inflation and growth outlook in India continues to be influenced by the amount of rainfall received from southwest monsoon and distribution. India receives 75% of annual rainfall from southwest monsoon during four months from June to September, which is very important for agriculture sector, given the fact that 65% of gross cropped area in India still remains unirrigated. In 2019 a prolonged dry spell in the initial months along with heavy rainfall as monsoon progressed led to floods and crop damage integral parts of the country.
The mean annual temperature in the past two decades, India has witnessed a significant rise.
India Meteorological Department records, 2016 has been the warmest year on record for India.
Gradually increasing average wall temperature is a long term characteristics of changing climate conditions across the globe. Extreme weather incidence like changing precipitation patterns, its skewed distribution, increasing intensity and frequency of floods, unseasonal rainfall, draughts and heat waves, melting of glaciers and rising sea levels pose serious macroeconomic challenges and risks. These extremities can cause severe damage to the people’s livelihood and output of an economy. Climate change thus, alongwith technological rapid advancements and shifts in demgrapphy, has the potential to bring about economic transformation significantly.
Among the macroeconomic transformation, the most evident is agricultural output, the others could be adverse effects on labour productivity, mortality rates, asset’s prices and investment decisions.
Download plutus ias daily current affairs 8 November 2021
Plutus IAS Current Affairs Team Member
No Comments