Introduction

Private sector initiatives such as the Task Force on Climaterelated Financial Disclosures (TCFD) and Carbon Disclosure Project (CDP) also offer guidance and recommendations to stakeholders on how to incorporate climate risk mainstreaming decisions and also on how to disclose the information on climate related financial decisions.

TCFD is one of the first initiatives taken by the finance sector aimed at increasing transparency around climaterelated risks and opportunities; which are categorised into four thematic areas of governance, strategy, risk management; and metrics and targets. The TCFD Framework is slowly getting accepted with over 800 public and private organizations announcing their participation in climate finance disclosure related activities. While the acceptance is high, the implementation is still at nascent stages with most of the financial institutions still trying to understand how to assess the long term impact of climate change on their portfolios. Similarly, the World Bank in collaboration with other development agencies has also recommended Five Voluntary Principles to assist financial institutions in making climate considerations a core of their operations.

These voluntary principles include incorporating basic principles such as having strategies that are prepared in discussion with the top management, proactively working on understanding climate risks, developing financing vehicles and monitoring tools, along with sharing of best practices with the larger community while keeping the progress transparent.

In addition to TCFD and initiatives by the World Bank, there are other coalitions and platforms as well that promote climate friendly practices such as Global Investor Coalition on Climate Change/Institutional Investor’s Statement on Climate Change, United Nations Principles for Responsible Investment (PRI), The Equator Principles and The Portfolio De-Carbonization Initiative (PDC), among others. After careful analysis of the work of various institutions, Intellecap categorized the journey of investors to mainstreaming climate change and incorporating climate risk in their investment decision into four stages.

Journey Of Investors For Adopting Climate Risk Mainstreaming Strategies

Develop climate resilient strategies to avoid impact .on portfolio

As indicated earlier, majority of financial institutions across the globe are at nascent stages (step 1 in above figure) in their journeys of mainstreaming climate risk in their portfolios. Financial institutions in India are also at the same stage with almost no considerations of climate risks in investment decisions. India is already facing severe climate change consequences and is at a risk of facing an overall

Source: World Bank

heating of over 1.5 degree Celsius by the end of the century which will also impact the overall economy to a large extent. In general, the country has faced intense and increased events of floods, drought, cyclones, erratic rainfall, heat and water stress which has impacted livelihoods, businesses, and thus portfolio of financial institutions. It is thus important for financial institutions to re-think their financing strategies