{"id":123029,"date":"2021-08-03T10:05:25","date_gmt":"2021-08-03T04:35:25","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=123029"},"modified":"2021-08-11T13:46:01","modified_gmt":"2021-08-11T08:16:01","slug":"rbi-must-come-clean-where-it-stands-on-climate-change","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/rbi-must-come-clean-where-it-stands-on-climate-change\/","title":{"rendered":"RBI must come clean where it stands on climate change"},"content":{"rendered":"<p><strong>Source<\/strong>: <a href=\"https:\/\/epaper.livemint.com\/Home\/ShareArticle?OrgId=287cf2dee1&amp;imageview=0\">Livemint<\/a><\/p>\n<p><strong>Relevance:<\/strong>This article explains why the RBI should include green financing and what are the challenges faced by the RBI in its execution?<\/p>\n<h5><strong>Synopsis:<\/strong><\/h5>\n<p>Considering the extreme climatic events around the globe and in India, the RBI has to include green financing as its component<\/p>\n<h5><strong>Introduction:<\/strong><\/h5>\n<ol>\n<li>The past few weeks over 200 people have lost their lives in Maharashtra due to landslides, floods and other rain-related accidents.\n<ul>\n<li>The Maharashtra government\u2019s preliminary estimates of loss to property, business and infrastructure is around \u20b94,000 crore, with the final figure likely to be higher.<\/li>\n<\/ul>\n<\/li>\n<li>Elsewhere in India, heavy rains set off landslides in mountainous Himachal Pradesh, with cascading boulders killing tourists and residents.<\/li>\n<li>In Bihar, rain-fed Gandak river has washed away Motihari and East Champaran districts.<\/li>\n<\/ol>\n<h5><strong>Extreme Climatic events at global level:<\/strong><\/h5>\n<p>India is not the only country ravaged by these extreme weather incidents.<\/p>\n<ol>\n<li>Heat waves in Canada and the north-west coast of the US\u2014with temperatures reaching 50\u00b0 Celsius\u2014have killed close to 500 people.<\/li>\n<li>Uncharacteristic rains flooded Germany and Belgium, claiming about 200 lives.<\/li>\n<li>Similar abnormal rains and flooding in central China affected 2 million citizens and resulted in economic losses of over $500 million.<\/li>\n<\/ol>\n<h5><strong>How Climatic events will impact economy?<\/strong><\/h5>\n<p>Climate change, undoubtedly, is responsible for these extreme fluctuations in weather patterns. These episodes of extreme weather variations result in the following economic problems.<\/p>\n<ol>\n<li><strong>Supply chain disruptions, business continuity problems, <\/strong><\/li>\n<li><strong>Labour productivity diminution, <\/strong><\/li>\n<li><strong>Lower investment rates, <\/strong><\/li>\n<li><strong>Contraction in collateral values, and defaults by businesses and households, <\/strong><\/li>\n<li><strong>All of the above might lead to problems of overall financial instability<\/strong>.<\/li>\n<\/ol>\n<p>The <strong>International Monetary Fund\u2019s Global Financial Stability Report of 2019 <\/strong>also <strong>highlighted these risks<\/strong>: \u201cLosses from climate-related risks <strong>affect the financial system directly<\/strong>, through price impairment, reduced collateral values, and underwriting losses, and indirectly, through <strong>lower economic growth and tighter financial conditions<\/strong>. <strong>Insurance claims from natural losses have already quadrupled <\/strong>since the 1980s.\u201d<\/p>\n<h5><strong>About the Network for Greening of the Financial System (NGFS):<\/strong><\/h5>\n<ul>\n<li>Most of the central banks have been working to assess financial system risks from climate change, figuring out how to design stress-testing maps and trying to finalise risk mitigation models.\n<ul>\n<li>For instance, the Network for Greening of the Financial System (NGFS)<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h6><strong>NGFS:<\/strong><\/h6>\n<ul>\n<li>It was set up during the 2017 Paris \u2018One Planet Summit\u2019 for central banks and supervisors to share best practices in climate-related risk management practices.<\/li>\n<li>The network already has 95 central banks as members and 15 multilateral financial institutions as observers.<\/li>\n<li>The Reserve Bank of India (RBI) joined NGFS in April 2021.<\/li>\n<\/ul>\n<h5><strong>The Challenges faced by RBI in green financing:<\/strong><\/h5>\n<p>The Reserve Bank of India (RBI) in its July bulletin mentioned, the <strong>need for monetary-policy frameworks to incorporate climate-change risks<\/strong>, <strong>but refrained from <\/strong>explicitly expressing a desire to <strong>re-examine its own monetary policy <\/strong>framework or indicating whether it is moving in that direction.<\/p>\n<p>RBI faces two peculiar challenges that will test its resolve in the days ahead.<\/p>\n<ol>\n<li><strong>India\u2019s unique and differentiated position in the climate change battle when compared with developed nations<\/strong>.\n<ul>\n<li>Rich countries and their institutions are marching ahead with their agenda of net zero emissions by 2050, which is at odds with India\u2019s developmental challenges.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Like all other central banks, RBI is bound by a mandate fixed by the legislative<\/strong>.\n<ul>\n<li>The preamble to the Reserve Bank of India Act, 1934, states that monetary policy\u2019s \u201cprimary\u201d objective is price stability, \u201cwhile keeping in mind the objective of growth\u201d.<\/li>\n<li>This could skew RBI\u2019s attempts to foster a green financing compact within the Indian financial system.<\/li>\n<\/ul>\n<\/li>\n<\/ol>\n<h5><strong>Suggestions to improve RBI\u2019s green financing:<\/strong><\/h5>\n<ul>\n<li>The RBI will <strong>have to leverage its NGFS membership <\/strong>to access global best practices, but will also have to tweak the framework to suit India\u2019s development imperatives.<\/li>\n<li>In addition, the RBI will also have to <strong>act as a champion for other developing and poor nations <\/strong>by developing an alternative but sustainable model.<\/li>\n<li>The RBI has to balance its NGFS commitments versus its constitutional mandate of fostering \u201cgrowth\u201d. Therefore, the RBI will have to either seek legislative amendments or establish a legitimate work-around.<\/li>\n<\/ul>\n<p>The RBI can no longer afford to ignore the compelling imperatives of green financing or overlook how climate change is slowly but surely eroding financial stability.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Source: Livemint Relevance:This article explains why the RBI should include green financing and what are the challenges faced by the RBI in its execution? Synopsis: Considering the extreme climatic events around the globe and in India, the RBI has to include green financing as its component Introduction: The past few weeks over 200 people have&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/rbi-must-come-clean-where-it-stands-on-climate-change\/\">Continue reading <span class=\"screen-reader-text\">RBI must come clean where it stands on climate change<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[408,216,8852,579],"class_list":["post-123029","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-climate-change","tag-gs-paper-3","tag-mitigation-strategies","tag-reserve-bank-of-india","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704847489},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/123029","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=123029"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/123029\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=123029"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=123029"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=123029"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}