Welcome to the full Episode 10 of Sustainability Karma, India’s first and only talk show on sustainability on All India Radio.

In this episode of Sustainability Karma, Rajiv Anand, Deputy Managing Director, Axis Bank highlights that the bank is leading the ESG agenda in the banking sector by integrating sustainability into its core mission, aligning with global standards, and addressing practical challenges like data quality and climate risk management.

He says that their purpose statement that “banking that leads to a more inclusive and equitable economy, a thriving community, and a healthier planet” underpins the bank’s commitment to meet the diverse needs of millions across India, from urban to rural areas, and from small businesses to large corporations. The bank focuses on channelling investments into vital economic sectors, particularly in creating social and economic infrastructure, and emphasising financial inclusion for both unbanked and underbanked populations.

Saying that the bank’s alignment with national and global sustainability and climate action agendas reflects its dedication to higher-level initiatives, Anand adds that this alignment is not merely about ethical considerations but also about pragmatic risk management. Axis Bank has observed that poor management of climate sustainability risks has historically led to non-performing assets (NPAs), prompting them to integrate these risks into their lending practices to ensure financial stability and profitability.

Since inclusivity and sustainability are deeply ingrained in Indian society, Annad adds that Axis Bank adopts these values into its governance framework. With the liberalisation of markets and the influx of foreign institutional investors, the bank has embraced global best practices in governance, enhancing transparency and accountability.

Emphasising that a critical role of the banking sector in India’s journey toward net-zero emissions is undeniable, Anand points out that one significant hurdle is data quality, which is essential for assessing sustainability risks and combatting greenwashing. Ensuring consistency in data across various market players is a priority. To address these issues, he says, the RBI and SEBI are focusing on improving transparency and disclosure in the ESG space.

While regulatory bodies like the RBI are proactive in driving the ESG discourse within the banking sector, the RBI has highlighted climate finance as a critical risk for banks, urging them to evaluate potential climate scenarios and their impact on lending portfolios, he says.

Regarding the RBI’s draft disclosure framework on climate-related financial risks, Anand says that Axis Bank views it as a continuation of the regulator’s consistent focus on climate issues over the years. This framework aligns with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations, aiming to enhance the reporting of climate-related financial information. The framework builds on previous efforts like the discussion paper on climate risk and sustainability, which provided clarity for regulated entities.

The framework mandates that banks disclose their ability to identify and manage climate-related financial risks, covering governance, strategy, risk management, metrics, and targets. Anand says that this focus ensures that banks not only concentrate on these risks but also enable stakeholders to assess the vulnerability of banks’ balance sheets to climate risks. Axis Bank itself is aligned with the RBI’s objectives, viewing this framework as a step towards greater transparency and resilience in the face of climate change.