Context:
AU Small Finance Bank (AU SFB) has entered into a strategic partnership with the International Finance Corporation (IFC) to embed climate risk into its core banking systems. This initiative enhances the bank’s alignment with global climate resilience standards and the Reserve Bank of India’s evolving climate-related financial guidelines.
Objective:
To build climate risk resilience into AU SFB’s governance, risk management, strategy, and ESG disclosures—boosting long-term sustainability and compliance with frameworks like TCFD and NGFS.
Key Features of the Climate Risk Program:
- Physical Risk Assessment:
- Evaluates the vulnerability of AU SFB’s loan portfolio to climate-induced natural disasters (floods, droughts, extreme weather).
- Uses IPCC scenarios through the year 2100.
- Transition Risk Assessment:
- Analyzes financial exposure to policy, market, and technology shifts in India’s transition to a low-carbon economy.
- Follows Network for Greening the Financial System (NGFS) transition risk scenarios.
- Financed Emissions Calculation:
- Measures Scope 3, Category 15 emissions (financed emissions) across:
- Corporate loans
- SME finance
- Real estate
- Sovereign bonds
- Uses PCAF (Partnership for Carbon Accounting Financials) methodology
- Covers FY 2024–25 and FY 2025–26.
- Measures Scope 3, Category 15 emissions (financed emissions) across:
Significance:
- Embeds climate risk into AU SFB’s risk framework and business strategy
- Aligns with RBI’s sustainable finance agenda
- Supports long-term climate-resilient banking practices in India
- Strengthens climate disclosure and ESG reporting standards in Indian banking
About AU Small Finance Bank (AU SFB):
- Founded: 1996
- MD & CEO: Sanjay Agarwal
About International Finance Corporation (IFC):
- Formation: July 20, 1956
- Headquarters: Washington, D.C., USA
- MD: Makhtar Diop
- Membership: 186 countries
