Indian banks walked nonchalantly into the new year, their indifference as thick as the smoke from industrial projects they finance. Pollution levels soared, environmental concerns, and sometimes protests, were witnessed over big infra projects from Ladakh to Nicobar. Meanwhile, disasters like the Teesta 5 dam substation damage in Sikkim owing to yet another landslide laid bare the fragility of such ventures. Yet, banks remained unbothered, as if all this was happening in another country, insulated from the responsibility of having robust policies to mitigate environmental and social harm. Their fossil fuel investments expanded, while accountability regressed, leaving communities and ecosystems to bear the brunt of unchecked exploitation. A grim testament to priorities misaligned and impacts ignored. Yes, there was a lot of talk on āclimate risk preparednessā, green financing at international conferences, seminars and lectures at high profile events.Ā Ā
Increasing Finance for Carbon Emissions
Outside the conference rooms where āclimate risksā are opportunities to āunlockā investment āpotentialā, its effects unfolded. A recent study by Abhinav Jindal, Saket Hishikar, and Gireesh Shrimali, titled “Examining the Portfolio Carbon Footprint of Indian Banking System” and published in the Journal of Cleaner Production, highlights the alarming rise in financed carbon emissions of Indian banks. Financed emissions, in the study, are considered financial institutions’ Scope 3 emissions, representing the indirect environmental impacts of their financial services, investments, and lending. Reserve Bank of India (RBI) understands āFinanced emissionsā as the portion of gross greenhouse gas emissions attributed to the loans and investments made by banks. As per the study, these emissions, which are three to five times higher than banks’ direct and indirect operational emissions, are critical for assessing climate risks and achieving Paris Agreement goals. The study found Indian banks’ financed emissions at 364 tCO2e/US$ million. Public sector banks led with 304 tCO2e/US$ million, while private banks nearly doubled their emissions, driven by investments in electricity, construction, and transport. Regional rural banks contributed 53 tCO2e/US$ million, largely due to agriculture. States like Maharashtra, Delhi, and Gujarat were identified as hotspots for emissions. The findings emphasise the pressing need for Indian banks to realign their portfolios and address climate accountability.
Environmental Accountability Beyond Carbon Emissions?
Environmental impacts of banksā investments are not limited to carbon emissions. More than a year after the devastating glacial lake outburst flood (GLOF) in Sikkim’s Lhonak Glacial Lake ravaged the Teesta river basin, destroying villages, livelihoods, and over a hundred lives, the absence of environmental and social accountability in banking looms large. The flood wiped out the 1,200 MW Teesta III hydroelectric dam and rendered the Teesta V dam inoperable. Yet, the public sector financiers REC Limited and Power Finance Corporation reportedly plan to bankroll the Teesta III dam’s reconstruction, overlooking the glaring climate risks, ecological costs, and socio-economic harms tied to the project. This raises a big question mark on the effectiveness of a string of climate risk related directions issued by RBI in the recent past. Do the ever increasing number of glacial lakes, owing to rising temperatures in the Himalayas not count as a āclimate related financial riskā? If not, then it begs the question whether the climate related financial risk governance measures suggested by RBI are merely meant to check boxes, rather than to serve genuine public interest.
Investing in āFalse Solutionsā in the name of āGreenā
The absence of governance mechanisms in banks to oversee and rectify investments in false climate solutions poses significant risks to their environmental and social accountability. A glaring example is the Timarpur-Okhla Waste-to-Energy (WtE) Plant in Delhi, which has drawn widespread criticism for its contribution to severe pollution. A recent New York Times report highlighted the plantās release of toxic emissions, including cadmium, lead, and arsenic, endangering over a million residents. Despite these alarming impacts, the plant continues to receive financial backing, including investments from HDFC and the Power Finance Corporation. WtE plants are widely regarded as āfalse solutionsā because, promising to harness electricity from waste, they incinerate unsorted waste, releasing greenhouse gases and undermining sustainable practices like recycling and composting. The lack of oversight mechanisms within banks to identify and address such harmful investments undermines their climate-related claims and goals. Without stringent due diligence and remedial frameworks, banks risk perpetuating environmental harm, eroding public trust, and jeopardizing their commitment to sustainable development.
Will the new year be yet another chapter in this grim story of complicity and deception for the Indian banking sectorās environmental accountability?
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