February 2025 was the hottest since 1901, and the warming trend is only intensifying. The IMD data confirms what scientists have warned for years—climate change is no longer a distant threat but an active economic and financial disruptor. The rise in nighttime temperatures is particularly alarming, making recovery from daytime heat difficult and increasing health risks, particularly for vulnerable populations.
Banks and financial institutions remain largely unprepared for the cascading risks of climate change. Heatwaves are no longer just a public health issue—they impact labor productivity, disrupt agricultural output, and strain already overburdened public resources. Studies show that every 1°C increase in nighttime temperature can reduce wheat yields by 6% and rice yields by 10%, directly threatening food security and rural livelihoods. Prolonged exposure to extreme temperatures also raises mortality rates, exacerbates respiratory conditions, and increases hospital admissions, putting enormous stress on India’s already fragile healthcare infrastructure.
Yet, our financial sector continues to finance projects that accelerate environmental degradation while lacking robust risk assessment frameworks. The RBI’s climate risk initiatives, such as RB-CRIS and green deposit frameworks, are steps forward but fail to address the core contradiction—banks are still underwriting industries and infrastructure projects that fuel the crisis. Without enforceable safeguards, mandatory climate stress tests, and responsible investment regulations, India’s financial system remains vulnerable to climate-induced shocks. The question is no longer whether we will pay for inaction but how high the cost will be.
-Team CFA