Reserve bank launches climate risk data platform to address financial sector risks

Time of India

6 days ago

MUMBAI: The Reserve Bank is stepping into the climate data void. As concerns mount over the financial sector's exposure to climate-related risks, India's central bank announced the launch of the Reserve Bank–Climate Risk Information System (RBI-CRIS), a two-pronged data platform intended to bridge persistent gaps in climate-related financial information.
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The move signals the bank's recognition that climate change is 'emerging as one of the significant risks to the financial system,' and that regulated entities must better assess, quantify, and mitigate these risks.
Financial institutions face two broad categories of climate risk. Physical risks stem from weather-related disasters such as floods, droughts, cyclones, and rising seas. Transition risks arise from shifts in policy, technology, or market sentiment as the world moves toward a low-carbon economy. Both types, the
notes, require robust and granular data to measure financial exposure accurately.
That data, however, remains scarce. 'One of the major challenges by the REs in this regard is to have a comprehensive assessment of its financial impact, which is constrained due to lack of high-quality data, besides modelling challenges,' the central bank said in its report.
Estimates of physical risk, for example, rely on hazard data—such as geographic susceptibility to extreme weather—and vulnerability data, like historical financial losses.
Transition risk assessments need information on sectoral emissions, carbon pricing, and benchmark decarbonisation pathways. Yet institutions are often hampered by 'lack of uniform methodology, fragmentation in accessibility, lack of uniformity in publication of data and differences in metrics, units and formats.
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Global efforts such as the G20 Data Gap Initiative, the Network for Greening the Financial System (NGFS), and the Net-Zero Data Public Utility (NZDPU) aim to address these problems.
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But, as the RBI dryly notes, these 'need fine-tuning from a developing country perspective.'
Enter RBI-CRIS. The new system will consist of two parts: a web-based directory publicly listing a range of meteorological and geospatial data sources, and a restricted-access data portal offering processed, standardised datasets to regulated financial institutions. The platform aims to 'bridge and standardise three data gaps: (i) physical risk; (ii) transition risk; and (iii) carbon emission,' the RBI said.
The hope is that a better data foundation will lead to more rigorous climate-risk assessments and support informed decision-making across India's financial sector. Whether banks and other institutions are ready to act on that information, however, remains to be seen.