The Reserve Bank of India’s (RBI) consultation paper on Climate Risk and Sustainable Finance is an important and timely step towards achieving much needed awareness regarding climate risk and its systemic implications amongst its Regulated Entities (REs). We find that the discussion questions posed in the paper have been most useful to generate ideas and concepts around an area which is still very much at a nascent stage. We have perused the ‘Report of the Survey on Climate Risk and Sustainable Finance’ brought out by the Sustainable Finance Group, Department of Regulation, Reserve Bank of India in July 2022. The same has been quite informative of the level of awareness and concrete steps being taken by various institutions (public sector banks, private sector banks, foreign banks, etc.) to respond to this evolving reality.

We have attempted to provide some suggestions in this context centered around objectives of formulating a common definition of climate risk and sustainable finance, joint regulatory oversight on this rapidly evolving sector, possible approaches to risk measurement and disclosures. We hope that these suggestions will add to nuanced discourse for RBI Regulated Entities (REs) around climate risk which isn’t only that which affects the wellbeing of individual institutions or even financial systemic stability, but society’s functioning as whole. While assessment and disclosure of climate risk is important for the stability of India’s financial system, it is also perhaps a window of opportunity for financial institutions to innovate financial solutions and products to support the green transition of industry and society in an impactful way.