Extreme weather events put $84 billion of Indian bank debt at risk

 Banks flagged exposure to environmentally sensitive businesses including cement, coal, oil and power. They also listed effects of cyclones and floods on loan repayments in farming and related sectors

An increase in extreme weather events such as floods, droughts and cyclones risk souring debt worth more than Rs 6.19 trillion ($84 billion) at India’s biggest financial institutions.

That’s according to leading nonprofit environmental disclosure platform CDP. State Bank of India, the country’s largest lender, HDFC Bank, IndusInd Bank Ltd. and Axis Bank Ltd. are among the institutions that reported climate risks to CDP in 2020, it said in its annual report released Wednesday.

The banks flagged exposure to environmentally sensitive businesses including cement, coal, oil and power. They also listed the effects of cyclones and floods on loan repayments in farming and related sectors. Lenders accounted for 87% of the total risk, valued at about $97 billion, across 67 top Indian companies that responded to CDP.

“Climate is the biggest risk to businesses in the long run. Financial institutions are beginning to understand it,” said Damandeep Singh, New Delhi-based director of CDP India. “As investors look at funding companies based on environmental, social and governance disclosures, we’ve seen many more companies report climate change risk.”

The potential harm to agriculture echoes concerns raised by India’s central bank about the impact of climate change on farming, a sector that employs more than half of its citizens. At the same time, the world’s third-biggest emitter of greenhouse gases is relying on coal to help drive its post-Covid recovery. The dirtiest fossil fuel could remain its dominant energy source in the coming decades.

CDP, which gathered the data on behalf of 515 investors with $106 trillion in assets, said it received responses from 220 small and large Indian companies.