Natural Capital & Finance in India
To provide Indian financial institutions with an understanding of the relevance and magnitude of the natural capital risks they are exposed to and enhance their capacity to integrate such risks into lending and investment decisions we engaged, jointly with our partners, both in research and capacity building activities.
Commissioned by GIZ, our partner Trucost conducted the study Natural Capital Risk Exposure of the Financial Sector in India, which revealed that the annual natural capital costs caused by companies financed by Indian banks amount to INR 90.5 trillion – equivalent to 2.9 times the credit provided to these companies. Sectors with the highest natural capital costs include food, power and agriculture. The main factors pushing these costs are water consumption, land use and greenhouse gas emissions. If companies had to pay for their respective natural capital costs, for instance in the event of droughts or changes in the regulatory framework, it could significantly impact their ability to repay loans. To mitigate related risks, the study demonstrates how natural capital costs can be quantified and integrated into a bank’s portfolio valuation and credit risk assessment.
The supplementary workshop series Natural Capital: Relevance to Financial Institutions in Emerging Economies that is jointly organized by the EMD Green Finance and its partners, has the objective to enhance financial institutions’ understanding of the nature and extent of their exposure to natural capital risks. Finance professionals are provided with an overview of methodologies and tools to quantify natural capital risks and integrate them into lending decisions and risk management. Furthermore, they learn about potential business opportunities with regards to both product development and investments in new, eco-friendly technology markets.
Publications & Tools
The Workshop Series
- The symposium Natural Capital: Relevance to Financial Institutions in Emerging Economies (6 November 2015, Mumbai) focused on environmental risk management of financial institutions in India as well as the management of water risks. The event also served to launch the study Natural Capital Risk Exposure of the Financial Sector in India.
- The conference Natural Capital: Relevance to Financial Institutions in Emerging Economies (14 November 2014, Mumbai) addressed the senior management of financial institutions to raise their awareness of the relevance of integrating natural capital considerations into business operations.