AU Small Finance Bank (AU SFB) has partnered with the International Finance Corporation (IFC) to integrate climate risk considerations into its core banking framework. The initiative aims to strengthen the bank’s resilience to climate-related financial risks and align with evolving regulatory expectations and global standards. The partnership will help AU SFB embed environmental considerations into its governance, strategic planning, risk management processes, and ESG disclosures.
The climate risk advisory program involves three key components: Physical Risk Assessment, Transition Risk Assessment, and Financed Emissions Calculation. The Physical Risk Assessment will evaluate the bank’s loan portfolio exposure to hazards like floods, droughts, and extreme weather, using IPCC climate scenarios and projections. The Transition Risk Assessment will analyze financial risks linked to policy, market, and technological changes as India moves toward a low-carbon economy. The Financed Emissions Calculation will measure financed emissions across corporate loans, SME finance, real estate, and sovereign bonds.
The initiative is supported by the Government of Japan and is being implemented in collaboration with climate risk solutions firm StepChange. AU SFB’s Founder, MD & CEO, Sanjay Agarwal, emphasized that the partnership marks a key step in the bank’s sustainability journey and reflects its commitment to responsible banking and creating sustainable value. The bank has already demonstrated progress in this area through initiatives like its Green Fixed Deposit product, which has raised ₹1,178 crore for investments in renewable energy and clean transportation.
The partnership with IFC will help AU SFB strengthen its climate resilience and ensure long-term financial inclusion. The bank has already achieved a low-risk ESG rating of 17.1 from Sustainalytics and an AA rating in the MSCI ESG assessment. By integrating climate risk considerations into its core banking framework, AU SFB is taking a proactive approach to managing climate-related risks and opportunities, and is well-positioned to support India’s transition to a low-carbon economy. Overall, the initiative is a significant step towards promoting sustainable banking practices and reducing the bank’s environmental footprint.