SBI Tightens ESG Policy

State Bank of India (SBI) has formulated a policy for ESG compliant lending to companies.The policy will however not be used as grounds to deny loans. The bank is applying the parameters of SEBI's business responsibility and sustainability reporting (BRSR) guidelines to tackle proposals from its clients. 

The latter applies to the top 1,000 listed entities in terms of market capitalisation, it also lays down disclosure requirements in the areas of business responsibility and sustainability. SBI is also re-looking at its approach to funding thermal power projects from the perspective of asset quality.

There are a handful of other banks with similar policies. HDFC's 2020 ESG policy declares they will not extend finance for setting up of new units which produce or consume ozone-depleting substances. Axis Bank’s exclusion list include industries that deal in banned wildlife-related products or are engaged in production or trade in radioactive materials or unbonded asbestos fibers. 

These goals are in line with the United Nations Climate Change Conference (COP26) held in Glasgow in November 2021, where India had committed to reducing its total projected carbon emissions by 1 billion tonnes, and the carbon intensity of its economy by 45 per cent and less by 2030. 

Recently, the Reserve Bank of India (RBI) has also begun to lay emphasis on the importance of addressing climate-related challenges for the financial sector. In a 2021 speech, RBI's deputy governor M Rajeshwar Rao said the central bank has set up a sustainable finance group (SFG) within its department of regulation.