Topic 1 : Terms of coexistence
Introduction: In recent years, Kerala has been grappling with a spate of human-animal conflicts, predominantly involving elephants, tigers and wild boars.
The extent of animal-human conflict in Kerala
- According to the state government’s records, 98 people died after being attacked by animals last year.
- This year, wild animal attacks have claimed more than 10 lives.
- Protests have erupted in several parts of the state including Wayanad district, where elephants have killed at least three people in the last fortnight.
- Attacks by wild animals have also hurt the state’s agriculture sector.
What are the measures taken by the Kerala government?
- Kerala’s cabinet declared the conflict as a state-level disaster.
- Committees at various levels, including at the districts and other local governance units, have been tasked with stepping up vigilance against aggressive animals.
- The state government has also sought the cooperation of plantation owners and decided to deploy more forest watchers in areas prone to human-animal conflicts.
- This wide-ranging response, though belated, is welcome.
- The time has also come to look at the issue from beyond the perspective of an emergency.
Why human-animal conflict is increasing in Kerala?
- Kerala is not the only state to report loss of lives, property and livelihoods in the battle for space between humans and wildlife.
- According to data submitted by the government to the Lok Sabha in 2022, more than 1,500 people lost their lives in the country between 2019-2020 and 2021-2022 after being attacked by elephants.
- Tigers killed 125 humans between 2019 and 2021.
- The number of animals killed in this standoff adds to the depressing story.
- With forests thinning out, wildlife, especially elephants, and increasingly now leopards, have dispersed into areas with high density of human population.
- The conflict intensifies when people try to chase away animals with searchlights, crackers or guns, making them even more aggressive.
What more can be done to reduce human-animal conflict?
- On February 14, the Kerala assembly passed a resolution that called on the Centre to amend the Wildlife (Protection) Act.
- It asked for simplifying procedures to deal with wild animals that pose a threat to human life.
- The state also wants the Centre to declare wild boar as vermin.
- Extreme measures such as culling rogue animals, however, provide short-term solutions at best.
- The country needs a serious debate on balancing conservation with its developmental priorities.
- By all accounts, most protected areas in the countries do not undertake carrying capacity studies.
- At the same time, development projects fragment wildlife habitats, turning a large number of animals into ecological dislocates who have little option but to compete with humans.
Conclusion: Kerala’s predicament could be an occasion to start conversations that transcend the polarities of conservation and development.
Topic 2 : Banking for net zero
Introduction:
As fossil fuel consumption is phased down over the coming decades, the financial system will need to prepare for change. The banking sector is an important actor in the financial sector. As a result, the transition to net zero will have implications for the Indian banking system.
RBI’s assessment on exposure of the banking/non-banking sector to climate change
- RBI estimates that banks’ current exposure to utilities, metal, and transport is relatively higher.
- While the aggregate exposure level to climate-change risk remains moderate, there are sharp contrasts between the exposures of public- and private-sector banks.
- At the same time, non-banking financial companies (NBFCs) extend nearly half of their gross credit to power and auto segments.
- Given the interconnectedness between banks and NBFCs, the risk to the financial system may be pronounced.
How RBI is nudging banks to reduce their climate-related finance risks?
- The RBI is focussed on risk management and has signalled its intent to align policy with transition.
- The introduction of lending to renewable energy under priority sector lending, a framework for green deposits and the reports assessing climate risks are all efforts in this direction.
- The central bank has now followed through with its commitment to assessing climate change related risks in its draft disclosure framework on climate-related financial risks.
- The report underscores the need for comparable disclosure frameworks among Indian-regulated entities about climate-related financial risks to ensure that there is adequate information about mispricing of assets and misallocation of capital.
- Therefore, the framework is set to deepen the understanding of current exposures and preparedness among the various entities regulated by RBI.
- The regulation will cover scheduled commercial banks, Tier IV primary urban cooperative banks, all India financial institutions and all top and upper layer NBFCs.
- RBI’s survey of regulated entities in 2022 showed that 90 per cent of the respondents considered climate risk a material threat to business.
- However, detailed assessment of risks among the respondents is low.
- A disclosure framework fills in such a gap.
What are the components of RBI’s framework?
The draft by RBI sets three thematic pillars for reporting: Governance, strategy and risk management.
1. Reporting on governance
- The framework expects financial institutions to provide information on their internal processes to ensure capacity or understanding of climate change-related issues as well as oversight.
2. Reporting on strategy
- In terms of strategy, the regulated entities will have to specify the kinds of issues and impacts that may arise over different time horizons, that is, short, medium and long term.
- This is particularly important as the systemic risks will be more pronounced where there is more long-term lending to sectors in transition and prone to extreme weather events.
- In 2023, 64.2 per cent of bank loans had maturities less than or equal to three years.
- While the information on maturity of loans by sector is not available, a similar profile for the loans in fossil fuels-based sectors would mean that the banks may be able to prepare better for the transition.
3. Reporting on risk management
- Transition risks can impact differently under the various scenarios.
- Therefore, the framework seeks information from entities on the assessment of stress through climate-scenario analysis as part of the risk management strategy.
- This would require banks to provide reasons for choosing the climate scenario and align it with national and state-level policies.
- In fact, the draft refers to scenario analysis based on nationally determined contributions.
- To support more robust reporting, it is important to update the scenarios to align with India’s aspiration to achieve net zero.
- Therefore, national and sub-national governments must help provide a pathway to benefit from the disclosure framework.
A way forward
- Reporting of exposure and risks is not complete without metrics and targets.
- While reporting of information on the three pillars will begin in the financial year 2025-26, reporting of metrics and targets, which includes greenhouse gas emissions or intensity and financed emissions will begin in the financial year 2027-28.
- As entities prepare to report in a year’s time it is essential to recognise that the technical capacities of banks vary widely.
- Capacity building is key for the success of the framework.
Conclusion: RBI has taken a step forward by introducing a draft that aligns well with international standards. Even as regulated entities begin to respond to the regulatory shift, they must simultaneously keep a watch on the asset quality not just in fossil fuel-based sectors but also in “green” sectors so as to ensure a smoother journey to net zero.