While temporarily breaching the 1.5o C warming threshold in the next five years is not the same as a long-term 1.5o C increase in global temperatures, the World Meteorological Organization (WMO) report indicates that sufficient progress has not been made in cutting emissions. As a result, managing climate risks is increasingly important for financial institutions, as noted in a July 2022 Reserve Bank of India discussion paper on climate risk and sustainable finance.

With financial supervisors noting that climate risks threaten financial stability, it would be interesting to see how regulation facilitates the management of climate risks by financial institutions. Lending and investment mandates for financiers and concessions on regulatory requirements (such as capital adequacy) for climate-aligned investments are some possibilities regulators could consider.