Topic: Conservation, environmental pollution and degradation, environmental impact assessment.
6. Account for the risk that climate change poses to the financial stability of a country and in this backdrop discuss the possible role of RBI in mitigation of such risk. (250 words)
Reference: The Hindu
Why the question:
The article explains that the impact of climate change on financial stability is debilitating. RBI’s steps, though a little late are welcome.
Key Demand of the question:
Account for the risk that climate change poses to the financial stability of a country and in this backdrop discuss the possible role of RBI in mitigation of such risk.
Directive:
Account – Weigh up to what extent something is true. Persuade the reader of your argument by citing relevant research but also remember to point out any flaws and counter- arguments as well. Conclude by stating clearly how far you are in agreement with the original proposition.
Structure of the answer:
Introduction:
Start with the context of the question.
Body:
Like the Covid-19 pandemic, the impacts of climate change transcend both geographical and sectoral boundaries. The 2021 Climate Risks Index published by Germanwatch ranks India among the top 10 most vulnerable countries.
Explain that Climate change poses significant tail risks with catastrophic system-wide consequences to the stability of entire financial systems. These risks — termed ‘green swan risks’ — can manifest themselves through two channels.
Then discuss the role that RBI must play in mitigation of such risk.
Conclusion:
Conclude with way forward.
