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AU Small Finance Bank Partners with IFC to Embed Climate Risk Management into Core Banking Strategy.

Banking & Finance | Dated: 11 Jun 2025

In June 2025, Jaipur (Rajasthan)-based AU Small Finance Bank (AU SFB), India’s largest Small Finance Bank, partnered with the International Finance Corporation (IFC), a member of the World Bank Group (WBG) headquartered in Washington, D.C., USA, to launch a comprehensive climate risk advisory initiative.

🎯 Key Highlights:

  • - This strategic collaboration aims to embed climate risk management into AU SFB’s governance structure, strategic planning, risk assessment procedures, and ESG (Environmental, Social, and Governance) disclosures. The initiative aligns with global best practices and evolving regulatory standards, reinforcing AU SFB’s commitment to sustainable banking.
  • - The International Finance Corporation (IFC) will serve as the lead advisor to AU Small Finance Bank (AU SFB) on ESG and climate risk, helping the bank meet growing expectations to quantify, disclose, and manage climate-related financial risks.
  • - This component will assess AU SFB’s loan portfolio exposure to physical climate hazards like floods, droughts, and extreme weather. It includes creating a risk heatmap using IPCC climate scenarios and projections extending to 2100.

💡 Other Important Facts:

  • (i) AU SFB will analyze potential financial exposures resulting from policy changes and market shifts using the Network for Greening the Financial System (NGFS) scenarios to simulate transition risks.
  • (ii) The bank will apply the Partnership for Carbon Accounting Financials (PCAF) methodology to calculate financed emissions (Scope 3, Category 15) for FY25–FY26 across corporate loans, SME finance, real estate, and sovereign bonds.
  • (iii) For technical implementation, IFC will collaborate with Bengaluru-based StepChange, a specialized climate risk solutions firm, to conduct analytical modeling and quantitative assessments for the program.

📚 Test Your Knowledge:

Which organization recently partnered with AU Small Finance Bank to integrate climate risk management into its core banking strategy?

Correct Answer: IFC

🚀 Quick Recap:

About AU Small Finance Bank (AU SFB)

  • MD & CEO : Sanjay Agarwal
  • Headquarters : Jaipur, Rajasthan