Metrics and targets

We monitor KPIs for all major environmental indicators and initiatives covering energy, GHG emissions, water and waste for all our operations and aim to minimise the environmental impact thereof. We report on climate-related disclosures through the Carbon Disclosure Project and our TCFD disclosures, which are included in this report. Towards this end, the Bank is formalising a roadmap to guide its journey towards carbon neutrality. The roadmap consists of phased emission and energy reduction targets. More details on this can be found in subsequent chapters.

Notes:
#Base year for targets for energy and emissions: FY22.
*‘Carbon Neutral’ targets include the use of offsets and reflect neutrality over projected emissions in the corresponding year. **Including both demand & supply measures
Our Scope 1 emissions includes emissions from fuel consumption in own vehicles and DG sets. Scope 2 emissions include emissions due to purchased electricity. Energy consumption as discussed in this report includes energy consumed by the Bank within its operations – including electricity, and fuel consumed in DG sets at locations where it has operational control as well as its co-located data centres and company vehicles. All targets are based on accelerated emission reduction scenario used in our integrated carbon neutrality roadmap.

GHG emissions and climate change

At HDFC Bank, we have put in place an integrated strategy for managing our scope 1 and scope 2 emissions (refer page 69 and 70). As we had surpassed our previously set targets, we have taken on new targets with FY22 as base year. Our emission sources included in our base year GHG inventory demonstrates an enhancement of our ambitions and transparency goals. Not only have we ensured the completeness of our Scope 2 emissions from already identified source categories, but also included our colocated data centres as a source category for our scope 2 emissions. Similarly, we have added a new source category for our Scope 3 emissions – emissions on account of electricity consumption at our other facilities.

Enhancements to our emissions boundary and scope

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As a result of the enhanced boundary and scope, our total GHG emissions for FY22 increased 11% y-o-y by 36,100 tCO₂e, of which 92% (33,136 tCO₂e) is attributed to the addition of a new source category. Another 12,728 tCO₂e was added to the inventory on account of electricity consumption from our co-located data centres.

Thus, overall, there is a net reduction in GHG emissions in FY22 considering only the sources that were included in FY21 reporting. As a result, the share of Scope 1 and Scope 3 in our total emissions profile increased to 6% and 12%, respectively. Scope 2 emissions maintained 82% share in our total emissions.

Our Scope 1 emission increased from 5,826 tCO₂e in FY21 to 20,877 tCO₂e in FY22, primarily on account of inclusion of emissions from diesel consumption in generators – which were previously included in Scope 2. This is because we have actual/ perceived control on the fuel consumed at a significant number of our branches and office locations. Fuel consumption in company-owned vehicles account for about 41% of our Scope 1 emissions while diesel consumption in diesel generators account for the remaining 59%.

Our Scope 2 emissions decreased by 12,474 tCO₂e in FY22 over FY21, of this 9,570 tCO₂e was on account of shifting emissions from diesel generators to Scope 1. Emissions on account of purchased electricity decreased by 2,904 tCO₂e, despite the inclusion of our co-located data centres and an increase in the number of other locations in Scope 2 inventory.

We are committed to collaborating with our data centre service providers to reduce the GHG footprint of our owned and co-located data centres. Currently, data centres contribute 7% of our Scope 2 emissions. This year, we also enhanced our approach towards calculation of Scope 2 emissions. We have stepped up our efforts to collect actual electricity consumption data for estimating corresponding GHG emissions. In doing so, we are prioritising high-consumption locations. In FY22, we collected actual kWh data on electricity consumed from 46% of our locations – which collectively consumed about 50% of electrical energy.

For remaining locations, we track the cost of electricity consumed through our robust financial management system and use the same to derive estimates of electricity consumed using the most conservative tariff for commercial slabs at the state level. There are some of our smaller locations like ATMs for which we are in the process of establishing systems to collect activity data. For such locations, we are estimating electrical energy consumption based on a methodology that takes into account the climatic zone in which such locations are based, and energy consumption benchmarks derived from data on actual electrical energy consumption collected by us in similar locations. Although electrical energy consumption at such ATMs is only about 4% of our total electrical energy consumption, we are progressively enhancing our systems to capture actual activity data on electrical energy consumption for all locations.

In FY22, our Scope 3 emissions increased significantly over FY21, primarily on account of inclusion of emissions due to electricity consumption at other facilities. These emissions now account for 78% of our total Scope 3 emissions. The remaining 22% of our Scope 3 emissions are split between emissions due to hired cabs (13%), air and rail travel (2%), paper waste (7%), and e-waste (<1%).

Notes:

Scope 1 emissions includes CO₂, N₂O and CH₄ emissions from the combustion of diesel purchased by the Bank for its various facilities, as well as combustion of various fossil fuels in Bank-owned vehicles. For the former, diesel purchase data is extracted from the Bank’s financial management system and the cost of diesel purchased is converted into liters of diesel using conservative estimates of diesel prices in various states. For the latter source, activity data in terms of quantity of fuel has been extracted from the financial management system. Emission factors and GWP from GHG Protocol’s Cross sector tool and IPCC’s AR5 respectively have been used.

Scope 2 emissions include GHG emissions from electricity consumed in the facilities that can be reasonably considered to be under the operational control of the Bank, as well as its co-located data centres. A hierarchical approach has been followed for estimation of emissions from this category (i.e. (i) monitored data on electrical energy consumption, (ii) estimates of electricity consumed based on procurement costs and state-level tariff; and (iii) estimated electricity consumption based on climatic-zone specific, internally derived electricity consumption benchmarks; in that order). In all cases, Grid emission factor from version 17 of the CEA’s (Central Electrical Authority) CO₂ database has been used.

Scope 3 emission estimation: Emission on account of purchased electricity at our other locations have been estimated using the same approach as in Scope 2 but includes other facilities not included in Scope 2 emissions. Emissions from hired cabs have been estimated based on expense report for hired cabs from the Bank’s financial management system – which has been used to derive the distance travelled. Average of emission factor for various categories of cars from the India GHG programme has been used. For domestic air and rail travel, information on trip characteristics has been extracted from the Bank’s financial management system, and the distance travelled is derived from publicly available sources. The emissions have been calculated in accordance with the India GHG programme. For international travel through air, the source of data remains the same, but emission factors for different class of travel and haul categories have been derived from the GHG protocol.

Emissions from paper and e-waste have been estimated based on emission factors provided by the latest version of the USEPA’s WARM tool on the extracted data for paper used and e-waste disposed.

We have been monitoring our energy performance by benchmarking it against the Bank’s income and full-time employees (FTEs). During FY22, our Scope 1+2 GHG emissions intensity decreased by 14% and 6% y-o-y for per FTE and per Crore income, respectively.

Key measures to reduce GHG emissions across our value chain

Reducing paper waste emissions:

Our digital strategy forms the backbone of our paper waste reduction initiatives. Our digital products and services, along with automation of several internal as well as customer-linked processes and channels, have enabled us to reduce paper waste generation. The ‘Green Event Guidelines’ rolled out by our retail marketing team has helped save about 2.14 Million square feet of paper during the reporting year. We have also shifted to electronic payments for our electricity bill payments – which helps avoid paper use for issuing about 50,000 Demand Drafts annually. Where paper use is unavoidable, we are switching to recycled paper. As a result, associated emissions increased by less than 2% y-o-y in FY22, despite an 18.3% increase in our customer base.

Tree plantation: We are also implementing an ambitious tree plantation programme, under which we have planted over 17 Lakh trees so far. This programme has not only positively impacted our GHG emissions, but has also helped enhance our social capital and relationship capital.

Energy efficiency and energy management

over 80% of our GHG emissions are attributed to energy consumption in the form of electricity and diesel consumption in DG sets. We are aggressively working to reduce our energy consumption across operations to complement our initiatives to decarbonise. This is being achieved by reducing energy consumption across our operations by regulating existing equipment, installing energy-efficient ones, and implementing automated energy management solutions, among others. Our energy management and energy efficiency strategy includes various initiatives.

Energy efficient space cooling measures: We have installed 55 Air Handling Units (AHUs) at our Kanjurmarg location and we are planning to replace all blowers to EC Fan by FY23, indicating potential savings of 25-40%. Thus far, we have converted one AHU as a trial and saved around 4,082 kWh of electrical energy while avoiding 4 MT of carbon emissions. We are installing inverter ACs in our locations that has helped us save 5 Million+ kWh of electricity during FY22. Additionally, we have also saved 54,450 kWh of electricity during the year, through installation of VRF HVAC Unit at our back offices. We use digital systems and data analytics to understand the energy consumption pattern, in addition to ensuring that the branches are maintained at optimal temperatures, improving the power factor and automating major energy consuming assets.

Efficient data centres: Our Bangalore data centre, ‘Netmagic-DC3B’ is a certified green data centre under the IGBC Green Data Center Rating System. We have implemented several other energy-saving measures including upgradation to efficient cooling units, cold-aisle containment, replacement of old storages and servers and with new generation hardware, and implementation of Smart iPDUs. Additionally, we have switched to R-407c refrigerant for INROW cooling, deployed new fire suppression system with NOVEC 1230 gas, and replaced UPS batteries with Li-ion batteries.

Besides, we are leveraging technology and innovation as facilitators in our journey towards low-carbon growth. We have implemented elevator and equipment scheduling to reduce our energy consumption. We have also installed occupancy sensors, capacitor banks as well as Building Management Systems at several of our operating locations. The energy management modules with auto controls deployed across select branches have resulted in significant energy savings.

Renewable energy

With the goal of gradually decarbonising our energy consumption, we are steadily increasing the share of renewable energy in our overall power consumption. We have installed rooftop solar plants at our offices in Jaipur, Pune, Noida, Bhubaneswar, Chandigarh, Mumbai and Mohali.

In Maharashra, we are gradually shifting our branches to run on green power procured through DISCOMs at a premium. So far, 14 of our branches are operating on green power, resulting in annual avoidance of ~905 MT carbon emissions on 1,028 MWh of procurement per annum.

Managing waste

We are working progressively towards sustainable management of waste generated from our operations. We deal with three types of non-hazardous waste – e-waste, dry waste (paper waste) and wet waste (cafeteria, sewage), of which e-waste is disposed through authorised recyclers. A total of 212 tonnes of e-waste was generated in FY22, because of asset refresh, damaged and non-functional assets. For paper waste and wet waste, we are developing a management plan in consultation with our partners. We have already initiated pilots at select locations and intend to scale it up over the next few years. We continue to work towards establishing and implementing systems and procedures for tracking wet and dry waste from our operations.

We are also aggressively working towards minimising the use of plastic bottles. Single use plastic bottles have already been phased out from all our hub offices pan-India, and we have replaced multiple use plastic water bottles with glass jars across all meeting and video conferencing rooms. Hazardous waste within our scope, arising from diesel/fuel oil used in generator sets, is negligible.

For select large project finance transactions, we appoint a Lenders' Independent Engineer (LIE) for conducting an environmental and techno-commercial evaluation of the project prior to loan disbursement. Any loan disbursement is subject to the correction of deficiencies related to environmental and social risks identified by LIE. During the construction stage as well, the LIE continues to monitor the project and flags any risks associated with environmental/social issues in the project to the Bank and borrower for necessary corrective action.

Where required, we place predisbursement stipulations/terms of sanction to mitigate adverse environmental and social impacts, collect undertaking of compliance with applicable regulations and criteria, and monitor ongoing compliance on an annual basis.

Our lending procedures are guided by borrower and market demand, but our credit exposure is well-diversified, with no single industry having a high concentration. As a result, our credit exposure to ecologically/ socially sensitive industry sectors has minimal negative consequences. We also finance entities that deals with environmental and social issues.

Upgrading to a new ‘ESG & Climate Change Assessment’ framework

We have identified upgradation of the SEMS framework as a priority activity and have been working on revising the SEMS framework with a ‘ESG & Climate Change Assessment’ framework to enable a more comprehensive assessment of ESG and Climate Change issues. We have also been working on expanding the coverage of the assessment framework. Our newly formulated and exhaustive ‘ESG & Climate Change Template’ shall be applicable to all Credit Assessment Memoranda (CAMs) where the aggregate CAM appetite crosses a certain threshold, rather than at a transactional level, as is the current practice. This template shall be included in all CAMs where direct customer exposure is above a certain threshold.

Demand-side energy management

We are in the process of adopting a broad range of technological solutions and operational measures to reduce energy consumption at our operating locations. We have mapped Energy Performance Indicator (EPI) for all our locations and are using it as an internal benchmark for the energy performance of all types of facilities. We have shortlisted various demand-side interventions for phase-wise implementation across locations based on an assessment of feasibility and RoI. These measures include smart IoT-based building management systems, modular UPS systems, air-conditioners with high ISEER rating using Brushless DC Motors (BLDC) technology, etc.

Supply-side energy interventions

We seek to progressively decarbonise our energy consumption and are increasingly adopting lowcarbon energy sources to support our operations. Our supply-side strategy focuses on gradual shifting to green tariffs offered by utilities wherever available and procurement of renewable energy from offsite power plants and exchanges. The green tariff option, which is currently available only in a few states (Maharashtra, Karnataka, Andhra Pradesh) is expected to be made available and affordable in more states, and therefore in the interest of sustainability, we plan to make use of the offering on a gradual basis, despite a premium over the existing electricity rates. In large locations where regulatory requirements for open access and wheeling are met, renewable energy will be procured from offsite power plants, either directly or through power exchanges. The initial list of locations where renewable energy procurement is planned to be taken up is already identified. A firm-level policy guideline on making maximum use of green energy supply interventions in existing and new locations is also being finalised. If and when required, we may also utilise green certificates for carbon neutrality compliance.

Carbon Credits and Offsets

Carbon offsets will continue to play a role in addressing the balance of our residual emissions. We will evaluate and leverage carbon offsets and assess opportunities to develop mitigation and abatement projects through technological and nature-based solutions. We intend to engage in voluntary markets, and in compliance markets when the latter is applicable to our business operations. When participating in voluntary carbon markets, we will carry out due diligence to ensure that we retire the highest quality offsets, which are verified by internationally recognised standards such as Verra, Gold Standard, etc., to balance our residual emissions. We will adopt a two-pronged approach to secure the availability of offsets for retirement. While we may make direct investments in carbon offset generating projects in collaboration with our partners, we may also need to purchase carbon credits from various market options on a need basis for retirement against our residual emissions. While investing in carbon offset generating projects, we will prioritise projects that add socioeconomic- ecological value to the communities in which we operate, and those projects which are in proximity to our operations in India.

The ‘management’ related pillars of our carbon neutrality strategy pertain to developing firm-level guidelines for operations and procurement for supply-side and demand-side interventions, establishing a framework for coordinated action between key teams for implementation and continuously enhancing the GHG data collection processes to improve the quality of the inventory. We will also monitor the implementation of interventions and progress towards our emission reduction targets every two years and realign our integrated strategy incorporating the best available technologies and measures.

Our roadmap to 2032

We have identified six strategic pillars to ensure that our journey to carbon neutrality is meaningful and brings about a systems change within the organisation

TCFD disclosures

HDFC Bank recognises the growing concerns of regulators, investors and clients about climate risks that businesses, particularly banks and financial institutions, face. This is our second year of working on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) – which provides a useful framework for identifying climate-related risks and opportunities, evaluating effective responses and communicating crucial information to stakeholders.

Governance

We have a strong Risk Management Group (RMG) at the Bank that oversees putting the Board's risk strategy into action, as well as designing procedures and systems for detecting, measuring, monitoring, assessing and managing risks. The RMG is led by the Chief Risk Officer (CRO), who is responsible for risk management and the entire risk architecture and framework of the Bank including stress testing. The Chief Information Security Officer reports on the Bank's cyber-security concerns as well as updates from Business Impact Analysis and Disaster Response.

Strategy

The Bank has been reporting to the Carbon Disclosure Project (CDP) on its climate change strategy, risks, opportunities, and emissions. From the perspective of climate risk assessment, we will assess the priority of physical and transition risks in the near to medium term. Some of the critical parameters to consider would be GHG emissions, air pollutants and climate transition risk pathways both at the sector and borrower level

There are two main types of climate-related risks:

1. Physical risks (both acute and chronic): Economic losses (physical damage to property and assets) from extreme weather events (flood, cyclone, etc) attributed to climate change; and
2. Transition risks: Possible process of adjustment to a low-carbon economy and its effects on the value of financial assets and liabilities

We are exploring frameworks to model and assess climate risks. We also continue to acquire granular data further corroborated by BRSR data (FY23 onwards) and test tools for climate risk assessment and conduct scenario analysis through suitable partnerships – including exploring options to tie-up with data providers. Given that climate risk is an emerging and long-term risk for the Bank, we will consider adopting a suitable methodology/pathway to analyse the Bank's exposures under different climate scenarios.

Risk Management

Metrics and Targets

We are firming up an integrated strategy to achieve carbon neutrality by 2032, which will set internal benchmarks for energy performance and targets for phased renewable energy integration. We will monitor the implementation of interventions and emission reduction achievements every two years and realign our integrated strategy incorporating the best available technologies and practices.

We plan to enhance our commitment to financing climate change solutions such as energy transition, renewables, energy efficiency, sustainable transportation, green buildings, climate smart agriculture, among others, besides monitoring the implications of our own operations. We are working on developing KPIs and setting goals to monitor, manage, and track the progress. This involves a thorough examination of our Scope 3 emissions and our carbon-related asset exposure. Please refer to the Environment section of this Report for details on our performance on emissions and energy-related KPIs.