Necessity of green banking in sustainable development

Bangladesh is one of the world’s fastest-growing economies and one of the fastest-growing middle-income countries globally. Where natural disasters are a common occurrence that often leads to massive losses. Even in our country, where the effects of climate change are dire which requires practical guidance from all sides. Banks can play an outstanding role in sustainable economic growth and environmental protection to prove themselves as an environmentally friendly and socially accountable institution. Green banking is an essential issue in facing climate change. Bangladesh, like other countries in the world, is at risk because of climate change. Despite this challenging reality, the country needs to allocate funds from the national budget to tackle climate change. Finance programs to achieve SDGs and implement green and environmentally friendly financing initiatives should be taken by the central bank.

In the era of sustainable development, banks have started to think about the environment, greenhouse effect, environmental pollution, ensuring proper use of natural resources. As a result, the idea of green banking has spread. Bangladesh Bank has played a significant role in formulating and financing environmental and social risk management policies in recent years.

United Nations Environment Programme Finance Initiative (UNEP FI) is a partnership between UNEP and the global financial sector to mobilize private sector finance for sustainable development. UNEP FI works with more than 400 members – banks, insurers, and investors – and over 100 supporting institutions to create a financial sector that serves people and the planet while delivering positive impacts. The aim was to integrate environmental and social dimensions with financial performance and its risks in the financial sector. As promised in this UNEP FI statement, business management is considered fundamental to sustainable development. It advises considering and coordinating environmental issues with environmental management in regular business activities, asset management, and other bank business decisions. The dialogue between banks and the government was established in 1999 to formulate policies to improve the environment by developing new financial products and services. Due to the Sustainable Development Goals, we also have new expectations from the financial sector at the core of ensuring funding for environmentally friendly initiatives and considering environmental and social aspects of mainstream financing.

Green banking is socially, and ethically responsible banking where the use of natural resources will be less, and banking activities will be environment friendly. The government can encourage the public to practice green banking. The government should take the initiative in green banking practices to protect our environment. In 2011, Bangladesh Bank issued policy guidelines for green banking. As per the guidelines, all commercial banks and financial institutions must take adequate measures to conduct eco-friendly banking activities in the country; this issue also needs to be emphasized. The green finance sectors are renewable energy, energy efficiency such as solid waste management, green factories, etc.

A green banking system will increase eco-friendly project financing and discourage financing of environmentally harmful projects. Green Banking protects forest resources through limited use of paper and ink, increasing online communication, increasing online services, and reducing environmental catastrophe risk. The Guidelines cover the incorporation of environmental risk management in credit management, in-house ecological management, green financing, climate risk funds, green marketing, and online banking. Moreover, training, research and development in green banking, sector-specific environmental policies, green strategic planning, innovative sustainable products, and sustainability reporting are also needed. Paperless banking has been given utmost importance by introducing online banking in conducting internal and inter-bank activities; In this case, the customer does not have to waste time standing in a long line.

Emphasis on online banking services will reduce the use of paper and save much money. Moreover, Banks need to finance projects that do not cause damage to the environment. The key to green banking is to provide environmental and social business practices. In the case of industrialization, also importance is given to the environment. Consider whether the project is environmentally friendly and will have any adverse effects on humans and the earth. Now is the time to use ecologically sensitive parameters to fund projects. Green banking will ensure the greening of the industry, but it will also help improve the quality of bank assets in the future.

Bangladesh Bank’s green banking policy states that since green banking ensures the bank’s sustainability and deals with environmental disasters. So, it is time for the banks in Bangladesh to introduce the green banking system. In light of the central bank guidelines, all initiatives must be taken to not pollute the environment through the projects invested by the country’s banks.

At present, emphasis is being laid on making the offices of the bank branches environmentally friendly. One of these examples is Shahjalal Islami Bank Limited. It built its 17 storied Corporate Head Office Building at Gulshan Avenue, the first Green Building in the Banking sector gold certified by The U.S. Green Building Council (USGBC); the building is 35 percent energy and water efficient. The roof of the building is decorated with trees. Another example of green banking is Al-Arafah Islami Bank, which unveils the vast field of green banking concepts. Of the bank’s 174 branches, 63 are running on solar energy.

Environmental awareness must be increased among officers, employees, suppliers, and customers. Training can be organized to raise the attention of the officers and employees. Scientific and technological developments can be followed to prevent environmental pollution and improve environmental performance. As a result, in such banking, environmentally friendly conditions will prevail inside and outside the bank.

There is no substitute for green banking to protect the environment and people from disasters for sustainable development. Bank and financial sectors need to be given particular importance for sustainable development. The practice of green banking will enable business owners to change their business and take environmentally friendly initiatives, which will come in handy for future generations. Thus, the importance of green banking in ensuring the sustainable development of Bangladesh is immense.

Writer: Associate Professor, Dept. of Accounting & Information Systems, Jatiya Kabi Kazi Nazrul Islam University, Bangladesh