Factors Affecting the Sustainability Performance of Financial Institutions in Bangladesh: The Role of Green Finance

Abstract

Despite the increasing popularity of green finance and sustainable investment in the field of Sustainable Development Goals (SDGs), very few studies have investigated the effect of green finance dimensions on the sustainable performance of banks. Therefore, this study attempts to examine the dimensions of green finance and their effects on the sustainability performance of financial institutions in developing economies such as Bangladesh. The study also depicts the level of green financing adoption among the banks and non-bank financial institutions in the country between 2015 and 2020. Considering the nature of the dataset, the structural equation modeling technique was employed in this study to fulfil the research objectives. Amongst banks and non-bank financial institutions, the study highlighted private commercial banks as being the highest contributor to green financing, accounting for 78.12% of the total green financing in Bangladesh. In addition, the empirical findings revealed that the dimensions of green finance are related to the economic, social, and environmental aspects of the SDGs. Furthermore, empirical findings indicated that the dimensions of green finance—social, economic, and environmental—have a strong positive effect on the sustainability performance of banks. The study also discovered that approximately 95% of bankers identify green financing as an essential element in the short- and long-term development of banking strategies in Bangladesh. Consequently, this study adds to the body of knowledge on green finance development and the sustainability performance of banks and financial institutions in emerging economies such as Bangladesh. Therefore, major managerial policy implications are discussed.

Does Green Financing Develop a Cleaner Environment for Environmental Sustainability: Empirical Insights From Association of Southeast Asian Nations Economies

“…This helps solve economic ecology issues and uncover the economic ecosystem’s internal significance and requirements. The idea of economic environmentalization is to grow the economy while also protecting the environment on which humans depend, according to Zheng et al (2021) . In order to attain this, environmental protection must be prioritized in all dimensions of environmental protection and economic development actions must be improved.…”

“…Despite the COVID-19 epidemic, sustainable investments worldwide totaled USD 35.3 trillion, indicating a 15% gain in two years. ESG equities have also been more hardy to market slumps like the global financial crunch, commodities price fluctuations ( Saint et al, 2021 ), or the COVID-19 pandemics ( Zheng et al, 2021 ). Using equity markets to finance green technology and clean energy projects has a number of advantages.…”

The Effect of Green Banking Practices on Banks’ Environmental Performance and Green Financing: An Empirical Study

“…Bangladesh Bank (BB), the central bank and operator of the banking sector in Bangladesh, has been at the forefront of implementing green financing through GB development, which is pivotal to the progress and transition to a green economy towards the achievement of SDGs. GB is an important antecedent to the establishment of an effective green economy [5], which serves as an avenue for economic development in emerging markets and a medium to secure sustainability via low energy consumption and pollution [12,13].…”

Revisiting the Current Status of Green Finance and Sustainable Finance Disbursement: A Policy Insights

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