Green Banking Practices in Bangladesh: A Critical Investigation

Abstract

Green banking or sustainable banking is one of the issues of the concern of all stakeholders of the world. Following this concern, this study has investigated the status of green banking practices of the non-bank financial institutions (NBFIs) and commercial banks of Bangladesh. Analyzing the contents of annual reports as well as websites of banks and NBFIs, the study finds that 44 out of 57 banks and 13 out of 33 NBFIs, to a varying degree, have exposures in direct or indirect green financing. But only 45 banks and 25 NBFIs conducted environmental risk rating. Most of the banks and NBFIs practice green banking only in a limited scale and volume and disclose green banking information in a semi structured manner in both the annual reports and corporate websites. However, except one, all the 56 scheduled banks and all the 33 non-bank financial institutions (NBFIs) have their own green banking policy guidelines. They also have green office guide for conducting in-house green activities. The study finds that green banking disclosures in their annual reports exceed that in their websites. It is also found that both private commercial banks (PCBs), and foreign commercial banks (FCBs) have surpassed state-owned commercial banks (SCBs) and state-owned specialized development banks (SDBs) in terms of the green financing.

The Impact of COVID-19 on the Green Banking of Financial Institutions in an Emerging Economy: Implications for the Green Economic Recovery

“…Thus, the empirical findings revealed that the total number of branches with an online coverage increased by 4.55%, 0.6% and 1.54% for PCBs, SOCBs and FCBs respectively during the pandemic. On the other hand, the number (percentage) of online branches slightly decreased for the PCBs and SOCBs during this pandemic, while that of FCBs remained unchanged, which is consistent with the past studies (Akter et al, 2018;Hoque et al, 2019;Khairunnessa et al, 2021;Zheng et al, 2021). These studies highlighted that the green banking in Bangladesh had improved in recent years, especially in terms of green funding and in-house risk management, which is largely promoted by the BB in a bid to green the Bangladeshi banking system.…”

A Review of the Recent Developments of Green Banking in Bangladesh

“…Climate vulnerability and potential threats of economic slowdown makes sustainability a prime development concern for the country [82][83][84][85], resulting in strong calls for adopting and implementing ambitious mitigating policies. The country is one of the worst sufferers of environmental pollution and climate change impacts, while being responsible for less than 0.35% of global greenhouse gas emissions [86], which is very insignificant compared to other developed and developing countries [87].…”

“…This fund can be utilized either through providing grants for implementing relevant projects or financing green projects at concessional interest rates. Banks and financial institutions (FIs) have been instructed to set up Solid Waste Management System, Rainwater Harvesting, and Solar Power Panel in their newly constructed or arranged building infrastructure [87,97,99]. Table 1 below depicts green banking policy initiatives taken by Bangladesh Bank.…”

“…USD 48 million) from its own fund for solar energy, biogas, and effluent treatment plant (ETP) in 2009, which was increased to BDT 4 billion subsequently. Bangladesh Bank also launched a refinancing window targeting the green transformation of brick industries in 2012 [87,97,102]. The Asian Development Bank (ADB) funded USD $50 million in Financing Brick Kiln Efficiency Improvement Project aimed at reducing emissions of greenhouse gases and fine particulate pollution through promoting use of energy efficient modern technology in the existing traditional brick fields.…”

“…The central bank also launched Green Transformation Fund (GTF) in 2016, a $200-million refinancing scheme sourced from Bangladesh Bank's own resources for export-oriented sectors like textile, jute, and leather industries. From that fund, all manufacturing industries can avail loans at less than two per cent interest, to import environment-friendly and energy-efficient capital machinery and accessories [87,97,99].…”