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

Abstract

This study aims to identify the COVID-19 impact on the green banking activities including green financing of banks and non-bank financial institutions (NBFIs) during the pandemic. Besides, this study also reveals the in-house environmental management of banks and NBFIs during the COVID-19 outbreak. To analyze the impact of the pandemic on green banking activities, secondary data were obtained from the quarterly and annual reports of Bangladesh Bank (BB) on green banking activities, annual reports and websites of the sample banks and NBFIs in Bangladesh for the period 2020–2019. The study utilized descriptive statistics, relative percentage changes, and varying tables and graphs to analyze the obtained secondary data. Consequently, the empirical findings revealed that, compared to the pre-pandemic period, banks’ total green financing rose by 7.26% during the pandemic, while total green financing of NBFIs plummeted by 18.53% during the same period. In addition, the category-wise results indicate that green financing of the private commercial banks (PCBs) decreased by 11% during the COVID-19 pandemic, contrasting the 56.54% increase witnessed by the state-owned commercial banks (SOCBs) during the same period. Interestingly, our findings showed that green financing of foreign-owned commercial banks (FCBs) during the pandemic increased by 78.69% in 2020 compared to 2019. During the same period, BB refinancing scheme for green products/initiatives of banks and NBFIs grew by 76.97%. The results further showed that the PCBs and FCBs’ in-house environmental management expanded during the outbreak except for the number of solar-powered ATM booths, which dropped by 68.25% for PCBs and 9.09% for FCBs. On the other hand, SOCBs’ in-house environmental management grew during the pandemic. Furthermore, the results indicate that the Bangladeshi banks’ automation towards green banking were satisfactory during the pandemic. Therefore, major policy implications for the green economic recovery of the government, BB, and mangers of the banks and financial institutions in emerging economies like Bangladesh were discussed.