Introduction

Source: https://www.dawn.com/news/1364096

“GO Green” is the mantra going on everywhere. 

With the impact of Global Warming people started having awareness towards the importance of resources and the ways to protect them. 

Similarly, the bank has lent its support to protect the environment through the concept of “Green Banking”. 

In this blog, we can have an insight on the importance of Green Banking and its emerging trends for sustainable development.

What is Green Banking?

Source: https://www.slideshare.net/sanjiom/green-banking-a-perspective-on-bangladesh/

Environmental sustainability

The concept of environmental sustainability started in 1969 with the establishment of the National Environmental Policy Act (NEPA, 2014) in the United States whose purpose is to promote the general welfare, to maintain productive harmony between man and nature and to fulfil the economic and social welfare of the present and future generations.

Green Banking

Green Banking is like any other normal bank, but it takes into consideration the environmental and ecological factors into consideration with the aim to protect the resources.

It is also known as an ethical bank or sustainable bank.

It is controlled by the same authorities.

Green Banking Products

Source: https://www.slideshare.net/123456789ASHU/green-banking-57517096

Source: https://www.researchgate.net/figure/Examples-of-green-banking-products-and-services_tbl6_339751522

Why is it necessary?

The importance of Green Banking is immense for the overall economy as it lessens Credit Risk, Legal Risk and Reputation Risk involved in the banking sector.

 Credit Risk: Credit risks are those whose businesses are affected by the pollution cost, changes in environmental regulations and new requirements on emissions levels. 

 Legal Risk: Banks are likely to face legal risk if they violate environmental regulation rules while allotting funds to environmental damaging projects. 

 Reputational Risk: Banks are prone to loss of their reputations if they indulge in environmentally damaging projects.

Benefits of Green Banking

• Basically Ethical (Green) banking avoids as much paperwork as possible. Less paperwork means less cutting of trees.
• To create awareness to businesspeople about environmental and social responsibility enabling them to do an environmentally friendly business practice by providing loans at concessional interest rates.
• To motivate the customers to the practice of using online and avoid the emission of pollution and wastage of time.
• To reduce the impact of climate change with the help of less carbon emission campaign.
• It helps to improve and introduce solar energy and wind energy.

Source:https://www.semanticscholar.org/paper/Green-Banking-Practices%3A-A-Study-on-Environmental-Deka/7eb87d63e0d26535c820c9008b5538f929de10d0/figure/2

Challenges of Green Banking

Diversification Problem: Green banks restrict their business transactions to those business entities who qualify the screening process done by green banks. 

With a limited number of customers, they will have a smaller base to support them.

Start-up face: Many banks in green business are very new and are in start-up face.

Generally, it takes 3 to4 years for a bank to start making money. Thus, it does not help banks during recession.

High operating cost: Green bank requires talented and experienced staff to provide proper services to customers. 

Experienced loan officers are needed, they give additional experience in dealing with green business and customers.

Green banking developments in India towards sustainable development

Source:https://www.researchgate.net/figure/A-simplified-schema-for-understanding-broad-terms-Source-UNEP-2016_fig1_339751522

Environment is a key focus for green banks. In general, bankers analyse their customers in terms of single bottom analysis (i.e., related to financial performance). 

But when the environment is also taken into consideration it would be advisable if a bank performs a triple bottom analysis (related to environment, social and financial performance).

An awareness movement was promoted for the green reason called ‘GREENATHON’, by NDTV, in association with Toyota for the green object, the fourth time in a row. 

The website http://labl.teriin.org/ is meant to encourage donation towards ‘Lighting a Billion Lives’ i.e., Lighting with the aid of solar lighting devices, with the ingenuity of The Energy and Resources Institute (TERI). 

This is a clear suggestion of the deepness of efforts taken in the nation for environmental guard and maintaining a sustainable natural balance.

In India many public as well as private sector banks have adopted the green banking programme for sustainable development.

Green Banks in India

The various banks in India which provide green banking services to their customers are as follows

i. State Bank of India: State Bank of India (SBI) has become the first bank in the country to venture into generation of green power by installing windmills for captive use.

As part of its green banking initiative, SBI has installed 10 windmills with an aggregate capacity of 15 MW in the states of Tamil Nadu, Maharashtra, and Gujarat.

ii. Punjab National Bank: They had taken various steps for reducing emission and energy consumption.

iii. Bank of Baroda: They had taken various green banking initiatives such as financing a commercial project.

BOB is giving preference to environment friendly green projects such as windmills, biomass and solar power projects which help in earning the carbon credits.

iv. Canara Bank: As a part of green banking initiative, it has adopted environmentally friendly measures such as mobile banking, internet banking, telebanking, solar powered biometric operations.

v. ICICI Bank Ltd: ICICI bank has started “Go Green” initiative which involves activities like green products/offerings, green engagement, and green communication with customers.

vi. HDFC Bank Ltd: HDFC bank is taking up various measures for reducing their carbon footprints in waste management, paper use and energy efficiencies.

vii. Kotak Mahindra Bank: Through the “Think Green” initiative this bank had taken several initiatives such as to reduce the paper consumption and encouraging their customers to sign for e-statements and they had become partners with “Grow- Trees.com” to plant one sapling for every e-statement on behalf of its customers.

viii. IndusInd Bank: It has initiated its Green Office Project under which it has installed solar powered ATMs in different cities targeting energy saving as well as reducing CO2 emissions.

ix. YES Bank: It has projects portfolio in the areas of alternative energy and clean Technologies.

x. HSBC Group: HSBC has separate targets for data centre, paper consumption and business air travel. 

The purposes of the targets are to drive efficiency, reduce its operational impact on the environment and generate cost savings.

xi. IDBI: IDBI Bank is providing various services in the field of Clean Development Mechanisms (CDM) to its clients.

Role of reserve bank of India in promoting green banking

On October 28, 2011, Reserve Bank of India asked all Non-Banking Financial Corporations i.e., NBFCs by issuing a circular titled “Implementation of Green Creativity of the Government” asking them to take steps for better operation of their resources and better delivery of amenities.

You can also visit their site https://www.rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=20022# to know about the latest article on green financing.

Conclusion

These initiatives taken by the bank helps the companies to contribute towards the welfare of the society by funding them for eco-friendly projects. 

The companies must not always think about the profit they earn, rather they must also think about how they can develop the society through providing eco-friendly products, at a low cost, and to provide employment to the people in a safer environment.

Hope you enjoyed the blog. See you soon!!!