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What is Green Banking? Importance of green banking

What is Green Banking? It is a type of banking that provides sustainable financial services. The central bank of Bangladesh has issued policy guidelines for green banking that aim to prevent environmental degradation and ensure sustainable banking practices. The Guidelines cover the incorporation of environmental risk management in credit management, in-house environmental management, green financing, climate risk funds, green marketing, online banking, training, research and development in green banking, sector-specific environmental policies, green strategic planning, green bank branches, bank-specific environmental resources management (ERM) plans, innovative sustainable products, and sustainability reporting.

What is Green Banking? need and importance

Green bank means an ethical, a socially responsible and a sustainable bank. A green banker is more than a banker, it is not an individual but a unit or a group or a team. As a regulator of financial sector, the central bank already proved resounding success to implement the concept of green banking in its regular activities. Besides, it also created congenial atmosphere for the banking sector to ensure profound impact of green banking on socioeconomic landscape of Bangladesh.

Green Banking can provide these sustainable financial services by using green finance to promote sustainability in the following areas:

·  lending to companies and individuals who are committed to environmental responsibility;
·  providing investment products that align with investor values, such as renewable energy quotas or carbon offsets;
·  Reducing operational emissions through its operations.

Need and importance of green banking in present & future global warming situation in  bangladesh

The attack of human beings on nature is the cause of environmental deterioration. This deterioration is leading to global warming and climate change. It has been noticed that the temperature has risen up by 1 degree Fahrenheit in comparison to the previous century, leading to melting of Himalayan glaciers, bursting of lakes and rise of the sea level. Along with this, climatic changes have been causing natural disasters like cyclones, floods, landslides, and droughts.

Combined efforts of governments, corporate sector and individuals can help in minimizing these various forms of environmental deterioration. For this, governments have to come up with strong policies; corporate houses should follow environmental protection guidelines more strictly; and individuals have to be self-aware to protect the environment around them. 

As part of the role to be played by the corporate sector, banks and financial institutions should embrace green banking — adopting process and strategies that promote environment-friendly practices to help in reducing carbon emission. Green banking helps in reducing internal carbon footprint as well as external carbon emission.  

Banks have been using lighting, air conditioning, electronic equipments, IT, high paper wastage in massive proportion. Green banking avoids paper work and contributes to lower the cutting of trees. It makes the corporate world aware about environmental and social responsibility and thereby contributes to handing over a good environment to the upcoming generation. Adopting green banking policies are directly beneficial for the banks as well. 

However, green banking is not a  paper content ; there are various challenges in making it a reality. It’s not only about reducing paper use and getting digital; there are strategies that a bank should follow.

The most important step towards this objective is while providing loans. Any entrepreneur would think of green environment only when banks will restrict loans to businesses which might cause environmental degradation.

 Banks can deny loans to businesses that aim high profits by degrading the environment. The nature of business and its impact on the environment should be carefully considered before approving business loans. On the other hand, banks can offer low-interest loans to businesses that are environment friendly.

In this way, banks can play a key role in promoting secondary source of energy like solar energy or bio gas energy.

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