1.

1 Background of the study

Global warming is a buzzword. It is causing a rapid and major climate change across the globe.
It has made many countries vulnerable to natural disasters. The regular visit of natural disasters
of our country reminds us that Bangladesh is one the most vulnerable countries in the world. We
cannot fight against the natural disasters. We can make sure causes of natural disasters will not
happen again. Every person of our society must step forward to protect the environment. Every
little contribution can add up and have a big positive impact on the environment.
Banks conduct business with money. Their activities are environment friendly. They do not
impact on environment through their internal operation in terms of emission and pollution. They
provide loan to their customers in different projects. These projects may not be environment
friendly. So banks may have external impact on environment through their customers activity.
Banks play a major role in economic development activities. They provide finance in many
projects which ensures the economic growth of the country. As part of the society, banks have to
protect the environment. They have to ensure economic development through environmental
protection by promoting environmentally sustainable and socially responsible investments. This
practice of banks can be termed as green banking. Green banking considers all social and
environmental factors. The main objective of green banking is to use the resources in favor of the
society and environment.
The green banking concept has been evolved in western world. It has been practicing all over
the world. But it is a recent issue in our country. Today banks have turned their attention to ecofriendly activities. They want to reduce the carbon footprint from their normal banking activities.
This movement from normal banking activities to green banking activities is driven by banks
responsibility to society to environment.
Green finance is a part of green banking activities. Green finance is financing in resourceefficient and low carbon industries. These will have no negative impact on the environment.
Various financial services have been introduced by banks as part of green banking. Online
banking is a product of green banking. Online banking will result in less paperwork, less mail
and less driving to branch offices which in turn will have positive impact on the environment. As
more customers will use online banking, the costs of bulk paper overload, bulk mailing fees will
Green Banking |

be reduced. Banks will not need expensive branch banking. They will not have to hire customer
service representatives. Online banking will make banks more efficient and more profitable.
Today people are more conscious than any other time. People want to conduct business with
those who are responsible to them, who perform their duties properly, who give them better
facilities. Banks have promoted different green banking products. These products include ATM
booths, SMS banking, Credit Card, and Debit Card. If banks conduct green banking activities in
large amount, the customers will be interested to conduct their activities with them which will
result in higher profit for banks.
As the guardian of banking financial sector of Bangladesh, Bangladesh Bank has taken many
steps to smooth the activities of banks. It has issued many guidelines so that Bangladesh can
have a sustainable smooth economy. It has also issued guidelines of green banking so that
Bangladesh can attain a green economy in future with sustainable growth. According to this
guideline, banks have to allocate a fixed amount for green banking in their annual budget. Banks
utilize money against that allocated amount. In this paper we have tried to show if there is any
relationship between this budget allocation and budget utilization. We have also tried to show if
there is any relationship between the green banking activities of banks and profitability.

1.1 OBJECTIVE OF THE PAPER

General Objective: This thesis paper is primarily prepared as a requirement of the completion of
Bachelor of Business Administration degree under the Faculty of Business Studies at University
of Dhaka.

Specific Objective: The specific objectives of this report area) To find out how Green Banking as a concept of Sustainable Banking has emerged in
Bangladesh.
b) To identify what are the major initiatives taken in Bangladesh to promote Green Banking.
c) To analyze how the commercial banks of Bangladesh manage green banking activities.
Green Banking |

d) To identify the lack of initiatives and the scope of Green Marketing in Bangladesh.

1.2 METHODOLOGY OF THE STUDY

The objectivity of any study depends largely on how methodologically it is done. For the purpose
of this report I have used both qualitative and quantitative information to give it a clear judgment
opportunity.
All the information used in this report are from two major sources. These are:
Primary Sources:
Face-to-face interview with some concerned BBs officials.
Conversations with some employees working in the Risk Management Division of Prime
Bank Limited & Eastern Bank Limited.
Secondary Sources:
Published materials from Bangladesh Bank regarding Green Banking.
Published materials of some commercial banks in bangladesh regarding Green Banking.
Some national and international journals regarding Green Banking.

1.3 LIMITATIONS OF THE STUDY

Lack of Published Materials:there is a lack of published materials regarding Green Banking by
the commercial banks in Bangladesh. Besides, because of confidentiality issue some important
documents couldnt be attached with the paper like Green Office Guide of a Commercial Bank.
Time Constraint: Covering the entire Green Banking performance of the in the context of
Bangladesh was a difficult and time consuming task.
Lack of Experience: Preparing a formal document like a thesis paper requires some prior
experience in this field. I have tried my level best to reduce the distortion or biasness of
information that I have used in this report.

Green Banking |

LITERATURE REVIEW
There are studies showing positive correlation between environmental performance and financial
performance (Hamilton, 1995; Hart, 1995; Blacconiere and Pattern, 1993). Thus, it is imperative
for the banking institutions in the present context to consider environmental performance in
deciding whether to invest in companies or advise clients to do so. The formation of different
rules for environmental management like resource conservation, clean water act, clean air act,
toxic substance control act are also viewed as potentially significant contributor to the recent
increase in environmental liability for banking institutions. Adoption of these principles will
offer significant benefits to banking institutions, to consumers and also the stakeholders. Credit
risks are also associated with lending on the security of real estate whose value has diminished
owing to environmental problems (additional loss in the event of default). Further, risk of loan
default by debtors due to environmental liabilities because of fines and legal liabilities and due to
reduced priority of repayment under bankruptcy. In few cases, banks have been held responsible
for actions occurring in which they held a secured interest (Schmidheiny and Zorraquin, 1996
and Ellis, Millians and Bodeau, 1992).
There are also few cases where environmental management system has resulted in cost savings,
increase in bond value etc. (Heim, G et al, 2005). In few cases the environmental management
system resulted in lower risk, greater environmental stewardship and increase in operating profit.
The banking and financial institutions should prepare an environmental risk and liability
guidelines on development of protective policies and reporting for each project they finance or
invest (Jeucken, 201). They can also have an environmental assessment requirement for the
projects seeking finance. Banks also can issue Environmental hazards management procedures
for the each project and follow through.
Environmental risk is a facilitating element of credit risk arising from environmental issues.
Managing environmental risk can help to reduce the number of Non-Performing Loans for a
financial institution (Environmental Risk Management Guideline of Bangladesh Bank, 2011).
Md. Shafiqul Islam and Prahallad Chandra Das (2013) have conducted a study highlighting the
mobile banking, online banking, green financing, and guidelines for green banking practices as
well as green banking unit. They have found that though green banking is a new term in
Green Banking |

Bangladesh, it is a mature issue in developed countries. So banks should consider the

environmental issues of the country as a social responsible person not only to face the impact of
globalization but also to face competition.
S.G. Khawaspatil and R.P. More (2013) have intended to find the importance of green banking in
India. The industries and firms are vulnerable to stringent environmental policies, severe law
suits or consumer boycotts in the globalized economy. The banking sector may face credit risk
and liability risk. The banks should go green and play a pro-active role to take environmental and
ecological aspects as part of their lending principle, which would force industries to go for
environment friendly investments.
Ms. Jasdeep Kaur (2014) has told that go green is a buzzword in all spheres of life. Banks are
also affected by it. So banks should take environmental issue under consideration to protect the
environment.
Dr. Sarita Bahl (2012) urged banks to promote different types of environment friendly products
which will ensure the protection of our environment and the profitability of banks in India. Dr.
Bahl demonstrated the significance of providing loan in green technology and pollution reducing
projects.
Suresh Chandra Bihari(2011) clarified that banks should consider before financing a project
whether that project is environment friendly or not and has any future implication on
environment in future. As a part of the society it is banks corporate social responsibility. This
green banking can be implemented with the help of technology and policy.
Alice Mani (2011) indicated that as Socially Responsible Corporate Citizens (SRCC), banks
have a major role to play and responsibility in enhancement of governmental efforts towards
substantial reduction in carbon emission and building a green economy. Banks should practice
and take initiative of green banking not only for the environment but also for sustainable
economic development.

Green Banking |

2.1 ABOUT GREEN BANKING

Global warming, which is one of the most burning & discussed issues, has the worst impact on
the climate of the planet as a whole. Due to unusual weather pattern, rising greenhouse gas,
declining air quality etc. society demands that business also take responsibility in safeguarding
the planet.
Green Banking is one of the revolutionary concepts in todays business world which basically
refers to as sustainable banking, socially responsible banking or ethical banking that endorse
environment-friendly practices and reducing carbon footprint from banking activities.
The main objective of Green Banking is to ensure the use of organizational resources in favor of
the environment and society. Green banking as a concept is proactive and smart way of thinking
with a vision for future sustainability of our only Spaceship earth. So in a very specific wayGreen Banking means banking practices that fosterenvironmentally responsible financing
practices as well as using environmentallysustainable internal processes.
Morshed, Rubayat and Singha (n.d., p. 11) explained that Green Banking can be viewed from
two different approaches as follows:

Transformation of Internal
Operation:Firstly, banks can adopt
appropriate ways to utilize renewable
energy sources, automation and other
measures to minimize carbon usage in
banking activities.
Environmentally Responsible Financing
Policy:Secondly, banks should consider
environmental issues with utmost
importance while financing or investing in
project.

Green Banking |

2.2 EVALUATION OF THE IDEA OF GREEN BANKING

Although the theoretical idea of Green Banking is not very old; some practices can be traced
from the ancient banking & financial practices. During the 16 th century religious ethics, the
environment and local community provided the main framework for both life and economy and
therefore influence businesses and the financial sector as well. Besides, during the 19 th century
credit unions and financial cooperatives worked on the criteria that were used as sustainability
criteria later. (Weber n.d., p. 2)

Following the political

disturbance in the 1960s and
first discussion about
environmental and social
responsibilities of business,
the first ethical banks were
founded in the 1970s. They
wanted to re-integrate ethics
into the financial business.
These banks used some of the principles of the credit unions and co-operatives but added an
ethical perspective to their business. Because of higher energy and waste management prices it
was worthwhile for a service sector as well to be eco-efficient in order to reduce costs. At about
the same time new environmental regulations influenced the responsibility of business for its
environmental impact. After mainly managing costs and risks connected with environmental
issues the financial sector began to explore business opportunities connected with sustainable
development as well. Weber (n.d., p. 3) also stated that in the beginning of the 1990 the first
Green Banking |

sustainability mutual funds, indices and other financial products and services were launched.
Since then their market share is increasing. They changed the landscape of financial products and
services as they re-integrated non-financial issues like the environment or sustainability into
financial decision making processes and product development.
Weber (n.d., p. 3) again explained that another event that influenced the financial sector to
consider environmental responsibility was the launch of the Kyoto Protocol on climate change
mitigation. Because financial instruments were needed to reduce carbon emissions, the financial
sector engaged in creating products and services around carbon reduction, carbon offsets and
financing projects under the Kyoto Protocol mechanism.
However, today the view about social or environmental responsibility in changing from
managing environmental risks into creating positive impacts on sustainable development by
using different financial products and services. This new view is reflected in the Global Impact
Investment Network (GIIN) and in the Global Alliance for Banking on Values (GABV) both of
which emphasizes the positive role that the financial industry can play in fostering sustainable
development.

2.3 COMPONENTS OF GREEN BANKING

The scope of Green Banking is huge- leading to the way of Green Economy in a broad sense. So
determining all the components of Green Banking is a difficult task. However, the following can
be a short checklist of the components of Green Banking.

Green Banking |

2.4 CHALLENGES TOWARDS GREEN BANKING

Although the concept of Green Bank is considered as a sustainability issue but it is true that
achieving the actual response of Green Banking initiatives is associated with some major
challenges like:
DIVERSIFICATION MATTERS
Green banks will be screening their customers and naturally, theyll be limiting and restricting
their business to those entities that qualify. With a smaller pool of customers, theyll
automatically have a smaller profit base to support them. If they focus their loans on certain
industries, they open themselves up to being much more vulnerable to economic shifts.
THESE BANKS ARE STILL STARTUPS
Apparently, it takes 3 to 4 years for a typical bank to start making money. Many green banks in
business today are very new and are still in startup mode. It doesnt help that these banks are
trying to get their footing during a recession.
BANKS ARE SPECIALIZED
Again, while the main goal of a green bank is to do good by supporting those who are taking care
of the environment, the question here is just how much money is there in these businesses and
in the eco-friendly industry? Saving the environment does not necessarily equate to making a
profit. Hopefully though, this premise is proven wrong in this case and that green banks prove
that they can survive, even as they face restrictive requirements for doing business.
OPERATING EXPENSES AND COSTS ARE HIGHER
Green banks require specialized talent, skills and expertise as well, due to the kind of customers
they are servicing. Employees, such as loan officers, need to have additional background and
experience in dealing with green businesses and consumers. Plus, giving breaks to such clients
via discounted loan rates can eat at their profit margins.

Green Banking |

REPUTATION RISK
In all likelihood, due to growing awareness about environment safety, banking institutions are
more prone to lose their reputations if they are involved in big projects, which are viewed as
socially and environmentally damaging.

2.5 INTERNATIONAL INITIATIVES OF GREEN

BANKING
Environmental responsibility has always achieved importance from the international community.
During early 1990s there had been a growing concern about the environmental management
system because of increasing energy prices and new environmental regulations. However,
from that time financial institutions have been trying to mitigate social and environmental risk
issues by introducing different environmental friendly policies & operations. Today the financial
sector has begun to explore business opportunities connected with sustainable development one
of the result of which is the concept of Green Banking. According to Pravankar (2008, p. 8)-in
the beginning of the 1990 the first sustainability mutual funds, indices and other financial
products and services were launched.
DEVELOPMENT OF UNEP
During the early 1990s the United Nations Development Programme (UNEP) was launched
which is now known as UNEP Finance Initiatives. The objective of this initiative was to
integrate environmental considerations into the regular business operations, asset management,
and other business decisions of the banks. (Pravankar 2008, p. 8)
INITIATIVESTAKEN BY RENOWNED INTERNATIONAL ORGANIZATIONS
Pravankar (2008, p. 9) also mentioned that during the year 1991 to 2002 some renowned
international organizations had taken different initiatives regarding environment friendly
business practices like:

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10

DEVELOPMENT OF EQUATOR PRINCIPLES

All these concerns for sustainable finance or green finance have compelled the banking
institutions to devise a common and coherent set of environmental and social policies and
guidelines that can be used to evaluate the projects. Then a small group of banks along with IFC
came together to initiate the process of designing the common guidelines in October 2002 and
came up with a guidelines in June 2003 that is known as Equator Principles with 10 leading
commercial banks adopting these voluntary set of principles.
ABOUT THE EQUATOR PRINCIPLES
The Equator Principles (EPs) is a credit risk management framework for determining, assessing
and managing environmental and social risk in Project Finance transactions. It is based on the
International Finance Corporation Performance Standards on social

and environmental

sustainability and on the World Bank Group Environmental, Health, and Safety Guidelines.
(The Equator Principles 2006, p. 1)
Green Banking |

11

There are 10 broad principles under the EP framework. Eventually these principles have become
the industry standard for environmental and social risk management and financial institutions,
clients/project sponsors, other financial institutions, and even some industry bodies refer to the
EPs as good practice.
Currently 79 adopting financial institutions (77 EPFIs and 2 Associates) in 32 countries have
officially adopted the EPs, covering over 70 percent of international Project Finance debt in
emerging markets.

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12

3.1 GREEN BANKING IN BANGLADESH

The economic development of any country is inextricably linked with environmental issues
because activities of financial institutions may boost wealth creation as well as environmental
degradation. Bangladesh is identified by climate change experts as being among the countries
more severely challenged by climate change threat with correspondingly high urgency of
preparedness with mitigate and adoptive responses. The government and the central bank of
Bangladesh is fully conscious about this issue and have played a proactive role in this regard.
As being realized that bank as a responsible financial institution has a significant role to play in
these game changing developments, Bangladesh Bank, the central bank of Bangladesh has taken
the first initiative to make activities of the financial institutions of Bangladesh more
environmentally responsible at the beginning of the year 2011.
Green Banking as a concept of sustainable banking practices was formally introduced in
Bangladesh on February 2011 with the development of an indicative Green Banking Guideline
for Banks and Financial Institutions by Bangladesh Bank. The main objective of this guideline
is to give a detail and indicative advice to all the commercial banks of Bangladesh to adopt
environment friendly financing policies as well as to take appropriate initiatives to make internal
operations more energy efficient and environment conscious.

Rules & Regulations Governing Green Banking in Bangladesh

With a view to encouraging sustainable development in Bangladesh, the government of
Bangladesh has formulated two important documents namely the Environmental Conservation
Act 1995 and the Environmental Conservation Rules 1997. These two documents basically
make the ground rules for Green Banking in Bangladesh.
In January year 2011, Bangladesh Bank as a regulatory body in the financial sector of
Bangladesh had formulated the Environmental Risk Management Guidelines for Banks and
Financial Institutions. The ERM guideline basically represents structured formats of addressing
environmental risks in project financing and also provides standards in this regard.

Green Banking |

13

Besides, in February 27, 2011 Bangladesh Bank formulated the Green Banking Policy
Guidelines that provides a standard format for the commercial banks in Bangladesh to develop
their own Green Banking Policy.

3.2GREEN BANKING INITIATIVES BY BD

GOVERNMENT
With the growing pressure of the concerned groups to save the deteriorating environment from
pollution, the government of the Peoples Republic of Bangladesh had come forward with the
Environmental Conservation Act 1995 as a legal framework against environmental pollution.
This Act established the Department of Environment (DOE) and empowers its Director General
to take measures as he considers necessary which includes conducting inquiries, preventing
probable accidents, advising the Government, coordinating with other authorities or agencies and
collecting & publishing information about environmental pollution. To make operational the
ECA 1995 and in exercise of the power conferred under it, the Environmental Conservation
Rules (ECR) 1997 were issued by the Government. Together- ECA 1995 and ECR 1997 provide
the basis of the legal framework of Green Banking in Bangladesh.

Brief Review of the ECR 1997

Any business initiative that has applied for a borrowing from a bank or any FIs has to submit an
Environmental Clearance Certificate from the DOE. For the purpose of the issuance of the
Environmental Clearance Certificate, the industrial units or projects shall, in consideration of
their site and impact on the environment be classified into the following four categories:

Green Banking |

14

Source: Environmental Conservation Rules, 1997

Schedule-1 of the ECR 1997 provides a list of 186 industrial units or projects that includes 22
under the Green Category, 26 under Orange-A Category, 69 under Orange-B Category and 69
under the Red Category.
According to the rules, Environmental Clearance Certificate shall be issued to all existing
industrial units and projects and to all proposed industrial units and projects falling in the Green
Category. And for industrial units and projects falling in the Orange-A, Orange-B and Red
categories, firstly a Location Clearance Certificate and thereafter an Environmental Clearance
Certificate shall be issued. However the Director General may issue the ECC directly in such
cases if he considers it appropriate. The ECR 1997 also includes a total of 14 schedules of which
schedule 2-11 represents the detail standards that should be maintained in case of different
pollutants in different business units or projects.
Besides, the government of Bangladesh has invested USD 10 billion over the last three decades
to make the the country climate resilient and less vulnerable to disaster. According to Morshed,
Rubayat & Singha (n.d., p. 4) over the past three fiscal years (FY2009-10 to FY 2011-12) the
government has allocated USD 300 million under the following two specialized funds regarding
sustainable development:

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15

Source: Annual Report on Green Banking of BB, 2012

3.3 GREEN BANKING INITIATIVES BY BANGLADESH

BANK
Taking into account the adverse effects of climate change and progressive actionworldwide,
Bangladesh Bank, the central bank of Bangladesh, has shown a deepcommitment towards the
vision of green world through green initiatives.Bangladesh Bank is the first central bank in the
world which has taken real initiatives according to a definite agenda in its vision and mission to
play a specific role in Green Banking.

Own Initiatives
Bangladesh Bank has taken some exemplary initiatives for itself to promote green banking in
Bangladesh and to encourage other organizations to make such steps to protect the environment.
The initiatives include:
1. Refinance Scheme: BB is providing to the lending banks refinance at five percent
interest per annum, from a taka 2.00 (two) billion refinance window accessible against
financing for revolving eco-friendly or Green initiatives like installation of bio mass
based, solar and other renewable energy generation units, effluent treatment plants,
adoption of new energy efficient outputprocesses and so forth.As of December 2012, taka
853.54 million out of taka 2.0 billion revolving fund allocated by BBto the following
green categories (Annual Report of Green Banking of BB, 2012):
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16

Tk. (in

Category

million)

Solar irrigation pump

Solar home system
Biogas plant
Effluent Treatment Plant (ETP)
Hybrid Hoffman Kiln (HHK)
Solar PV module assembling plant
Total

23.90
102.84
262.70
90.40
124.80
248.80
853.54

Sectorwise Disbursement of Bangladesh Bank's Refinance Fund (in percentage)

Solar irrigation pump

Solar home system

3%

12%

29%
Biogas plant

Effluent Treatment Plant (ETP)

31%
15%
10%

Hybrid Hoffman Kiln (HHK)

Solar PV module assembling plant

2. In-house Green Initiatives: Bangladesh Bank is concentrating on its in-house green

activities through the most effective utilization of resources (power, gas, fuel, water,
paper etc.)

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17

Source: Annual Report of Green Banking of BB, 2012

1. With a move towards encouraging green banking in Bangladesh, Bangladesh
Bankinstalled 8 kilowatt solar power system on its rooftop in March 2010. This is now
beingextended to 20 kilowatt to cover more areas.
Green Banking |

18

2. LED bulbs are being installed to bring significant energy efficiency.

3. As part of central bank automation, Bangladesh Automated Clearing House (BACH),
Credit Information Bureau online, Enterprise Resources Planning (ERP), Enterprise Data
Warehouse (EDW), e-tendering, and e-recruitment have come into reality. National
Payment is in live operation since 2012. Southeast, Pubali& BDBL are now
connectedwith NPSB and doing live transaction.
4. The overall banking functions of Bangladesh Bank (including all departments and
branchoffices relating to banking functions) have been brought under automation by
implementing the Banking Application Package that includes Core Banking
Module,Treasury Management Module and Market Infrastructure module.
5. All the departments of Bangladesh Bank Head Office and its nine branch offices
havealready been brought under a computer network (LAN/WAN), connecting more
than3,800 PCs.
6. Environmentally harmful incineration of non re-issuable damaged bank notes is
beingphased out, resorting instead to shredding.
7. Online salary and other necessary advice, personal file updated information, office
orders,notification online balance statements for all employees of BB, electronic passes
forvisitors are instantly available.
8. A recent initiative has been taken to convert the 30-storied building of Bangladesh
Bankinto a Green Building with the modern facilities of rain water harvesting, waste
waterrecycling and motion sensor energy efficient bulbs supported by window based
solarpanels.

Initiatives for the Industry

With the different initiatives of in-house green activities, the authority has developed an
indicative Green Banking Policy on February 27, 2011 which aims to provide a detail guideline
to all the commercial banks to adopt Green Banking policy. In this policy guideline BB has
shown the strategic roadmap of green banking under three phases.

1. Policy Guideline of Green Banking:

PHASES

REQUIRED INITIATIVES

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19

Phase-I
(Time Line: 31
December, 2011)

Phase-II
(Time Line: 31
December, 2012)

Phase-III
(Time Line: 31

Policy formulation and governance

Incorporation of Environmental Risk in Core Risk Management
Initiating In-house environment management
Introducing Green Finance
Creation of Climate Risk Fund
Introducing Green Marketing
Online Banking
Supporting Employee Training, Consumer awareness & Green

Event
Sector Specific Environmental Policies
Green Strategic Planning
Setup Green Branches
Improved In-house Environment Management
Formulation of Bank Specific Environmental Risk Management

Plan & Guideline

Rigorous Programs to Educate Clients
Disclosure & Reporting of Green Banking Activities
Designing & Introducing Innovative Products
Reporting in Standard Format with External Verification

December, 2013)

Source: Policy Guideline of Green Banking by BB

Those phases are descrbibed below:

Phase-I Banks are needed to develop green banking policies showing general commitment on
environment through in-house performance. The time lining for the actions to be taken under
Phase-I should not exceed December 31, 2011.
Policy Formulation and Governance: Bank shall formulate and adopt broad

environmental or Green Banking policy and strategy approved by their Board of

Directors. A high powered Committee comprising of directors from the Board should be
responsible for reviewing the banks environmental policies, strategies and program in
case of scheduled Bangladeshi Banks. But in case of Foreign Banks, a high powered
committee comprising Regional Chief of Global Office and members from the top
management including CEO should be responsible for reviewing the banks
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20

environmental policies, strategies and program. Bank must approve a considerable fund
in their annual budget allocation for green banking. Banks are required to establish a
separate Green Banking Unit or Cell which will have the responsibility of designing,
evaluating and administering related green banking issues of the bank. A senior executive
should be head the unit for carrying out the responsibility of the unit. The unit will report
to the high powered committee time to time.
Incorporation of Environmental Risk in CRM: Banks shall comply with the stipulated

instructions of the detailed guidelines on Environmental Risk Management (ERM) which

will be considered as a part of the Green Banking Policy. Bank shall incorporate
Environmental and Climate Change Risk as part of the existing credit risk methodology
prescribed to assess a prospective borrower. This will include integrating environmental
risks in the checklists, audit guidelines and reporting formats. All of this will help
mainstream Environmental Risk that covers possible sources of Environmental Risk such
as Land use, Climate change related events (cyclone, drought), animal diseases/pathogens
such as avian influenza, solid waste including waste feed, animal waste, carcasses,
sediments, wastewater discharges, hazardous materials, etc will be reviewed under
Environmental Due Diligence (EDD) checklists.
Initiating In-house Environment Management: Banks shall prepare an inventory of

the consumption of water, paper, electricity, energy etc. by its offices and branches in
different places. Then it should take measures to save electricity, water and paper
consumption. A 'Green Office Guide' or at least a set of general instructions should be
circulated to the employees for efficient use of electricity, water, paper and reuse of
equipments. In place of relying on printed documents, online communication should be
extensively used (where possible) for office management and make sure that the printers
are defaulted to duplex for double-side printing to save papers. Banks may apply Ecofont
in printing to reduce use of ink, use scrap paper as notepads and avoid disposable
cups/glasses to become more eco-friendly. Banks must install energy efficient electronic
equipments and manage automatic shutdown of computers, fans, lights, air coolers etc.
which will help reducing electricity consumption. Banks should replace normal bulbs in
branches/offices of the banks by energy saving bulbs. Banks should make plan to use
solar energy at their premises to save electricity. Bank should take steps to save energy
Green Banking |

21

from corporate business travel and encourage employees to purchase energy efficient cars
(that consume less fuel) to reduce gas and petroleum consumption.
Introducing Green finance: Bank must give preference to finance in eco-friendly

business activities and energy efficient industries. Environmental infrastructure such as

renewable energy project, clean water supply project, wastewater treatment plant, solid &
hazardous waste disposal plant, bio-gas plant, bio-fertilizer plant should be encouraged
and financed by bank. Consumer loan programs may be applied for promoting
environmental practices among clients.
Creation of Climate Risk Fund: Bank should finance the economic activities of the

flood, cyclone and drought prone areas at the regular interest rate without charging
additional risk premium. However, banks should assess their environmental risks for
financing the sectors in different areas for creating a Climate Change Risk Fund. This
will be used in case of emergency. The bank would ensure regular financing flows in
these vulnerable areas and sectors. The fund could be created as part of banks CSR
expenses.
Creation of Climate Risk Fund: Bank should finance the economic activities of the

flood, cyclone and drought prone areas at the regular interest rate without charging
additional risk premium. However, banks should assess their environmental risks for
financing the sectors in different areas for creating a Climate Change Risk Fund. This
will be used in case of emergency. The bank would ensure regular financing flows in
these vulnerable areas and sectors. The fund could be created as part of banks CSR
expenses. Banks should use environmental causes for marketing their services to
consumer. Green marketing is expected to help awareness development among common
people.
Online Banking: Online banking is the practice of making bank transactions or paying

bills via the Internet on a secure website of the respective bank that allows the customers
to make deposits, withdrawals and pay bills. Online banking will help environment by
eliminating paper waste, saving gas and carbon emission, reducing printing costs and
postage expenses. Banks should give more emphasis on online banking to help
environment.

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22

 Supporting Employee Training, Consumer Awareness and Green Event: Bank

should develop employee awareness and organize training on environmental and social
risk and the relevant issues continuously as part of the bank's Human Recourse
Development. Awareness development among consumers and clients would be a
continuous job of a bank under its public relation department.
Introducing Green
Marketing

Online
Banking

Creation of Climate
Risk Fund

Supporting
Employee

Introducing Green
Finance

Phase
-I

Initiating In-house environment

management

Incorporation of Environmental Risk in Core Risk

Management

Policy formulation and

governance

Figure: Policy Guideline of Green Banking by BB (Phase-I)

Phase-II The time lining for the actions to be taken under Phase-II should not exceed
December 31, 2012.

Green Banking |

23

 Sector Specific Environmental Policies: Banks need to formulate strategies to design

specific policies for different environmental sensitive sectors such as Agriculture, Agribusiness (Poultry & Dairy), Agro farming, Leather (Tannery), Fisheries, Textile and
Apparels, Renewable Energy, Pulp and Paper, Sugar and distilleries, Construction and
Housing, Engineering and Basic Metal, Chemicals (Fertilizers, Pesticides and
Pharmaceuticals), Rubber and Plastic Industry, Hospital/Clinic, Chemical Trading, Brick
Manufacturing, Ship breaking etc.
Green Strategic Planning: A bank should determine green targets which can be attained
through strategic planning. Bank should determine a set of achievable targets and
strategies, and disclose these in their annual reports and websites for green financing and
in-house environment management as well. The target areas for in-house environment
management should cover attaining energy efficiency in the form of the use of renewable
energy, reduction of electricity, gas, and petrol consumption, reduction of Green House
Gas(GHG) emissions, issuance of e-statements, electronic bill pay, saving papers,
environment friendly office buildings etc. The target areas for Green Financing should
cover reducing loans for certain environmentally harmful activities, attaining a particular
percentage of environmental loans as percentage of total, introducing eco-friendly
financial products etc.
Setting up Green Branches: A bank should specifically designate a branch as a Green
Branch if it uses natural light, uses renewable energy, uses energy saving bulbs and other
equipments, requires reduced water and electricity use, uses recycled water etc. A Green
Branch should be featured by the provision of the maximum use of natural light, use of
renewable energy, use of energy saving bulbs and other equipments, reduced water and
electricity use, use of recycled water etc. A Green Branch will be entitled to display a
special logo which will be approved by Bangladesh Bank. The criteria for certification of
a Green Branch will be circulated by Bangladesh Bank in due course of time.
Improved In-house Environment Management: In-house environmental management
in Phase-II should include strategy of reuse, recycling of materials and equipments, and
source reduction and waste minimization strategy. Banks should increasingly rely on
virtual meeting through the use of video conferencing instead of physical travel which
would help saving cost and energy.
Green Banking |

24

 Formulation of Bank Specific Environmental Risk Management Plan and

Guidelines: A bank should develop and follow an environmental risk management
manual or guidelines in their assessment and monitoring of project and working capital
loans. The bank may set internationally accepted higher environmental standards as
environmental risk management manual or guidelines in addition to the compliance of
national regulation. In this connection, Green initiatives by a group of banks will not only
be effective but will also offer competitive advantage. Bank alliances may prepare
standard and guidelines for themselves for improving Green Banking practices.

Rigorous Programs to Educate Clients: Banks should encourage and influence clients
and business houses to comply with the environmental regulations and undertake
resource efficient and environmental activities. Banks should introduce rigorous
programs to educate clients.
Disclosure and Reporting of Green Banking Activities: Banks should start publishing
independent Green Banking and Sustainability reports showing past performances,
current activities, and future initiatives. Banks should also disclose updated and detailed
information about banks environmental activities and performances of major clients.

Green Banking |

25

Pha
seII

Disclosure & Reporting of Green Banking Activities

Rigorous Programs to Educate Clients

Sector Specific Environmental Policies

Formulation of Bank Specific Environmental Risk Management Plan & Guideline

Improved In-house Environment

Green Strategic Planning

Setup Green
Branches

Figure: Policy Guideline of Green Banking by BB (Phase-II)

Phase-III A system of Environmental Management should be in place in a bank before the

initiation of the activities of Phase-III. Banks are expected to address the whole eco-system
through environment friendly initiatives and introducing innovative products. Standard
environmental reporting with external verification should be part of the phase. The time lining
for the actions to be taken under Phase-III should not exceed December 31, 2013.
Designing and Introducing Innovative Products Alongside avoiding negative impacts
on environment through banking activities, banks are expected to introduce environment
friendly innovative green products to address the core environmental challenges of the
country.

Green Banking |

26

 Reporting in Standard Format with External Verification Banks should publish

independent Green Annual Report following internationally accepted format like Global
Reporting Initiatives (GRI) targeting their stakeholders. There should be arrangement for
verification of these publications by an independent agency or acceptable third party.

R e p o rtin g in S ta n d a rd Fo rm a t w ith E x te rn a l
Ve rifi c a tio n

p h a s e -III

D e s ig n in g & In tro d u c in g In n o v a tiv e

P ro d u c ts

Figure: Policy Guideline of Green Banking by BB (Phase-III)

2. Environmental Risk Management Guideline (ERM)

Environmental risk is a facilitating element of credit risk arising from environmental issues. To
provide a complete technical guideline to the commercial banks to mitigate these environmental
risks, Bangladesh Bank formulated the Environmental Risk Management Guideline on January
2011. The ERM Guideline provides:

The different types & sources of environmental risks.

What are the approaches to identify, mitigate & control these risks.
What are the organizational requirements & structure for ERM.
What are the responsibilities of different functions of a bank in this regard.
A technical manual that includes specific tools to assess environmental risks and

Green Banking |

27

 A technical Annexes that includes 10 sector specific Environmental Due Diligence

checklist.

3. Green Banking Reporting Format

Bangladesh Bank has also developed a specific reporting format of green banking initiatives by
commercial banks and at present all the commercial banks are to provide a report monthly to
Bangladesh Bank following the structure.

3.4 HOW COMMERCIAL BANKS MANAGE GB

INITIATIVES
The concept of green banking is gaining popularity day by day in Bangladesh. Currently all the
scheduled 47 commercial banks of Bangladesh have formulated separate green banking cells to
manage green banking activities.
Organogram of Green Banking Cell in Commercial Banks

Source: Self-creation from rational analysis

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28

Policy Formulation Regarding Green Banking by Commercial Banks:

All the scheduled commercial banks have formulated their own Green Banking Policy Guideline
according to Bangladesh Bank directions. This guideline indicates the functions of each
responsible divisions regarding green banking. Besides, some banks like the Eastern Bank
Limited, the Prime Bank Limited etc. have also formulated their Green Office Guide that
basically highlights the policies regarding responsible in-house resource management and Sector
Specific Policies which highlights the banks policies regarding financing to that sector
. How Banks Assess Environmental Risks in Case of Financing a Project?
Banks/FIs have to identify environmental risks whenever a potential borrower approaches for
financing. Banks/FIs are recommended to take a holistic approach towards assessing
environmental risk rather than concentrating on the specific project only. As part of the
Relationship Banking Function the first step is to assess the General Environmental Due
Diligence (EDD) checklist. This is given in the Technical Manual Part of the ERM guideline.
However, the environmental risk assessment is only applicable as directed by the ERM
guidelines for following cases (ERM Guideline, 2011):
For corporate, exposure > BDT. 10 million
For real estate exposure > 10 million
For SME, exposure > BDT. 2.5 million

The General Environmental Due-Diligence Checklist

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29

Source: ERM Guideline, 2011

In this General EDD checklist the italic questions are more important or critical ones. After
completing the checklist the project considering for financing can be rated according to the
following criteria:

The Environmental Risk Rating (EnvRR)

Criteria
If answers to any one of the italic questions is No
If answers to all italic questions is Yes but 50% or more of the non-

EnvRR
High
High

italic questions is No
If answers to all italic questions is Yes and if answers to more than

Moderate

25% and less than 50% of the remaining questions is No

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30

If answers to all italic questions is Yes and if answers to less than

Low

25% of the remaining questions is No

Source: ERM Guideline, 2011
Besides, the Technical Manual of the ERM guideline provides 10 Sector Specific EDD
Checklists. So in case of project financing or managing project portfolios for financing the
Banks/FIs also need to assess Sector Specific EDD checklist if it comes under consideration. In
case of projects where no sector specific checklist is available, the EnvRR should be considered
as overall environmental rating. However, after completing the Sector-specific EDD checklist the
Overall Environmental Risk Rating (Overall EnvRR) can be determined as follows before
forwarding the proposal to the Credit Risk Management (CRM):

Overall Environmental Risk Rating (Overall EnvRR)

General EDD
Sector-Specific EDD
Low
Low
Moderate / Low
Low / Moderate
If any one or both the General and Sector-specific EDD

Overall EnvRR
Low
Moderate
High

checklists is indicated as High

Source: ERM Guideline, 2011

Now whenever the EnvRR is High, the CRM will ensure that additional conditions/ covenants
are included for example: a)the borrower will conduct business and maintain property in
compliance with all environmental laws b)the will provide the Environmental Clearance
Certificate (ECC) as and when obtained or renewed c) the borrower take immediate and
necessary remedial action in the event of a hazardous spill or release etc.
In-house Initiatives for Responsible Resource Management

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31

The main objectives of in-house environment management as

observed in case of the scheduled commercial banks are
Reduce, Reuse and Recycle of the resources used for day to
day business operations. So for obvious reasons the in-house
environment

management

is

associated

with

1)

Water

Management, 2) Waste Management & 3) Management of

Energy Consumption. Only a few banks have take real
initiatives in this regard. However, according to the Green
Office Guide of Eastern Bank Limited, the bank has taken
following

initiatives

for

in-house

responsible

resource

management:
Computers, Printers, Photocopiers

Switching off all the equipment while not in use

Program equipment to Hibernate in office times
All the office equipment must be shut down after office hours
Making sure that all the employees know how to use the equipment as

for not to waste resources in unlearned hands

LCD or Desktop Monitor use energy as of energy needed for printing
800 Laser prints if it is left open for 8 hours without use. So it is very
important to shut down all the equipment
Personal computers must be shut down while not using it
Laptops should run in battery saving mode. The charger should not be
plugged in while running on battery.
Photocopiers and Printers have high electricity consumption and
theseequipment are mostly turned on idle. All the employees must
know how to use them efficiently and must make sure to turn them off
after use.
Air Conditioning
Use of Fans and natural ventilation when possible
Use Energy efficient, Eco-friendly Air Conditioners

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32

 Buy Programmed AC which has motion detection on, allowing them to

maintain proper room temperature
Use Central AC system rather than Split or Box AC as the use of
resources will be less.
Close all windows, doors to maximize the cooling while AC is turned on
Set Air Conditioning at a Minimum of 24C which will keep proper
balance of Air
All the AC will be turned off after 7pm ( End Of Office Hours)
Switch off all the AC while leaving the room
Lights
Use of natural lights whenever possible. This will save a significant
amount of energy and associated greenhouse gas emissions
Replacing bulbs with energy efficient bulbs. This will not just only
reduce costs but also energy consumption.
Replacing Spotlights with same effect but with more energy saving.
Like using 20W halogen light instead of 50W will reduce 60% of energy
but serve with same lighting
Cleaning and maintaining lamps and bulbs will create light efficiency.
Everyone must know Last man to leave the room , turns off the
switch rule not in just lights but in all equipment
All the lights except very important security lights will be turned off
after Office Hours
Conservation of Water
Must conserve Water as the best possible way
Use of water bottles which can be reusable
Cleaning Staff must commit to reduce water usage in cleaning
procedures.
Install low-flush toilets and water saving faucets in the restrooms.

Purchase of Stationeries
Office Stationeries should be bought which are needed
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33

 Seek & Inspect for Energy Saving, Environment Sustainable or Ecofriendly products for purchase before buying
Seeking for longevity, reusability, refill-ability and recyclability of
Products like Printers, Scanners and Photocopiers before Purchase
Seek products made out of or has elements of Recycled Products
All office elements should be eligible for recycling at the end of its life
Office shall buy Recycled papers for their use.
Reuse of Stationeries
Reuse of Single Sided Paper as notepads or draft copies usable within
office
Reusing Clip-files, Covers , Folders
Use of Reusable Cups, Crockery & Cutlery within Office
Encourage the use of Reusable Bottles instead of Single use water
Bottles
Making the Office Journals, Journal Subscription common for all
Employees
Selling used papers to the firms who are recycling the papers
Use of Email instead of paper works with clients who understand
internet business.
Use telemarketing and email marketing
Reduce the use of Paper to the best possible way
Single Transportation on the Same Rote
Transportation is another important issue when we thinking about energy or
resource consumption. There are a number of employees of every
organization who uses the same rote everyday for reaching to the workplace.
To reduce the consumption of diesel as well as to reduce the emission of CO 2
PBL has encouraged its employees to use a single vehicle for the
transportation purpose on a same rote. Besides, all the vehicles used for
banking purposes use CNG which also contributing to the reduction of CO 2
emission.

Green Banking |

34

4.1 INDUSTRY ANALYSIS IN TERMS OF GB

INITIATIVES
Policy Formulation & Governance
All 47 commercial banks have formulated Green Banking Policy Guidelines approved by their
Board of Directors/Competent authority and formed Green Banking Unit (GBU) for Green
Banking activities. Besides, 44 banks have Green Office Guide for in-house green activities.

Budget Allocation for Green Banking Activities

Banks are required to allocate a considerable amount for green banking in their annual budgets,
which will include:
Budget for green finance
Budget for Climate Risk Fund and
Budget for Green Marketing, Training & Capacity Building.
According to the Annual Report of Green Banking of Bangladesh Bank 2012, the scheduled 47
commercial banks of Bangladesh have allocated a total of BDT. 109352.18 million for green
banking activities based of the above three categories on which,

Green Banking |

35

Source: Annexure B (in appendix)

Budget Utilization for Green Banking Activities

The scheduled banks have utilized a total of BDT. 386510.41 million during 2012 for (i) green
finance, (ii) Part of CSRActivities for Green Project and Green Event (iii) Marketing, Training
and Capacity Building.However, the degree of budget utilization varies based on 5 categories
namely1.
2.
3.
4.
5.

Utilization against allocated budget

Utilization under budget
No allocation & utilization
Allocation but no utilization
Full utilization

Green Banking |

36

Green Banking |

37

Source: Annexure B (in appendix)

From the table it can be observed that during the year 2012, although the banks have allocated
substantial amount for their overall green banking initiatives, in case of utilization the scenario is
different except green finance.
During 2012, 87% of the scheduled commercial banks
utilized more than their allocated budget for green finance,
9% of the banks utilized less than their allocated budget,
2% of the banks although made allocation for green
finance but did not utilized the fund and 2% of the banks
had no allocation & utilization at all in case of green
finance.

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38

In case of climate risk fund, 45% of the banks had

allocated funds but did not make any utilization of it.
Besides, a major portion- 30% of the banks had no
allocation & utilization of funds in this regard at all.
However, 15% of the banks utilized under allocated
budget, 8% utilized more than the allocated budget and
only 2% made full utilization of the allocated budget.
In case of budget utilization for marketing, training and
capacity building, the majority portion that is 38% of the
banks had no allocation & utilization at all. Besides, 30%
of the banks utilized lower than their allocated budget, 26%
made no utilization of the allocated budget, only 4%
utilized more than the allocated budget and 2% made full
utilization of the allocated budget.

Green Finance
Utilization of funds for Green Finance includes two major categories: 1) Direct Green Finance
and 2) Indirect Green Finance. Banks make direct green finance for installation of Effluent
Treatment Plant, Renewable Energy Plant and some other environment friendly projects.
Besides, indirect green finance includes providing funds on projects having ETP or the like.

Green Banking |

39

Source: Annual Report of Green Banking of BB, 2012

Source: Annexure B (in appendix)

Climate Risk Fund
Banks climate risk fund covers their part of CSR activities as green event or green projects
related to Climate Change Risk. Banks in general have not yet responded well in terms of
utilizing Climate Risk Fund. Banks have utilized only 7.35% against total allocation. Out of taka
Green Banking |

40

2145.35 million, Private Commercial Banks (PCBs) have utilized taka 135.32 million (85.84%)
maximum contribution whereas State Owned Commercial Banks (SCBs) have utilized 8.03%,
Foreign Commercial Banks have utilized 6.13% and Specialized Development Banks- no
utilization at all.

So
urce: Annexure B (in appendix)
Marketing, Training & Capacity Building
During the year 2012 mainly the private commercial
banks (PCBs) have given more concentration on
Green Marketing, Training and Capacity Building
compared to SCBs, SBs and FCBs. In this case PCBs
share of utilization is 96.21% where FCBs share is
2.03% and SCBs share is 1.77%.

Green Banking |

41

Source: Annexure B (in appendix)

Environmental Risk Rating (EnvRR)

Environmental risk is not a part of credit risk; rather it is a facilitating element of credit risk
when it is linked with the credit risk due to environmental condition/climate change.
Incorporation of environmental risk is required to be incorporated in the Core Risk Management
(CRM) that mandates considering EnvRR in the overall credit risk methodology. Incorporation
of environmental risk in CRM is also important for computation of adequate capital under Risk
Based Capital Adequacy (RBCA) and the CAMELS rating under off-site supervision as well.
Banks are now assessing EnvRR following the Environmental Due Diligence (EDD) Checklist
of Environmental Risk Management (ERM) guideline.
The scheduled commercial banks have started EnvRR since July 2011. During the year 2012,
total number of projects rated by the banks is 17644 of which 17601 projects have given finance
amounting to BDT. 1482914.30 million.

Green Banking |

42

Source: Annexure C (in appendix)

Online, Internet & SMS Banking

Access to online banking service for the customers is expanding day by day along-with the
increase in number of branches with online coverage and accounts facilitated with internet and
SMS banking.

Green Banking |

43

Source: Annexure D (in appendix)

Online banking scenario looks promising where 3445 out of 8392number of branches i.e.
41.05% are equipped with online banking services. Thirty seven banks mainly private and
foreign commercial banks are fully automated ensuring online banking services in each of their
branches. 92.24% of the total branches of PCBs have been brought under online banking
coverage. 5.08% of the total branches of State Owned Commercial Banks (SCBs) and 5.28% of
Specialized Development Banks have been brought under online banking coverage respectively.

Source: Annexure D (in appendix)

Banks have started to concentrate on mobile banking, SMS banking and internet banking. It
shows from the returns that 3.20% and 1.22% of the total number of accounts have been
facilitated with SMS banking and internet banking respectively.
The State-owned Commercial Banks (SCBs) and Specialized Development Banks need to go a
long way in Online, Internet & SMS Banking.
Green Banking |

44

ATM Services by Banks

Most of the banks have been offering 24-hour banking services through their countrywide ATM
booths. According to the Annual Report of Green Banking of Bangladesh Bank 2012, currently
there are 4738 ATM booths operating in Bangladesh. Dutch-Bangla Bank is taking the lead with
installation of 2366 ATMs. BRAC and AB Bank also take a good position with 317 and 222
ATMs respectively.
Scenario of ATMs/ SME Units of Banks Powered by Solar
Energy Up to 2012
Type of Banks

Total Number of Branches

Number of ATMS/ SME
Number of Powered by Solar
Units Powered by Solar
Branches
Energy
Energy

State Owned Commercial Banks

Specialized Banks
Private Commercial Banks
Foreign Commercial Banks

Total

3482
1457
3378
75

21
22
169
2

8
0
150
3

8392

214

161

Source: Annexure E (in appendix)

214 branches of 26 banks are now powered by solar energy. To mention a few, 23 branches of
Islami, 16 branches of both Sonali & Al-Arafah and 14 branches of Mercantile Bank Ltd. are
powered by solar energy. 161 SME/ATM units of 9 banks are powered by solar energy. BRAC
Bank has facilitated 131 SME/ATM units powered by solar energy. Sonali, AB, Prime, Mutual
Green Banking |

45

Trust, Islami, Standard Chartered, HSBC and Bank Al-Falah banks have SME/ATM units
powered by solar energy.

4.2 GAP ANALYSIS & SCOPE OF GREEN MARKETING

Green banking as a concept of environmentally responsible business is gaining popularity all
over the world. Although its a new concept in the context of Bangladesh, the banks especially
the central bank has already taken some exemplary initiatives to promote it. But there is a long
way to go. From the industry analysis it is observed that the commercial banks are following
systematic approaches for disbursing finance for projects but there are very few initiatives for the
development marketing of green products and services. According to the Report of IFC
Consulting Canada 2007, there are a lot of organizations around the world that are providing
some innovative products and services to their customers which are either environment friendly
or with some environment friendly features. So there is a huge scope for the companies in
Bangladesh to come up with some new and innovative products that will help to protect the
environment from pollution. This section shows some examples of such products and services
from the report of IFC Consulting.
Products/
Services

Features

Offering
Company

Region

Bank has developed a loan

rating system in case of home
1. Home
Mortgage

loan based on yearly reduction

in emission of carbon.
Based on the rating the bank

Dutch Bank

Europe

gives reduction of interest rate

from 1%-3%.

Green Banking |

46

 Company offers 10% premium

refund on its mortgage loan
insurance

premiums

and

extended amortization period

for

35

years

purchasing
homes

2. Commercial

in

case

energy

or

of

CMHC
(CIBC, BMO)

Canada

efficient

making

energy

efficient renovations.
Bank provides 1/8

to 1%

discount on loans to green

Building

leadership

Loans

commercial

projects
or

in

the

NRB

USA

NRB

USA

Citigroup

USA

Mecu

Australia

multi-unit

residential sectors.
Bank provides loans for a 25
3. Home Equity
Loan

year term which is equal to the

warranty period of solar panel
used in the home.

Bank signed a joint marketing

agreement

with

Sharp

Electronic Corporation to offer

customers easily accessible &
convenient financing options to
purchase and install residential
4. Auto Loan

solar technologies.
GoGreen Auto Loan where
the company provides low
interest loanfor low-emitting
vehicle.

This

worldwide

has

received

recognition

as
Green Banking |

47

successful Green Product.

BarclayBreathe Card
The card provides the user the
facility of discount and low
5. Credit Card

borrowing rates when buying

Barclays

UK

green products and services.

50% of the cards profit goes to
the emission reduction fund of
the company.
EcoDeposits
Fully insured deposits that are
allocated for lending to local
6. Deposit Accounts

energy

efficient

aiming

to

companies

reduce

waste/

Shorebank
Pacific

USA

pollution or conserve natural

resources.
EcoCash
Bank provides the opportunity
for accounts checking for a

Shorebank

little service charge of $3 and

Pacific

USA

the service charge is used for

Climate Trust.

If the commercial banks of Bangladesh will come forward with such products and services in the
market and encourage their clients to accept the products, it will not only protect the environment
but also contribute to the company reputation.

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48

4.3 Research Findings

The following matters have been found through the research:
Green banking activities have a major impact on banks performance.
The banks should have given larger amount loan in the effluent treatment plant. But they
have given larger amount of loan in projects having effluent treatment plant.
Banks have allocated only 2% and 1% of their total budget allocation for climate risk
fund and marketing, training & capacity building.
Specialized banks have allocated smaller amount (2% of the total allocated amount for
green banking) for green banking in their annual budget.
Governmental banks are lagging behind in budget allocation for green banking.
Banks have used little amount of money (12.07% of their allocated amount for climate
risk fund) in climate risk fund.
Banks have just used 10.74% of their allocated amount for marketing, training &
development activities.
Governmental banks are lagging behind in online banking.
41 banks have formulated green banking policy.
45 banks have established green banking units.
Only 40.99% branches are with online banking facility. Government banks have to go a
long way in this case.
Only 3.20% accounts are facilitated with SMS banking.
Only 16 banks have started mobile banking.
45 banks have 4735 ATM booths.
Only 214 branches are powered by solar energy.
Only 160 ATM booths are powered by solar energy.
People are not aware about green banking.

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49

 Top level management is not aware about the green banking activities of their respective
bank.
There is a lack of culture of green banking activities among banks.
The government has not taken necessary steps to encourage people at environment
friendly projects.

5.1 Recommendation
Banks have initiated their effort for green banking. They have not been fully successful in this
matter. Some steps can be taken to make betterment of this sector. Following are some of the
suggestions that can be adopted by the banks to promote green banking in Bangladesh.
As part of the green banking activities, banks must give larger amount of loan in effluent

treatment plant. Because it is their green banking activities.

Banks must try to utilize their whole budgeted amount.
Banks must allocate larger amount in climate risk fund and marketing, training &

capacity building.
Banks must utilize greater amount in climate risk fund and marketing, training & capacity

building.
All banks must formulate their green banking policy soon.
Banks green banking unit must play an active role in conducting business.
More branches must be brought under solar/renewable energy.
Government banks must step forward to make their branches online.
All banks must start SMS banking so the customers can get banking facilities through

SMS.
Banks must establish more ATM booths to make green banking fruitful.
To set an example before general people, banks must manage their ATMs powered by

solar/renewable energy.
Bangladesh Bank must monitor and supervise whether the banks are following the green

banking guidelines properly.

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50

 Government banks must be more responsible in green banking. They have to allocate

more and make the best use of their budgeted amount.

Bangladesh government should encourage people about environment friendly projects.
Banks should inform general people about green banking.
Coordination among top level management must be made.
Different types of green banking products must be promoted.
Government and Banks must award their customer for their environment friendly

projects.
Banks must apply green banking guidelines and environmental risk management

guideline in an efficient manner.

Banks must develop an environment friendly culture within the organizations.
Banks must follow the global green banking practices.
Credit risk management must be further integrated into credit risk methodology.
Banks must encourage and train their customers to use different green banking tools.
Banks must develop a database for technical issue.
Banks must make their infrastructure green based.
The activities of decision makers must be coordinated to make an overall green economy.
Banks must focus on sectorial lending policy and procedure.
Bangladesh Bank must develop a quantitative approach for more justified rating.

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51

5.2 CONCLUSION
As far as green banking is concerned Bangladeshi banks are far behind their counterparts from
developed countries. The implementation status of the study highlights the fact that banks in
Bangladesh are beginning to understand the importance of introducing green banking into their
mainstream operations. Still, no bank in Bangladesh has been found in the UNEPs signatories of
the Equator Principles (which is regarded as one of the most important standards for responsible
financing). The general picture presents a transition from some notable individual actions in a
consistent and measurable environmental performance for most banks. According to this study,
though the banking industry in Bangladesh are in the intensification phase passing through the
foundation phase within the time frame, some banks are yet to stand on its feet. A few
commercial banks are engaged in in-house environment management and are contributing
towards environment friendly finance through their Green Energy Loans. However banks have a
lot more scope to contribute and should make adequate investment in generating renewable
energy.
Besides, there are no Green Products and Services available in our country in real terms. So
banks have to think about the issue as there is huge market opportunity in this sector.

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52

REFERENCES
Khondokar Morshed Millat, Rubayat Chowdhury, Edward ApurbaSingha, n.d., About
Green Banking, Green Banking in Bangladesh- Fostering Environmentally Sustainable
Inclusive Growth Process, pp. 11.
Olaf Weber, n.d., Introduction, Sustainable Banking- History and Current Developments,
pp. 2-4.
Bangladesh Bank 2012, Annual Report on Green Banking, 2012, Bangladesh Bank, Dhaka.
All Banks Annual Report
Md. Maruf Ullah, n.d., Steps in Green Banking, Green Banking in
Bangladesh-A Comparative Analysis, pp. 7.
PravankarSahoo, Bibhu Prasad Nayak, 2008, Green Banking: International Initiatives,
Green Banking in India, Ser. No. 125/2008, pp. 8-10.
The Equator Principles 2006, Statement of Principles, pp. 2-6.
Khondokar Morshed Millat, RafezaAkhterKanta, Md. MahfuzurRahman
Khan et al. 2012, Bangladesh Bank Green Banking Activities Other than In-House, Green
Banking Report: March 2012, pp. 5.
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