Green Banking and Sustainable Development

Kanak Tara*, Saumya Singh**, Ritesh Kumar*** *JRF, **Faculty, ***Scientist * & **Department of Management Studies, ISM, Dhanbad-826004 *** CSIR-CIMFR, Dhanbad-826015 Email: kanak_2282@yahoo.co.in

Contents Abstract Introduction (General; GB; SD & SB; Literature Review: History) Role of Banks & Environmental Impacts (Internal & External Impacts; Shareholders Diagram) Green banking Industry in India Stages of Sustainable Banking Benefits of Green Banking vis--vis Sustainable Banking Future of Green Banking in India Conclusion References

Green Banking and Sustainable Development

Kanak Tara*, Saumya Singh**, Ritesh Kumar*** *JRF, **Faculty, ***Scientist * & **Department of Management Studies, ISM, Dhanbad-826004 *** CSIR-CIMFR, Dhanbad-826015 Email: kanak_2282@yahoo.co.in

Abstract The present era of industrialization and globalization has added a lot of comfort and luxury to human life but has also lead to an alarming situation of huge environmental degradation incorporated with all the involved activities. Today, the entire sector in the world economy is facing huge challenge to deal with the environmental problems and their related impacts in their day to day businesses. Not only the business firms have realized the importance of the environment but more than that an immense awareness is seen among the consumers and general public for the same. Due to all these reasons the business organizations have started modifying their activities and strategies so as to ensure protection to our natural resources and environment. In this context the financial sector and especially the banks can play an important role in promoting environmental sustainability. Sustainability is one of the most important factors driving the strategy making process of the business fraternity. Though we have realized very late that any development needs to be sustainable and equitable but the positivity lies in the fact that currently there has been an increasing concern for sustainable development among all the sectors in the economy including the financial sector. The various financial services which have adopted green business are banks, stock brokerages credit card companies, consumer finance companies etc. The concern for environmental sustainability has given mass recognition to the concept of corporate social responsibility. The potential benefits of the concept has gained the interest of the regulatory authorities, society, NGOs, employees, customers as well as the international bodies to the issue. In this regard, this concern for environmental sustainability by the banks has given rise to concept of Green Banking. In the present paper green banking and sustainability has been discussed in detail. The paper also highlights on the initiatives, benefits and future of green banking in Indian context. (Key words: Sustainability, Green Banking, Sustainable Development, degradation ) Environmental

Introduction Banks can play a crucial role in maintaining sustainability by becoming a promoter of sustainability. Sustainable development tends to shift the focus of the business fraternity from their traditional bottom line approach of profit to the approach of triple bottom line where the focus lies on three Ps i.e. People (society), Planet (environment) and Profit (economy) and the decision point is the point of intersection of the three considerations (Figure 1).

The Triple Bottom Line Approach Banks and all the financial institutions are focusing on the environmental protection with the purpose of fulfilling the dual role. The first role is to work towards ethically and socially responsible banking and secondly as an important role of their corporate social responsibility. Banks have realized the importance of triple bottom line in their day to day functioning and so its main motive of profit has now shifted towards three Ps. And this theme has worked as a drive towards Green Banking concept. Green Banking: Definition Though green banking (environmental friendly banking, ethical banking or sustainable banking) can be defined in a number of ways in a broader perspective, it is defined as promoting environmentally friendly practices that aid customers in reducing their carbon footprint through their banking operation activities. To aid the reduction of external carbon emission, bank should finance green technology and pollution reducing projects. Green banking aims at combining operational improvements, technology and changing clients habits in the banking business. There are other definitions for this green banking concept but the central meaning is the same i.e. protecting the environment and resources for future generation by looking for sustainable development. Green banking includes several things like sustainable banking, ethical banking, green mortgage, green loans, green credit cards, green savings accounts, green checking accounts, green money markets accounts, mobile banking, online banking, etc. Green Banking helps to create effective and far-reaching market-based solutions to address a range of environmental problems, including climate change, deforestation, air quality issues and biodiversity loss, while at the same time identifying and securing opportunities that benefit customers. Sustainable Development and Sustainable Banking Sustainable development as per the Report of the World Commission on Environment and Development (United Nations, 1987)can be viewed as a pattern of resource use that aims to meet human needs while preserving the environment so that these needs can be met not only in the present, but in the indefinite future. The field of sustainable development can be conceptually broken into three constituent parts: environmental sustainability, economic sustainability and socio-political sustainability. Sustainable banking as per the United Nations Environmental Programme Finance Initiative (UNEP-FI) (2007, 41) is defined as the process whereby banks

consider the impacts of their operations, products and services on the ability of the current or future generations to meet their needs. Banking sector is under huge pressure from its different shareholders to carry out its business in ethical ways (Frenz, 2005; Jecken, 2001). Many initiatives have been taken to promote sustainable banking across the globe and one very important such initiative is establishment of United Nations Environment Programme Finance Initiatives (UNEP FI) in 1990. Few countries have imposed heavy penalties to banks for violating socio-economic principles e.g. the US Comprehensive Environmental Response Compensation and Liability Act lead to a huge loss to the banks in the US. The penalty was imposed to the banks for the environmental pollution by their clients and those banks were made to pay huge remediation cost. The UNEP-FI (2007) states that sustainable banks consider the effects of its services and operations on the ability of the current and future generations to meet their needs. Direct impacts of banks are related to its products and services. (UNEP-FI 2007). Sustainability in banking sector has basically two forms (International Institute for Sustainable Development (2012): Sustainable banking, accessed at www.iisd.org/business/banking, International Institute for sustainable Development). Firstly through adoption of environmental and social responsibility in banks day to day operations like wise use of paper, energy conservation etc. and secondly, by including sustainability in to banks products and strategies like green lending etc. Role of Banks and Environmental Impacts

Green Banking Industry in India Green banking requires a fundamental change in the planning process of the banks with the adequate consideration about the economy, business, finance, society and also the banks profit. This will also help in the ecological balance. If we see the green banking concern in Indian banks then we will find that they are far behind the global trends. None of the Indian banks have adopted Equator Principle despite the RBI instructions. Also, none of the Indian banks are signatory to the UNEPFI. But in recent few years, various Indian banks have started working towards this goal and have adopted various important contributions. State Bank of India in partnership with the Suzlon energy has set up their wind mills to generate power in three states of India i.e. Tamil Nadu, Gujarat and Maharashtra for its own consumption. SBI has also started Green Channel counter (GCC) to initiate various paperless transaction activity of the banks in the branches like cash deposit, cash withdrawal and fund transfer up to Rs 40,000. IndusInd bank has set up Solar power ATM to save 1980 KW of energy per hour every year to reduce carbon emissions. Yes Bank under community development initiatives,

called Planet Earth is promoting clean and green drives energy efficient practices and local disaster management plans at its retail branches. ICICI Group Companies have saved around 30,000 trees and 16 crore litres of water through their various green initiatives. The bank has also supported other organizations to go green by funding and managing green technology projects. Bank investing or lending in environmentally friendly businesses could prove to be an influential trend affecting the strategies that the companies can follow for surviving in the environmentally friendly market. Stages of Sustainable Banking

Benefits of Green Banking vis--vis Sustainable banking: Free electronic bill payment services Various transactions of green banking not only make the transactions easy but also cost saving for both bank and customer as and also time saving. E-statements sent to customer through email. Various green banking activities make the banking transactions very easy and convenient. Green banking activities are also cost saving for both banks and customers and also time saving. E-Remit services for remitting funds to customers home country. Avoids paper work Creates environmental awareness and consciousness among business firms.

History

The concern for degrading environment around the globe has raised an alarm among every individual. It is high time now to start thinking of possible ways of protecting the environment. Green Banking as a concept is a proactive and smart way of thinking with a vision for future sustainability of our only planet Earth. Bank as we all know are the lending agents for the industries that contribute immensely in environment degradation and so needs to be all alert in the modern era for its own sustainability and existence as well as showing its concern for the environment as a member of the society. The present paper looks into the aspects of green banking from the point of view of protecting the environment and providing sustainable development in the society. (Key words: Bank, Green banking, green environment, pollution, corporate social responsibility) Introduction

Green growth means fostering economic growth and development while ensuring that natural assets continue to provide the resources and environmental services on which our well-being relies. To do this it must catalyse investment and innovation which will underpin sustained growth and give rise to new economic opportunities. A return to business as usual would be unwise and ultimately unsustainable, involving risks that could impose human costs and constraints on economic growth and development. It could result in increased water scarcity, resource bottlenecks, air and water pollution, climate change and biodiversity loss which would be irreversible; thus the need for strategies to achieve greener growth.

Twenty first century is strongly determined towards the protection of the environment and sustainable development. This is evident from the different initiatives being undertaken by various sectors, viz. transport, manufacturing and process, telecommunication, information technologies, services, etc. in operation around the world. The deteriorating environment at a rapid rate has raised an alarm demanding for immediate steps towards protection of the environment and saving of the mother earth from further deterioration. The current developmental activity looks only at the economic benefits exploiting the limited natural in an unplanned and unchecked manner overlooking the needs of the future. The industrially developed countries are causing environmental degradation greatly. The developing countries are fast getting closer to their contribution in damaging the environment. Human activities have caused serious damage to the environment. All have the responsibility to save the ecology by prudent activities. The industrial activities that mostly contributes to the over exploitation of the limited resources and pollution should be controlled in the present time. The most influencing agent that can do this job successfully and keep a check on the overall industrial activity, economic growth and development in terms of both quality and quantity is the financial institutions such as banking sector. Green Banking Green banking (environmental friendly banking, ethical banking or sustainable banking) is defined as promoting environmentally friendly practices that aid customers in reducing their carbon footprint through their banking operation activities. There are other definitions for this green banking concept but the central meaning is the same i.e. protecting the environment and resources for future generation by looking for sustainable development. Green banking includes several things like sustainable banking, ethical banking, green mortgage, green loans, green credit cards, green savings accounts, green checking accounts, green money markets accounts, mobile banking, online banking, etc. Green banking is not a new thing in the market. The term has gained importance since the climate change and deteriorating environment issue has come to the forefront. In the present time every one of us now feels the need for protecting the environment. The best thing about the green banking is that under the umbrella of corporate social responsibility the bank through green banking initiatives has now started participating in the movement of protecting the environment. Green bank is just like a normal bank. The new thing that makes it more special is that it is also considering all the social and environmental/ecological factors while performing its regular duties with an aim to protect

the environment and conserve natural resources. It is thereby also called as an ethical bank or a sustainable bank as it now strives for a sustainable future. Green bank operates with the same authorities but with an additional agenda toward taking care of the Earth's environment/habitats/resources. Green banking is often confused with the online banking. Though it may be one of its many activities, it covers a broad spectrum of work in order to protect the environment. The bank can participate in the green movement in almost all the activities it undertake. Similarly, customers through their active participation can take the bank rolling on the right track. Green banking is all about where the bank puts its money. This is also supported by how the daily activities are managed and monitored by the banks. The bank as a financial institution has large responsibility to use their money resources in the right area. Bank is also such identity that is in close contact with almost maximum human faces. With this advantage that the bank possesses it can bring environmental revolution through green operation, green funding, green campaign, etc. Such efforts from the financial institutions can definitely create an environment conducive enough to drive every individual to start caring for the mother earth. Green Banking in India Indias rapid development in the last decade or two is mainly due to the growth in the industrial sector. Such rapid industrialization has also raised an important question of controlling the impact of such growth on the environment. There are environmental legislations as given by the government that encourages industries to follow environmental technologies and practices. However, so far such legislations have not been utilized effectively to raise the industries morale on the ethical ground to protect the very environment where they also live. The bank has been the source of finance to the industries like metallurgical, paper & pulp, pesticides/insecticides, refineries, fertilizers, chemical/pharmaceuticals, tanneries, textiles, sugars, etc. Thus the role of bank in controlling the environmental degradation is very important. Banks in India is now realizing their responsibility for the society and the environment around them and has started taking active role by efficiently implementing green banking concept in their daily operational area. Bank has now started online banking, paperless banking, energy efficient ATMs, green funding in renewal energy resources, going for environmental awareness programme for creating awareness among the people for the degrading environment and asking for their active participation in the green movement. These are all positive steps taken by the bank for the betterment of the society and achieving sustainable development in the society. In the section that follows there few examples that will show how the banks in India are becoming a part of a big movement of protecting the environment. Green banking has many benefits as can be seen from the points outlined below: 1. Green banking attempts minimizing the use of paper and this way going for less cutting of trees.

2. Through awareness activities to business people about environmental and social responsibility green banks are encouraging an environmental friendly business practice. 3. Green lending is another step by the bank to encourage the environment and societal friendly projects. 4. Green banks adopt and implement environmental standards for lending which is a very good step to streamline the industries towards green initiatives for the societal cause. Green Banking Some Examples In the recent times banks in India are all ready for going green by adopting green practice. Banks are now lending to projects that are green, opening ATMs that are energy efficient and environment-friendly, going for paperless banking and use of recycled paper for printing of cheques. Some of the banks in India that have adopted green practice are given below. State Bank of India State Bank of India (SBI) has adopted green banking policy with the objective of contributing towards the fight against climate change. The banking giant that spreads all across the world has taken initiatives of providing loans for those projects that are environment friendly. Green home loans is one such steps in this direction for supporting those green housing environment-friendly residential projects that reduce carbon emissions and promote renewable energy. SBI is also lending to those industries that are going for green projects. SBI is using energy-efficient equipment in its 10,000 new ATMs and ready to go for more of such ATMs and this way the banking giant has not only saved power costs and earned carbon credits, but also set the right example for others to follow. Under the umbrella of Green Channel Counter, a green service initiatives, State Bank of Ind ia is providing many services like; paperless banking, no deposit slip, no withdrawal form, no checks, no money transactions form and all these transaction are done through SBI shopping & ATM cards. State Bank of India has also switched over to energy sector and is now banking on green energy with Suzlon Energy Ltd. SBI has started harnessing wind energy to reduce emissions through its 15-megawatt wind farm developed by Suzlon Energy. The wind farm located in Coimbatore uses 10 Suzlon wind turbines, each with a capacity of 1.5 MW. The wind farm is spread across three states Tamil Nadu, Maharashtra and Gujarat having 4.5 MW, 9.0 MW and 1.5 MW, respectively of wind capacity. The wind project is the first step in the State Bank of India's green banking program dedicated to the reduction of its carbon footprint and promotion of energy efficient processes, especially among the bank's clients. IndusInd Bank This bank is considered as the bank that has revolutionized the green services in the Indian banking sectors. IndusInd is credited with opening of the first solar powered ATMs in the

country. As per the estimate, bank expects saving of 1980 kw of energy annually from the use of solar powered ATMs. The bank is further committed for addressing the climate changes issues and planning for taking many more initiatives in this direction. Industrial Development Bank of India Industrial development Bank of India (IDBI) Bank takes a step towards the Green Initiative in Corporate Governance by going paperless and sending documents to shareholders through electronic mode. IDBI is also a member of the Council of National Action Plan on Climate Change (NAPCC). Besides this, it is also a signatory investor in Carbon Disclosure Project (CDP). IDBI has been taking several eco friendly initiatives in its journey to contribute its mite to combat against global warming and support the green and clean environment. Under the Banks CSR initiatives, a Green Environment Awareness Campaign has been launched wherein it has been resolved to increase green cover in the Banks office and residential premises. The Bank has already issued various suggestions to be followed by its staff members to inculcate environment friendly approach during day to day working in order to achieve its mission to become a greener Bank. ICICI Bank As the first step towards going Green, ICICI bank has always looked at their day to day functioning to identify and implement Green measures. These measures ranged from reduction in consumption of energy and paper to employee engagement. ICICI Banks Green initiatives aimed at customers are driven by the objective of collaborating with each of our customers and making Green a part of all our lives. These initiatives range from Green offerings/ incentives, Green engagement to Green communication to our customers. ICICI bank has been providing assistance to organizations that go for the clean energy and environmentally sustainable projects. ICICI has also been pioneer in the area of clean coal technologies in India. Besides this, ICICI provides assistance in those projects at a concessional rate that make an effort for manufacturing vehicles with zero emissions. ICICI Bank also provide finance for any innovative products that are eco-friendly in nature. Union Bank of India Energy audits conducted annually, measures implemented to bring down the energy consumptions and installation of solar water heaters in the banks building are some of the green initiatives of the bank besides other like paperless banking, awareness programme, etc. Yes Bank Bank has started Planet Earth project to create awareness in local communities surrounding their bank branches. The themes of this project are pollution prevention, recycling and minimizing waste, conserving energy, conserving water and improving sanitation and cleanliness.

Canara Bank Canara Bank has also shown its active participation in the green banking movement through their involvement by financing the green energy projects i.e. solar energy projects. The bank daily activities like deposits, withdrawal and remittance transactions are made without the use of paper by customer using modern technology. Axis Bank Axis Bank recognizes its duty as a responsible corporate citizen to help strengthen the communities in which we live and work. Axis Bank has set up an Axis Bank Foundation (ABF) that is committed to participate in various socially relevant endeavours with a special focus on poverty alleviation, providing sustainable livelihoods, education of the underprivileged, healthcare, sanitation etc. The Bank also contributes up to one percent of its net profit annually to the Foundation under its CSR initiatives. ABF is also actively involved in making steps towards reversing the effects of our ecological footprint, by implementing several Sustainability Initiatives. In line with the Banks initiative in Green Banking with the theme of Reduce, Reuse and Recycle, the Foundation has carried out recycling initiative at the Corporate Office. Environmental Management by the Bank The mankind has seen huge economic progress so far and has made a long journey through time. However, in the search for development mankind has also given invitation to enormous side effects i.e. impacts of development such as, loss of biodiversity, climate change, environmental damage, etc. Bank has a major role to play in the countrys economy and sustainable development. Bank indirectly contributes to the environmental degradation by directly financing those projects and the industries whose activities affect and pollute our environment. Thus, the bank by their active participation in the lending business in a judicious manner can contribute greatly in the society. Banks are now adopting strategies where the projects are scrutinized using a set of tools that take environment into considerations. Banks are also encouraging projects that show its concern for the environment in the form of sustainable development, use of renewable natural resources, waste minimization, pollution prevention, occupational health and safety, energy efficient, care of human health and many similar attributes that tries for the betterment of the society. Thus through active participation at all levels of the project bank can take environmental management action, can monitor the projects and thereby leave a positive impression on the society. Bank through green bank loans can encourage new environmental projects that will have ecological and social concerns incorporated in it. The bank should also see that the customers comply with the environment action plan during the construction and operation of the project and provides regular reports, prepared by in house staff and third party experts. The government should see that there is legislation to force banks to adopt a formal environmental policy statement and should bring this in the notice of the customers. Besides this, the government can definitely play an important role by controlling the impacts of big projects on the environment by designing proper legislation of environmental rules and seeing that these are also properly

implemented. So, government should design proper legislation of environmental rules for banks and ensure enforcement. In India either we do not have proper legislation or when it is there the legislation and rules are not strictly enforced. It is therefore time to look into this matter seriously and work for the society. Future of Green Banking The future of green banking seems to be very promising. In future the Green banking will become the order of the day. We expect a lot of associated green products, green services and green regulations to come into the picture. Green excellence awards and recognitions, Green rating agencies, Green Investment funds, Green insurance and Green accounting and disclosure are some of the things that would be heard and seen in operation in the near future. The developmental activities will keep rising exponentially as we are on the race track trying to overcome the rival and showing our supremacy irrespective of the impact that such unchecked developmental works throw on our environment. At this stage bank along with the legislation of environmental rules can control the activities of the customers and save the environment. Green banking if implemented properly will act as a check to the polluting industries and will also open a path for the new customers who wish to participate in the developmental activities showing ecological and social concerns. Conclusion Green banking refers to the initiatives taken by the banks to encourage environmentfriendly investment. In this respect bank prefers to use their money with those industries that have already turned green or are trying to go green. Going green is in fact more than just becoming environment friendly. Going green is looked upon as a way to reduce costs and mitigate risk. Green banking optimises costs, reduces the risk, enhance banks reputations and contribute to the common good of environmental sustainability. In a broad sense, green banking serves both the commercial objective of the bank as well as its social responsibility. It is important that Indian Banks now recognize their environmental and social responsibilities if they desire to enter the global markets. Indian banks are lacking far behind their counterparts in the developed countries. In India the concept of green banking is catching up slowly and banks are actively looking for methods to portray themselves as a Green Bank. References Biswas, N., 2011, Sustainable Green Banking Approach: the Need of the Hour, Business Spectrum, Vol. 1, No. 1, January-June, pp. 32-38. Ghosh, M., 2010, Green Marketing A Changing Concept in Changing Time, BVIMR Management Edge, Vol. 4, No. 1, pp. 82-92. Goyal, K. A. and Joshi, V., 2011, A Study of Social and Ethical Issues in Banking Industry, International Journal of Ecological Research, Vol.2, Issue 5, pp. 49-57.

Indian Banks Beyond CSR, retrieved from http://timesofindia.indiatimes.com/Education/Indian_banks_beyond_CSR/articleshow/313 2402.cms Thambi, V., 2010, Top 10 Companies that Paint India Green. (http://www.chillibreeze.com/articles_various/top-10-indian-green-companies-greenbusiness-practices.asp). Accessed on 15.08.12. Verma, M. K., 2012, Green Banking: A Unique Corporate Social Responsibility of Indian Banks, International Journal of Research in Commerce & Management, Vol. 3, No. 1, January, pp. 110-114. Banking on Greener Initiatives. (http://lite.epaper.timesofindia.com/mobile.aspx) Major Bank should lead the way to Green Banking. (http://www.deccanherald.com/content/296615/major-banks-should-lead-way.html). http://www.statebankofindia.com http://www.icicibank.com http://www.rbi.org http://www.idbibank.com http://www.unionbankofindia.com http://www.yesbank.com http://www.axisbank.com http://www.indusind.com http://www.financialexpress.com/news/banks-go-green;-indus-ind-opens-1st-solarpoweredatm/556133/0