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Sustainable Banking

Over the past year, intense and wide-ranging debate has arisen on the heels of the
global financial crisis. In recent months, the critique has turned to capitalism itself, with
media headlines posing questions such as 'Crisis in Capitalism?' and 'Whats wrong with
capitalism?' Criticism has targeted the international financial system, questioning the role
and activities of banks in particular. Questions have focused on how banks have
generated their returns and, even more closely, on how they have shared their returns
with various stakeholders including customers, investors, employees (especially senior
management), and wider society more generally. While the debate continues to draw
attention a group of banks has for some time been answering many of these challenges
by delivering strong, straightforward and sustainable banking services. Sustainable banks
have consistently delivered products, services and social, environmental and financial
returns to support the real economy1. These banks demonstrate decades of responsible
banking and a consistent commitment to productive economic activity. They have
increased their activity during the present recession, expanding their lending to small and
growing businesses in particular. Committed to providing a broad range of banking
services to the real economy over the long-term, they highlight the powerful role of
sustainable banks as stewards of successful, equitable capitalism. Many of these
sustainable banks have been in business for a few decades, others for far longer. Their
models of providing long-term, patient but sustainably profitable banking services have
been at the heart of some of the worlds most successful economies, especially in the
small and growing business sectors. The vital role that these banks play in true economic
development is increasingly recognized in the debate over how to restructure local and
global finance. The evidence of their success suggests a renewed emphasis in public
policy, and by investors, on sustainable banks, could provide the long-term path for
responsible banking. Such responsible banking is necessary to support a more just,
environmentally sound, and sustainable economy.
Definition of Sustainable banking
Sustainable banking also known as a social, alternative, civic, or ethical banking, is using
money with conscious thought about its environmental, cultural and social impacts, and
with the support of savers and investors who want to make a difference, by meeting
present day needs without compromising those of future generations.
History of Sustainable Banking
Mainstream financial banks have had varying relationships with Corporate Social
Responsibility and Sustainable investment. However, a clearer movement has emerged
since the 1990s. With changing social demands, and as more is known about the effects
that banks can have through their lending policies, banks have begun to feel pressure
from the general public, NGOs, governments, regulatory bodies and others to consider
their social and environmental impact. For example, in the mid-1990s the Cooperative
Bank asked 6,000 customers what their thoughts were on Sustainable banking; 84%

responded that it was a good idea. Harvey 1995 In fact the cooperative bank was
formed in response to the growing consumer base looking for Sustainability oriented
Principles of Sustainable Banking
Triple bottom line approach at the heart of the business model;
Grounded in communities, serving the real economy and enabling new business
models to meet the needs of both;
Long-term relationships with clients and a direct understanding of their economic
activities and the risks involved;
Long-term, self-sustaining, and resilient to outside disruptions;
Transparent and inclusive governance;
All of these principles embedded in the culture of the bank.
Activities of Sustainable Banking
1. Ethical initiatives
2. Community involvement
3. Environmental standards for lending

1. Ethical initiatives: Numerous sustainable banks allow customers to contribute to

organizations that have positive societal/environmental impacts either in the local
community or in developing countries. Examples include an evaluation of the
energy efficiency of a home and potential improvements in this; carbon-offsets;
Coro Strindberg 2005 credit cards that benefit charities or lower interest rate loans
for low emission cars.
2. Community involvement: Ethical banks excel in community involvement, as do
other financial institutions such as credit unions. Community involvement is not
limited to ethical banks as conventional banks also partake in such actions. The
following are a few examples of community involvement done by ethical banks,
credit unions, and conventional banks:
a. Affordable housing projects
b. Many banks/credit unions try to increase financial literacy in the community
c. Give local scholarships & sponsorships.
d. Financially support community events (for ex. each year TD Canada trust
donates to a local cause)
3. Environmental standards for lending: Environment is a key focus amongst ethical
banks (in this field specially called sustainability or green banks) as well as amongst
many conventional banks that wish to appear more ethically oriented or that see
switching to more environmental practices to be to their advantage. Some view
this move as green washing. In general bankers "consider themselves to be in a
relatively environmentally friendly industry in terms of emissions and pollution.
However, given their potential exposure to risk, they have been surprisingly slow to
examine the environmental performance of their clients.

Sustainable Banking practice in Bangladesh

In our country Green Banking is given more focus among sustainable banking activities
Bangladesh is one the least developed countries (LDCs) where natural calamities are a
common phenomenon, which often causes huge losses. Even climate change impacts
are high in our country, which needs proper dealing and management, effective
guidance from all quarters, especially from banks. Green banks involve pursuing financial
and business policies that are friendly to environment. The Bangladesh Bank has shown
keen interest in it, and as such formulated guidelines in this respect, and encourages the
scheduled banks to take measures to create a congenial atmosphere through 'green
banking methodology'. Green banking can also reduce the need for expensive branchbanking and customer services. Green banking is a new initiative in Bangladesh. The
leading bankers and entrepreneurs have come forward to save man from environmental
disasters. In the context of Bangladesh, if we think about it, we will find the situation to be
terrible. Our people have little awareness about environment, air and water pollution,
industrial and medical, and household wastes.
Some Important Features of Green Banking Operations are as Follows:
Banks can help environment through automation and online banking.
Green banking focuses on social safety and security through changing the
negative impacts of the society
In financing, it always gives priority to investments / loans which consider risk
factors regarding environmental conditions.
It always cares for sustainable and green growth in industrialisation and for social
It creates a congenial atmosphere inside and outside the bank.
It considers the clients as its family members, and as such, guide and supervise the
projects to reduce pollution and thus implement scientific methods in the real
sense by implementing environmental due diligence (EDD) checklist.
It reduces cost and energy, thus saving money and increasing GDP of a country.
It changes the mental faculties of the officials and customers, in line with green
It helps institutions, men and the nation in general live with dignity.
Green Banking products and services
Financial institutions are rushing to market with new or re-packaged product and service
Offerings from green auto insurance to innovative pro-eco mortgages and new
sustainability-backing investment funds.
Green Deposits: Banks can offer higher rates on CDs, money market accounts,
Accounts and savings account if customers opt to conduct their banking activities online.

Green Mortgages and Loans: A green mortgage offers better rates or terms for
energy efficient houses. Green mortgages can allow home buyers to add as much
as an additional 15 percent of the price of their house into loans for upgrades
including energy-efficient windows, solar panels, geo-thermal heating or water
heaters. The savings in monthly energy bills can offset the higher monthly
mortgage payments and save money in the long run. The Energy Efficient
Mortgage (EEM) is a type of HUD-approved green mortgage that will credit
you for your homes energy efficiency in the mortgage itself. Many home
improvements also qualify for the energy tax credit. Anyone undertaking an
energy-saving house project should shop around for a bank that offers a special
rate for a green mortgage or loan.
Green Credit Cards: A green credit card allows cardholders to earn rewards or
points which can be redeemed for contributions to eco-friendly charitable
organizations. These cards offer an excellent incentive for consumers to use
their green card for their expensive purchases. Imagine the millions of dollars that
could be raised for worthwhile environmental groups if green credit cards really
took off.
Green Reward Checking Accounts: A product called reward checking accounts
pays a bonus rate to customers who go green. Customers can earn higher
checking account rates if they meet monthly requirements like receiving
electronic statements, paying bills online or using a debit or check card. With
this banking product higher rates and eco-friendly livings go hand-in-hand.

Scopes of sustainable Banking in Bangladesh

2. All the branches of the banks may prepare a list of their goods, furniture fixture etc.
to arrange or keep the important commodities and reject the unnecessary goods
/ things and thus clean up the branch with better set-up and get-up.
3. Power, gas and water use and all other day-to-day activities ought to be
cautiously carried out.
4. Banks may introduce all sorts of IT-based online services to its customers to reduce
hazards and huge rush inside their premises.
5. Banks may offer higher rates of profit to the depositors if they opt to conduct their
banking activities only through online services.
6. Green banks think about environment, especially climate changes, natural
calamities and pollution. As such many scopes to establish eco-friendly industries
and pro- environment projects are created.
7. All the industrial units under their command should be advised to complete BMRE
if required, and establishment/ installation of Effluent Treatment Plants (ETPs) at
their industrial units.
8. Implementation of the solar energy programme is a must. It will help the banks in
the projects of electrification of schools, houses, hospitals and other places.

9. Banks may help the organizations dealing with environment in establishing special
projects or resisting the anti-environment elements and conserving the resources.
10. Bio-gas projects may be established. They are mainly based on animal and
municipal wastes.
11. There are still many scopes for establishing micro/macro level hydro projects in
Chittagong and Chittagong Hill Tracts. The capacity of the Kaptai hydro project
can be enhanced.
12. Banking authorities in Bangladesh may impose restrictions on establishment of any
industry or projects without putting in place the green banking methodology.
13. Banks may encourage jute and jute product projects, cottage industries and small
14. They may help ensure better sanitation, beatification, drinking water, smooth
water supply projects.
15. Green plantation may be introduced. Banks may initiate plantation programs
throughout the country.
16. The real GDP growth could be increased if the green banking project is
implemented properly.
We should expect banks to start looking more in detail at the potential ecological
damage that their clients could be generating when receiving financing from them.
Companies known to be involved in activities that result in substantial environmental
damage through the extraction of fossil fuels for instance; companies polluting the seas
through the release of toxic chemicals; companies that manufacture products which
persist in the environment and are linked to health concerns; and any other company
damaging the world should not receive financing so easily as they do today from banks
and financial institutions. While we recognize that avoidance of all possible
environmental damage is often very expensive and hard to achieve, we believe that the
efforts should be at least seriously pursued. We expect companies to actively search for
a balance between their activities, their production processes, their use of natural and
human resources and the respect for the environment.