18

Chapter 1

Introduction

Green Banking & Its Practice

 18

1.1 Background of the Study

The term Green Banking is now popular worldwide now-a-days. It is for stopping the
environmental degradation and making this planet habitable. The concept of Green Banking was
developed in the western countries. Green banking is a general term, which can cover a
multitude of areas from a bank being environmentally friendly to how and also where their
money is invested.

Defining green banking is relatively easy. It means promoting environmental-friendly practices

and reducing carbon footprint from banking activities. A green bank is a bank that promotes
environmental and social responsibility but operates as a traditional community bank and
provides excellent services to investors and clients. Its progressive approach to the community
and the earth makes it different from the crowd. A green bank is also called ethical bank,
environmentally responsible bank, socially responsible bank, or a sustainable bank, and is
expected to consider all the social and environmental factors.

Green banking involves pursuing of financial and business policies that are not hazardous to
environment rather help conserve environment. The broad objective of green banking is to use
resources with responsibility and giving priority to environment and society. It is more about
focusing on 'mother planet and its sustainability', shifting from a traditional approach on 'profit'
or even 'people'. Green banking is not just another corporate social responsibility (CSR) activity;
it is all about going beyond to keep this world livable without much damage.

Green banking, which considers all the social and environmental factors, is also called 'ethical
banking'. Ethical banks started with the aim of protecting the environment. These banks are like
normal banks that aim to protect the environment and are controlled by the same authorities.

Green banking, compared to normal banking, attaches more importance to environmental factors.
Its aim is to provide good environmental and social business practices. It checks all the factors
before considering a loan - whether the project is environment-friendly and has any implication
on the future of people and planet. On would be awarded a loan only when all environmental
safety standards are followed.

Basically, green banking avoids as much as paper work as possible - from go-green credit cards
and go-green mortgages to all transactions done online. It creates awareness around business
people about environmental and social responsibility, enabling them to adopt environment
friendly business practices, and follows environmental standards for lending. When a person is

Green Banking & Its Practice

 18

awarded a loan, the interest is less than normal banks because ethical banks give more
importance to environment-friendly factors - they do not operate with high interest rates only.

Green Banking & Its Practice

 18

1.2 Objectives of the Study

The main objective of this study is to know and have a clear idea about the concept of green
banking. Along of this objective some other special objectives may be exposed as under:

 To know the basic concept about green banking.

 To know the historical background of green banking.
 To know the objectives of green banking.
 To know the role of green banking.
 To know the application of Green banking in various countries.
 To know the present practices of green banking in Bangladesh.
 To have knowledge about policy standard set by the Bangladesh Bank for the application
of Green Banking.

Green Banking & Its Practice

 18

1.3 Importance of the Study

Environmental protection and awareness, and sustainable, ecological measures have emerged as
significant themes of our age and an increasing number of “green” technologies are also finding
their way into the banking branch. Until recently, environmental concerns were not considered
relevant to the business operation of banks and financial institutions. Traditionally, banking
sector’s concern for environmentally degrading activities of clients is like interfering or
meddling in their business affairs. However, now it is being perceived that dealing with
environment brings risks to their business. Due to strict environmental disciplines imposed by
the competent authorities across the countries, the industries would have to follow certain
standards to run their business. In the case of failure, it would lead to closure of the industry’s
leading to a likelihood of default to the bank. The importance of Green Banking is immense for
both the banks and economy by avoiding the following risks involved in banking sector. The
adoption of green banking strategies will help the bank to deal with these risks involved in their
business operation.

Green banking strategies involves two components:

(1) Managing environment risk and
(2) Identifying opportunities for innovative environmentally oriented financial products.

To manage environmental risk, the banks have to design proper environmental management
systems to evaluate the risks involved in the investment projects. The risks can be internalized by
introducing differential interest rates and other techniques. Moreover, bank can withdraw
itself from financing high-risk projects. The second component of green banking entails creating
financial products and services that support commercial development with environmental
benefits. This includes investment in renewable energy projects, biodiversity conservation,
energy efficiency, investment in cleaner production. Thus, 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. They can also have an
environmental assessment requirement for the projects seeking finance. Environmental concerns
are integrated into the international trade policy and often act as trade barrier for environmentally
sensitive goods (ESGs). So adopting environmentally sustainable Technologies or modes of
production is no more considered as a financial burden, rather it brings new business
opportunities and higher profit.

Green Banking & Its Practice

 18

1.4 Scope of the Study

In fact perception and exception of the customers have undergone a vast change with the
availability of retail banking services at their door steps with the help of technology and expects
to complete all their banking transactions from a single place.

The study identifies the product and service usage in terms of customer’s convenience pattern.
The reason for choosing this topic is to analyze customer behavior towards usage of different
green banking services provided by the privet sectors banks and to suggest strategies for using
this services in order to make it more competitive and customer friendly. The study will help
privet sector banks to reorient their marketing strategies for better reach among customer in order
to complete with its rivalry with technology as its core competence.

Green Banking & Its Practice

 18

1.5 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 the concerned employees of the bank.
 Conversations with my classmates.
 Practical work experience in the Green Banking Unit under the Risk Management Division of
the bank.

Secondary Sources:
 Quarterly Reports of Prime Bank Limited about Green Banking.
 Reports published by Bangladesh Bank.
 Some national & international journals about Green Banking.

Green Banking & Its Practice

 18

1.6 Limitations of the Study

During the completion of this term paper, numerous problems have been encountered for the
accomplishment of the study. These problems may be termed as limitation of the study,
enumerated as follows:

1. Time frame for the research was very limited. The actual survey was done within a short
period.
2. Unavailability of written documents as require for making a comprehensive study.
3. Some supportive materials were not available during the completion of my term paper i.e.
PC, Internet facility, Essential Books, Lack of Experience etc.
4. Last but not the least, in many cases, up to date information is not published.

It seems to me that during completion of this report necessary and up to date information was not
possible to gathered, I think if it was possible then a fully-fledged and comprehensive report
could have been made possible.

Green Banking & Its Practice

 18

Chapter 2

Green Banking

Green Banking & Its Practice

 18

2.1 Definition of Green Banking:

The word Green banking is like a normal bank, which considers all the social and environmental
or ecological factors with an aim to protect the environment and conserve natural resources. It is
also called as an ethical bank or a sustainable bank. They are controlled by the same authorities
but with an additional agenda toward taking care of the Earth's environment.

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 today’s 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 way-
Green Banking means banking practices that foster environmentally responsible financing
practices as well as using environmentally sustainable 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 & Its Practice

 18

Comments of experts about Green Banking

"We have to change our mindset about environmental issues for making a better future through
greening our mind," said Bangladesh Bank Governor Atiur Rahman.

"It is time to focus on protecting our planet through initiating green banking, because the main
objective of green banking is to protect environment through pursuing environment- friendly
financing policies." “Said Mamun Rashid, Ex. managing director of Citibank NA.

“We are facing a negative impact of climate change though we contribute little to global
warming, so, we have to focus on adaptation and mitigation process to cope up the adverse
impacts of global warming, and green banking initiative can facilitate this process." said Qazi
Kholiquzzaman Ahmad, chairman of Palli Karma-Sahayak Foundation.

2.2 Evolution 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 16th 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 19th century credit unions and financial cooperatives worked on the criteria
that were used as sustainability criteria later. (Weber n.d., p. 2)
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
sustainability mutual funds, indices and other financial products and services were

Following the political disturbance in

the 1960s and first discussion about

Green Banking & Its Practice

 18

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.
(Weber n.d. p. 2)

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
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 Objectives of Green Banking

 The broad objective of the Green banks are avoiding waste and giving priority to
environment and society.

Green Banking & Its Practice

 18

 Focusing on environment-friendly initiatives by providing innovative financial and

ensure sustainable development.
 Using organizational resources with responsibility.
 Keeping the world livable for a long period of time.
 To minimize paper works as much as possible inside and outside the bank.
 To achieve cost and time efficiency.

2.4 Importance of Green Banking

The public concern at the state of the environment has been growing significantly in the last few
years, mostly due to apparently unusual weather patterns, rising greenhouse gases, declining air
quality etc. Banks hold a unique position in an economic system, and can affect production and
businesses through their financing activities.

However, if green banking simply means incurring additional costs by a bank, it might never be
accepted as common business practice by the global banking industry. Though, positive
relationship between green banking strategy and profitability has not always been the case,
there is evidence that socially and environmentally responsible banks can also be financially
successful and have growth rates similar to, or even better than, those of their conventional
competitors.

Moreover, banks that mainly do business with the depositors' money cannot avoid
responsibility to the society. When the common people take care of banks in their bad days,
banks must be made responsible to take care of the society as well.

Banks that were once seen only as profit motive institutions have been adjusting to a more
demanding market and a more socially conscious society over the last two decades.
Environmental concern is at the center of the green banking strategy. An increasing
number of global banks around the world are going green by launching environmental friendly
initiatives and providing innovative green products.

In the long run, the trend towards green banking will be largely driven by consumer behavior.
Common people and consumers are becoming increasingly aware of the responsible behavior of
businesses.

Green Banking & Its Practice

 18

Green Banking & Its Practice

 18

Chapter 3
Green Banking Practices in
Bangladesh

3.1 Draft guideline of Green banking in Bangladesh

Green Banking & Its Practice

 18

Bangladesh Bank (BB) has prepared a draft policy guideline for introducing green banking
this year in line with global development and response to the environmental degradation.
The guideline, posted on the central bank web site, outlines a three-stage roadmap for
green banking, requesting public feedback by January 25, 2011.

The guideline, in the first phase, suggests all banks to develop green banking policies and
establish separate green banking cells and incorporate environmental risk management
strategies by June 30 this year. In this phase, the banks are also advised to introduce green and
create climate risk funds to finance flood, cyclone and drought prone areas at regular interest
rate without charging additional risk premium.

Promoting eco-friendly products, supporting training and events for raising awareness for
environmental risk management are also suggested to include in the regular activities of the bank
in the next six months. In the second phase, the draft suggests banks to take specific policies by
June 2012 for different environmental sensitive sectors such as agriculture, poultry, dairy,
farming, tannery, fisheries, textile and apparels, renewable energy, pulp and paper, sugar
and distilleries, construction and housing, engineering and basic metal, chemicals, rubber and
plastic industry, hospital/clinic, chemical trading, brick manufacturing and ship breaking.
During this period, all banks will also set up green branches to use maximum natural
light, renewable energy, energy saving light bulbs and other equipment’s. During the same
period, they will have to determine a set of achievable targets and strategies, and disclose these
in their annual reports and websites. They will have to set up green branches. The banks should
increasingly rely on virtual meeting through video conferencing.

According to the draft guideline, banks in the next one year will adopt a green strategic plan,
determining their target for green banking. The draft says a system of environment management
should be in place in all banks before they step into the third phase of green banking, to be
completed by June 2013.

In this final stage, banks will focus on fine tuning of their green activities and will look for more
innovative products and services to expand eco-friendly business and industries.

Commercial banks will have to adopt a comprehensive green banking policy by

December 2013 as part of the central bank's efforts to make banking practices more
responsible to social and environmental causes. The central bank will name top ten banks for
their overall performances in green banking, and will take into account to give it
permission to open new branches. In its policy guideline for green banking, the BB said co-
friendly business activities and energy efficient industries should get preference in financing

Green Banking & Its Practice

 18

by the banks. The banks will have to inform the BB of their initiatives on a quarterly
basis within 15 days after the end of a quarter. The first quarterly report has to be submitted by
July 15, 2011.Besides avoiding negative impacts on environment through banking activities, the
banks are expected to introduce environment friendly green products to address the core
environmental challenges of the country.

The commercial banks will now require taking measures

to protect environmental pollution while financing a new
project or providing working capital to the existing
enterprises. The guidelines advised the banks to facilitate
their clients with utmost care in opening letter of credit
for installation of effluent treatment plant (ETP) in the
industrial units. They were also asked to finance in solar
energy, biogas, ETP and Hybrid Hoffman Kiln (HHK) in
brickfield under BB finance scheme.

3.2 Green banking in Bangladesh

Bangladesh Bank, the central bank, has a greater role in shaping up a concrete guideline for
green banking practices in Bangladesh. According to central bank, each bank and financial
institution can formulate a strategy and guideline for Green Banking and Green Financing.

The commercial banks are to develop green banking policies and show general commitment
on environment through in-house performances by December 31 this year. A high-powered
committee will be responsible for reviewing the banks’ environmental policies, strategies and
programmers.

The committee will be comprised of directors from the board in case of scheduled
Bangladeshi banks and regional chief of global office and members from the top
management including chief executive in case of foreign banks. The banks will allocate a
considerable fund in their annual budget for green banking, and set up a separate green banking
unit. A senior executive should head the unit, which will report to the high-powered
committee time to time. They will have to comply with the instructions stipulated in the
detailed guidelines on Environmental Risk Management. The banks will also incorporate
environmental and climate change risks as part of the existing credit risk methodology prescribed
to assess a prospective borrower. The banks should take measures to save electricity, water
and paper consumption, according to the BB guidelines. A 'Green Office Guide' or at least

Green Banking & Its Practice

 18

a set of general instructions should be circulated among the employees. Instead of relying on
printed documents, online
communication should be extensively
used (where possible) for office
management.

Energy saving bulbs should replace the

regular ones in branches/offices of the
banks. They should make plans to use
solar energy on their premises, and
encourage employees to purchase energy
efficient cars.

3.3 Roles of Green

banking

The people of the whole world are concerned about the environmental degradation,
especially the rising of global temperature and thereby melting of glaciers and ice-berg in the
polar region and consequently rising of sea level, which will directly affect the low lying
countries of the world. The world conscious people are also concerned about the increase of
Green House Gases and Chlorofluorocarbons (CFCs) and thereby depletion of Ozone layer. As
such, every person and especially the professionals must have greater role to check the
environmental degradation.

Bankers are the important professional group who has interaction with the other groups of people
and also with general masses. They can adopt different green activities within their in-house
environment and also can initiate the protection of the air pollution, water pollution by their
clients. Bankers can finance the green projects, which are environmental friendly and discourage
the projects that damage the environment. It will be obligatory for each person to show respect to
the environmental issues. Otherwise, the environments where the concerned person lives will
be inhabitable and as whole the country and the globe will no longer be safe place. We
have to use resources carefully and keep in the mind that the reserve of the resources is not
unlimited and its excessive use may endanger the future generation. We have to think that each
of our activity has a specific impact on the environment

As a best creation of Almighty, we have greater role to conserve the environment,

maintain biodiversity, not to endanger other fauna and flora and above all a green, healthy

Green Banking & Its Practice

 18

planet for safe and sound living of our future generations. Since banking industry is a vital
institution in the economic and business activity round the world, bankers cannot remain
indifferent to this burning issue. A banker or a banking industry may address many issues to save
environmental degradation and conserve the ecological balance. Green banking is a good way
of making people aware of global warming. Each businessman will contribute to the
environment and make this earth a better place to live and enjoy. In addition, it is envisaged
that this institution is going to work towards reducing the country's dependence on foreign
energy sources, fighting climate change and creating additional jobs through the provision of
healthier energy generation facilities. Green finance may cover all the financial services related
to the promotion and development of green industry and green economy where the
environmental benefits in terms of reduced carbon dependency or reduced ecological
scarcity are the most significant. Green banking practices of banks are connected with both
internal operation and product ecology. Some banks are engaged in carbon offsetting, which
refers to the effort of canceling out the climate-changing effects of its own greenhouse gas
emissions. Banks, by using their commercial lending and securities underwriting, may catalyze
the necessary transition to an economy that minimizes greenhouse gas pollution and relies on
energy efficiency.

There is no doubt that the combined

threats associated with climate
change and biodiversity loss call for
a deeper commitment of resources
and investment from all
stakeholders. In the endeavor of
emission reduction and conservation,
stakeholders have been contributing in
different ways in different countries
and regions. Green banking is just
one of the initiatives by stakeholder
- banks and financial institutions.
The environmentally responsible
banks do not only improve their
own standards but also affect socially responsible behavior of other businesses. The banks
will have to go for online banking by eliminating paper waste, saving gas and carbon
emission, reducing printing costs and postage expenses.

Green Banking & Its Practice

 18

3.4 Green Banking practices

Practices of in house Green Banking:

Waste Management:
A green banker must be cautious about wastage and waste management. We should try to control
the wastage of resources like water, gas, electricity, paper, foods etc. For example, if we draft
our letters on a computer rather than in paper, it will save millions of paper as well as
thousands of trees that provide raw materials for paper production. Similarly, if we select a
location of the branch of a bank with sufficient access to light and air, it will save huge
electricity and create a healthy environment. Wastages must be grouped like organic and
inorganic wastage. Organic materials like food, vegetables, animals etc. can be recycled for
manure, gas and electricity etc. The inorganic material like paper, bottles, pots etc. can be
recycled. Wet and degradable materials can be processed directly keeping under the soil. The
recycling materials should be disposed of at the respective disposal site and the rotten items
should be buried under the soil and as such, pollution can be protected.

Clean and hygienic environment:

A green banker will not throw any waste, bottles or packing materials here and there.
Each group of waste should be kept in a separate place, which does not pollute the
environment and all the wastes must be disposed off separately. A green banker will not spit or
cough on the floor, walls or on the road.

On line statements, emailing documents:

We must send account statements and balance confirmation etc. To the clients through online
and through email, which will save paper, time, cost and above all the environment. We may
use these technologies for our clients as well as interbank correspondence.
Sound Pollution:
We should keep our voice low when we converse and also convince our clients maintain
This for the sake of healthy working environment in the branches.

Installation of solar panel in the rural branches and using high mileage vehicles or using
shared vehicles instead of personal vehicle:

Green Banking & Its Practice

 18

Since Bangladesh is an energy deficit country we can install solar panels in all Branches as an
alternative energy source. We can also use the vehicles which consume less fuel which will
save huge fuel import of the country. We can also use big vehicles to carry the employees of the
Banks instead of personal vehicle to reduce fuel as well traffic jam in the roads.

Practices by the Bankers in their business area:

Financing only the green projects:
Bankers must be aware of the environmental issues and they must go for financing the projects
that do not pollute the environment. The industries that are financed by the banks must have
effluent treatment plant (ETP), recycling facilities and smoke and gas arresting unit. The
industries must not release any kind of effluents, chemicals or smoke to the environment.
Banks must not finance any dirty project that pollutes the environment.

Voluntary activities of Banks:

Banks should take initiative to make their clients aware by organizing seminar and
symposium. They can organize awareness campaign in schools and colleges. They can
participate in the tree plantation and cleanliness programs in city areas.

Working on specific green project:

Our country has lot of problems of proper waste management, drainage and sanitation, and
affected by river pollution, water pollution by pesticides etc. Every bank can undertake a specific
green project for removal of existing polluting substances from the ecosystem.

3.5 Areas of Green Banking

Green Bank comes in many forms. Using online banking instead of branch banking. Paying bills
online instead of mailing them. Opening up CDs and money market accounts at online banks,
instead of large multi-branch banks.

Green Bank looks at green banking in three areas - operational, technological and client
acceptance. Banks have made improvements in the operational area such as replacing our daily
courier service with scans and electronic delivery. All employees receive paychecks and
reimbursement checks electronically.

Green Banking & Its Practice

 18

3.6 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.

Online banking: Green Banking has online banking services. It is one of the major important
part of green banking, Such as

Paying bills online

Remote deposit/ bKash
Online fund transfers
E statements
Automated clearing house

Green Deposits: Banks can offer higher rates on CDs, money market accounts, checking
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

Green Banking & Its Practice

 18

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 home’s 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.

3.7 Online Banking and Mobile Banking:

Online banking is the developing concept in young and whole over the country. Online banking
pretty convenient to not have to store all those reams of paper in file cabinet, and it reduces the
amount of paper that the banks have to go through every month. 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. Banks should give
more emphasis to make the easiest way to help environment by eliminating paper waste, saving
gas and carbon emission, reducing printing costs and postage expenses .Up to September 2015,
55 Banks out of 56 have at least one online branch and 39 banks have introduced internet
banking facility up to September 2015. Significant progress has been observed in the expansion
of online branches in the previous quarters. Moreover, SMS/mobile banking facility has been
observed a little varied than the previous quarter.

Green Banking & Its Practice

 18

Table-8: Online Banking (at September 30, 2015)

Type of No. of ATM No. of ATM No. of Total No. of % of Online

Bank/FI Own Shared Branches Branches Branches
with
online
coverage
SOCBs 132 8,421 3,687 2,028 55.00%
SDBs 0 5 1,406 88 6.26%
PCBs 6,413 56,472 3870 3,869 99.97%
FCBs 164 4,207 75 75 100.00%
New Banks 103 8,562 233 229 98.28%
Total 6,812 77,667 9,271 6,289 67.84%

Source: Bangladesh Bank’s Review Report on Green Banking, September 2015.

Table-9: Internet and Mobile/SMS Banking (at September 30, 2015)

Type of No. of Total No. of % of No. of % of

Bank/FI Accounts Accounts Accounts Accounts Accounts
facilitated facilitated facilitated facilitated
with with with with
Internet Internet Mobile/SMS Mobile/SMS
Banking Banking Banking Banking
SOCBs 35,688,076 26 0.00% 3,445 0.01%
SDBs 4,396,805 0 0.00% 3,077 0.07%
PCBs 37,015,994 1,447,572 3.91% 11,236,691 30.36%
FCBs 459,249 141,977 30.92% 160,710 34.99%
New Banks 316,335 3,479 1.10% 115,993 36.67%
Total 77,876,459 1,593,054 2.05% 11,519,916 14.79%

Source: Bangladesh Bank’s Review Report on Green Banking, September 2015

Green Banking & Its Practice

 18

3.8 Training, Promotion and Disclosure:

Employee awareness development and training on environmental and social risk and the relevant
issues should be a continuous process 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.27 Banks out of 56 have arranged 119 training programs
concerning green banking where total number of participants was 4,622. On the other hand, 6 FIs
out of 31 have arranged 22 training programs concerning green banking where total number of
participants was 260.

Table-10: Training in July-September, 2015.

Type of Bank/FI No. of No. of
Programs Participants
SOCBs 5 355
SDBs 4 306
PCBs 107 3,823
FCBs 3 138
New Banks 0 0
Total 119 4,622
FIs 22 260
Grand Total 141 4882

Events in this quarter .Up to September 2015, 45 Banks and 15 FIs have pursued disclosure on
green banking in their annual report; 41 Banks and 12 FIs have put green banking disclosure in
their website. 19 Banks and 5 FIs have disclosed their green banking activities in the media; 8
Banks and 2 F Is have prepared Independent Report on green banking activities.

Green Banking & Its Practice

 18

3.9 Rules and Regulations of 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. 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. The Green
Banking practices in Bangladesh can be viewed from three perspectives:

1) Initiatives taken by Bangladesh Bank,

2) Initiatives taken by Government &
3) Initiatives taken by other commercial banks.

Initiatives Taken by Bangladesh Bank

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. 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. (Morshed et al. 2012, p. 5) The policy is to be
rolled out in the following three phases.

Green Banking & Its Practice

 18

Besides developing a formal guideline regarding Green Banking practices, Bangladesh Bank has
also launched a refinance program of Taka 2 billion for different types of Green financing like
Solar Irrigation Pump Station, Solar Home System, Bio Gas Plant, ETP, HHK and Solar PV
module assembling plant.

Initiatives Taken by Government

The government of Bangladesh has already invested USD 10 billion over the last three decades
to make 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:

Green Banking & Its Practice

 18

Initiatives Taken by Commercial Bank

According to Morshed et al. (2012, p. 5) With some formal guidelines of Bangladesh Bank as
well as government, the commercial banks of Bangladesh have also come up with some
remarkable initiatives regarding green banking like:

Policy Formulation and Governance Climate Risk Fund

Budget Allocation Green Marketing
Green Banking Unit/Cell/Desk Green Banking
Incorporation of Environmental Risk in Core Branches powered by Solar Energy
Risk Management (CRM)
Bank‟s In-house Green Activities Improved In-House Environment
Management
Green Finance Employee Training, Consumer Awareness
and
Green Event

3.10 Top 10 Banks Practicing Green Banking During 2015

According to the report of Bangladesh Bank the top 10 banks in Green Banking activities by the
end of the year 2015 are:
1. AB Bank Limited
2. Bank Asia Limited
3. Eastern Bank Limited

Green Banking & Its Practice

 18

4. EXIM Bank Limited

5. IFIC Bank Limited
6. Islami Bank Bangladesh Limited
7. Prime Bank Limited
8. Rupali Bank Limited
9. Social Islami Bank Limited
10. Standard Chartered Bank Limited.

3.11 Prospects of Green Banking

The banking sector may also have significant impacts on biodiversity while providing
financial support to high impact sectors such as forestry, mining, oil and gas, fisheries, and
infrastructure. In project finance, banks may exercise their powers through assuming roles as
environmental policeman to ensure that their borrowers comply with the environmental
standards, and could enter into a partnership with different industries and encourage companies
to be more sustainable.
Regulatory enforcement by governments,
pressure from the civil society and
consumers, voluntary support, and responses
by the business entities are preconditions for
creating a congenial atmosphere for offering
and accepting productive green banking
services. A Common platform or unique
approach by the policy makers and civil
society groups in all countries or regions
would give the best result. However,
creating a common platform and launching a uniform approach would require major
political effort by all.

Green Banking & Its Practice

 18

Chapter 4

Recmendation, Findings &

Conclusion

Green Banking & Its Practice

 18

4.1 Recommendation

Bank should keep following aspects in mind while financing any projects:

1. Analyzing the project in terms of scale, nature and the magnitude of environmental
impact. The project should be evaluated on the basis of potential negative and positive
environmental effects and then compared with the ‘without project situation’. There
should be an Environmental Impact Assessment (EIA) of each project recommending the
measures needed to prevent, minimize and mitigate the environmental negative impact
before financing the projects.
2. While investing or funding the projects, the financial institutions should assess the
sensitive issues like vulnerable groups; involuntary displacement etc. and projects should
be evaluated in terms of environmentally important areas including wetlands, forests,
grasslands and other natural habitats.
3. Banking institutions need to evaluate the value of real property and the potential
4. Environmental liability associated with the real property. Therefore, the banks should
have right to inspect the property or to have an environmental audit performed through
the life of the loan.
5. Banks also need to monitor post transaction for the ideal environmental risk management
program (Rutherford, 1994) during the project implementation and operation. There
should be physical inspections of production, resources, training and support,
environmental liability, audit programs etc.
6. The next round of evaluation includes loan structuring, credit approval, and credit review
and loan management. Further banks have annual audits, quarterly environmental
compliance certificate from the independent third party and also from the government.

Further the banks can introduce green bank loans and products like:
I. Investing in environmental projects (recycling, farming, technology, waste, etc.) for
example reduced-rate of interest on loans to homeowners who install a solar energy
system
II. Providing option for customers to invest in environmentally friendly banking products
III. Investing in resources that combine ecological concerns and social concerns

Green Banking & Its Practice

 18

4.2 Findings:
(1) Basically Green banking avoids as much paper work as possible and rely on electronic
transactions for processing of activities. Less paperwork means less cutting of trees.
Here, most of the PCBs and FCBS adopted the GB policy except SCBs and SDBs who
have not taken such steps yet. Bangladesh Bank not only gives the policy but also provide
technical supports for GB adoption. Bangladesh Banks developed a policy for sanction
loans to environmentally harmful projects so that make sure the necessary environmental
compliance factors before lending a loan/investment. GB motivates the banking system
that reduces use of paper which create brand image and Create awareness amongst the
stakeholders about the environment as well as environmental friendly business practices
i.e. solar equipment’s, ETP, Bio-gas Plant, Hybrid Hoffman Kiln (HHK) etc.

(2) All 47 banks (scheduled before 2013) have their own Green Banking Policy Guidelines
approved by their respective Board of Directors/Competent authority as well as have
Green Banking Unit (GBU) for pursuing Green Banking activities. They also have their
own Green Office Guide for conducting in-house green activities.

(3) All newly scheduled banks (9 banks) have formulated their own Green Banking Policy
Guidelines and all have formed Green Banking Unit (GBU) till the reporting quarter. 7
out of 9 newly scheduled banks have prepared their own Green Office Guide.

(4) 30 out of 31 FIs have formulated their own Green Banking Policy Guidelines approved
by their respective Board of Directors and 30 FIs have formed Green Banking Unit
(GBU) till the reporting quarter. 29 FIs have prepared own Green Office Guide for
conducting their in-house green activities.

4.2 Conclusion

There is a growing awareness among banks and financial institutions to protect the environment
and thereby save 'mother planet'. Big banks are committing large funds on a sustainable basis in
responsible banking, creating more values for our next generation. They are shifting forward
from 'profit' to 'people' and now more importantly, to create a better future for all. The sooner
this philosophy of 'green banking' is embraced, the better it is for all.

A good online banking system is the linchpin of reduced costs, improved performance and
competitiveness. We provide the service at no cost to our retail and business customers. The
logical progression of online banking - converting existing customers to online bill payment - is

Green Banking & Its Practice

 18

a harder step and can require a lot of legwork. Once customers get here, there is the chance of
moving to completely electronic banking.

Environmental conservation and protection of ecological balance should be maintained through

combined efforts of multi stakeholders. The main stakeholders are businessmen, consumers and
professionals, NGOs and government organizations.

As green initiatives sweep across the globe, more and more banks have been adopting green
banking practices. Today, many banks are assessing environmental risk while selecting a project
for financing. Even as the market slows in the face of economic upheaval, many banks are
keeping a focus on green.

The positive outcomes of these green initiatives are evident in many instances. However, these
are the results of collective efforts. There is no doubt that the progress so far has been made
possible because of the substantial efforts of all stakeholders, covering banks, policy makers,
civil society organizations, international development and financial institutions, business entities
and the common people (consumers).

References
1. Bangladesh Bank Info on Mon, March 28 2012 08:55 am
2. FE (The Financial Express) Report, http://www.thefinancialexpress-bd.com/more.php?
news_id=112054 visited on 12.4.2012; 12:20 am
3. Jeucken, M (2001) “Sustainable Finance and Banking, The finance Sector and The Future
of the Planet”. London, Earthscan.
4. Down to Earth, “Enter the Green Rating Project’ (Science & Environment Fortnight),
July 31, 1999.
5. Hart, Stuart. (1995), “Does it Pay to be green? An Empirical Examination of the
relationship between Emissions Reduction and Firm Performance” Business Strategy and
the Environment (September).
6. Star Business Report, http://www.thedailystar.net/newDesign/news-details.php?
nid=154690. Visited on 20.4.12. 1.OO am.
7. http://www.thefinancialexpress-bd.com/more.php?news_id=114842.
8. http://theindependentbd.com/business/banking/12386-green-banking-gets-bangladesh-
banks-support.html
9. http://bankinfobd.com/blog/bb-draws-green-banking-roadmap. Visited on 24.4.12.
10. http://www.bssnews.net/newsDetails.php?cat=2&id=135054&date=2010-10-02

Green Banking & Its Practice