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Green banking can reduce carbon emission

January 11, 2019 00:00:00

Green banking refers to banking business conducted in a manner that helps in the overall reduction of external carbon emission and internal carbon footprint. It has led to the introduction of paperless banking and finance of banking projects, services or trade of a firm or individual that does not pollute the environment in any way or cause any harmful elements or waste to the atmosphere. Services like online banking, internet banking, ATM, POS, IDM, SMS service, finance in solar energy etc, are some examples of green banking technology in Bangladesh. At present, climate change is one of the most discussed issues globally. Continuous endeavours to measure and mitigate the risk of climate change caused by human activities are being made by governments and private institutions across the world.

Internal operations of banks are more or less harmless for the environment. But the activities of banks' customers affect the environment significantly. Generally, banking sector is one of the major sources of finance for industries such as steel, paper, cement, chemicals, fertilisers, power, textiles, etc. Production in these industries leads to carbon emission. Through green banking, the banking sector is playing an intermediary role between economic development and environmental protection by promoting environmentally sustainable and socially responsible investment projects.

Bangladesh Bank (BB) issued the Environmental Risk Management Guidelines for banks and financial Institutions (FIs) in 2011 to assess environmental risk in their credit and policy guidelines for green banking for Banks. BB also introduced a uniform reporting format for reporting green banking activities in a structured manner for banks in 2012 and prepared 'Policy Guidelines for Green Banking' in 2013.

From January 2016 onwards, a minimum target of direct green finance was set at five per cent of the total loan disbursement/ investment for all banks and FIs. They were also instructed to form a 'Climate Risk Fund' under the mentioned policy guidelines for green banking, where 10 per cent of the banks' annual Corporate Social Responsibility budget will go.

Banks and FIs have also been instructed to set up solid waste management system, rainwater harvesting and solar power panel in their newly constructed or arranged building infrastructure.

The BB established a revolving refinance scheme worth Taka 2.0 billion from its own fund for green products like solar energy, bio-gas and effluent treatment plant (ETP) in 2009. The BB has enhanced the product line to 50 under 11 categories (Renewable Energy, Energy Efficiency, Solid Waste Management, Liquid Waste Management, Alternative Energy, Fire Burnt Brick, Non Fire Block Brick, Recycling and Recyclable Product, Green Industry, Ensuring Safety & Work Environment of Factories and Miscellaneous) till date.

Other sectors can come up with similar plans and strategies to ensure that their activities are not harming the environment and contributing to climate change.

Md. Zillur Rahaman

Islami Bank Bangladesh Ltd.

Lalmohan Branch, Bhola.


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