BB issues policy guidelines on green banking, green finance

Bangladesh Bank (BB) has issued policy guidelines for green banking aiming to protect environmental degradation and ensure sustainable banking practices, officials said Sunday. "We've issued the policy guidelines in line with global development and response to the environmental degradation. The financial sector in Bangladesh should play an important role as one of the key stakeholders," an executive director of the central bank told the FE. He also termed green finance a part of green banking that makes great contribution to the transition to resource-efficient and low-carbon industries i.e. green industry and green economy in general. "Green banking policy needs to be covered through a timeframe which will be segregated into three phases," the BB said in its guidelines, adding that the guidelines would be implemented during the period between December 31 this year and December 31, 2013 in three phases. Under the guidelines, the banks will formulate and adopt broad environmental or green banking policy and strategy approved by their boards of directors. A high powered committee comprising directors from the board in case of scheduled Bangladeshi banks and a high powered committee comprising regional chiefs of global offices and members from the top management including CEOs in case of foreign banks should be responsible for reviewing the banks' environmental policies, strategies and programmes. The banks will approve a considerable fund in their annual budget allocation for green banking. "Banks shall comply with the instructions stipulated in the detailed guidelines on environmental risk management (ERM) in consideration of a part of the green banking policy," the guideline said, adding that the banks will incorporate environmental and climate change risk as part of the existing credit risk methodology prescribed to assess a prospective borrower. The guidelines also said the banks should take steps to save energy from corporate business travel and encourage employees to purchase energy- efficient cars (that consume less fuel) that can reduce gas and petroleum consumption. "Eco-friendly business activities and energy efficient industries will be given preference in financing by banks. Environmental infrastructure such as renewable energy projects, clean water supply projects, wastewater treatment plants, solid and hazardous waste disposal plants, bio-gas plants, bio-fertilizer plants should be encouraged and financed by banks,'' it added. The banks should determine a set of achievable targets and strategies, and disclose these in their annual reports and websites for green financing and in-house environment management as well.