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Green banking : Go green, think green

Md.Touhidul Alam Khan
***GREEN ECONOMY : DOES IT INCLUDE YOU?
The purpose of Green Banking initiatives taken by central bank is to ascertain required measures to save the environment and reduce pollution while serving or financing customers and improve in-house environment management through efficient and effective use of resources in all the branch and head offices of banks.***
COMMEMORATED every year on 5 June, World Environment Day is one of the principal vehicles through which the United Nations stimulates worldwide awareness of the environment and enhances political attention and action. The aim of the day is to:
• Give a human face to environmental issues;
• Empower people to become active agents of sustainable and equitable development;
• Promote an understanding that communities are pivotal to changing attitudes towards environmental issues;
• Advocate partnership, which will ensure all nations and peoples, enjoy a safer and more prosperous future.
The First regulatory enforcement named Comprehensive Environmental Responses, Compensation, and Liability Act (CERCLA) formed by US government in 1980. Under the act, a potentially responsible party (PRP) is a possible polluter who may eventually be held liable under CERCLA for the contamination or misuse of a particular property or resource. Four classes of PRPs may be liable for contamination under this act:
• Current owner or operator of the site;
• Owner or operator of a site at the time when disposal of a hazardous substance, pollutant or contaminant occurred;
• Person who arranged for the disposal of a hazardous substance, pollutant or
contaminant at a site;
• Person who transported a hazardous substance, pollutant or contaminant to a site, who also has selected that site for the disposal of the hazardous substances, pollutants or contaminants.
In these perspectives green banking initiatives taken by international organizations are:
• Equator Principles: Set of voluntary standards that commit signatory banks to take social and environmental risks into account when providing project finance.
• UN Principles for Responsible Investment (UNPRI): This was developed by institutional investors that recognise the increasing relevance of environmental, social and corporate governance issues that apply to asset management.
• UNEP Finance Initiative Statements: These recognise the role of financial service sector in making global economies sustainable. This promotes investment in clean and renewable energy by financial institutions and other investors.
• UN Global Compact (UNGC): Set of ten voluntary principles under which signatories promise to avoid complicity to human rights violations, adhere to labour standards, and protect the environment.
Being a responsible corporate body and with a view to developing green banking practices in the country Bangladesh Bank issued a circular on 27th February, 2011 (BRPD Circular No.2) on Policy Guideline for Green Banking towards banks stating “to adopt a comprehensive Green Banking Policy in a formal and structured manner in line with the global norms so as to protect environment degradation and ensure sus-
tainable banking practices”. In line with the instructions of Bangladesh Bank, all banks are supposed to take initiatives to formulate its Green Banking Policy with an aim to inculcate practices towards optimum usage of natural resources and make every effort for environmentally friendly activities.
As per circular of Bangladesh Bank, banks are to implement Green Banking guideline under three phases:
In a word, we can say that green banking refers to the attempt of the banking sector
to consider social, ecological and environmental factors with an aim to protect the environment and conserve natural resources. The banking sector plays a major role in financing investment for commercial projects, which is one of the most important economic activities for economic growth. Hence, by taking various measures to save the environment the banking sector can play a crucial role in promoting environmentally sustainable and socially responsible investment. As such, Green Banking is also known as Ethical Banking and Sustainable Banking.
The purpose of Green Banking initiatives taken by central bank is to ascertain required measures to save the environment and reduce pollution while serving or financing customers and improve in-house environment management through effi-
cient and effective use of resources in all the branch and head offices of banks.
Bangladesh Bank is well aware of the environmental degradation situation and has already given time-to-time directions to all scheduled banks. Commercial Banks are now required to ensure necessary measures to protect environmental pollution while financing a new project or providing working capital to the existing enterprises. Banks have been advised to facilitate their clients with utmost care financing for installation of Effluent Treatment Plant (ETP) in the industrial units and to finance in Solar Energy, Bio-gas, ETP and Hybrid Hoffman Kiln (HHK) in brick field under refinance programme of Bangladesh Bank.
By implementing this policy banks intend to accomplish the following objectives:
• Increase goodwill or improve brand image by showing their commitment to save and protect the environment;
• Reduce giving loans to certain environmentally harmful projects;
• Check the necessary environmentally due diligence factors before lending a loan/investment;
• Make efficient and effective use of resources and channel financing in an environment friendly manner;
• Introducing new technology in banking operations that would not only benefit
customers but also increase the productivity of employees;
• Reduce carbon foot print in all branches and head offices of all banks;
• Create awareness amongst the stakeholders about environmental and
social responsibility enabling them to adopt environmentally friendly business practices.
The theme of World Environment Day 2012 is "Green Economy: Does it include you?" UNEP defines a Green Economy as 'one that results in improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities.
Green Economy is one whose growth in income and employment is driven by public and private investments that reduce carbon emissions and pollution, enhance energy and resource efficiency, and prevent the loss of biodiversity and ecosystem services. These investments need to be catalyzed and supported by targeted public expenditure, policy reforms and regulation changes. This is why Green Banking initiatives by all banks are moral obligation to save the people. And the time has come for all lenders to “go green" and “think green” by setting their mindset taking remarkable footsteps through successful green banking initiatives.
The writer is SEVP, Head of Corporate and Team Leader of Green Banking Unit of Bank Asia Ltd and Associate Member of ICMAB. He can be reached: touhidl969@gmail.com