Need for Green Banking

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--By Dwaipayan Regmi
The attack of human beings on nature is the cause of environmental deterioration. This deterioration is leading to global warming and climate change. It has been noticed that the temperature has risen up by 1 degree Fahrenheit in comparison to the previous century, leading to melting of Himalayan glaciers, bursting of lakes and rise of the sea level. Along with this, climatic changes have been causing natural disasters like cyclones, floods, landslides, and droughts. 
Combined efforts of governments, corporate sector and individuals can help in minimizing these various forms of environmental deterioration. For this, governments have to come up with strong policies; corporate houses should follow environmental protection guidelines more strictly; and individuals have to be self-aware to protect the environment around them. 
As part of the role to be played by the corporate sector, banks and financial institutions should embrace green banking — adopting process and strategies that promote environment-friendly practices to help in reducing carbon emission. Green banking helps in reducing internal carbon footprint as well as external carbon emission.  
Banks have been using lighting, air conditioning, electronic equipments, IT, high paper wastage in massive proportion. The resultant internal carbon footprint can be reduced through the use of renewable energy, automation and other measures. On the other hand, banks can reduce external carbon emission by financing projects and companies that are working for pollution reduction and adopting green technologies. Providing loans to firms that have concern for environment would ensure proper utilization of natural resources.
Green banking avoids paper work and contributes to lower the cutting of trees. It makes the corporate world aware about environmental and social responsibility and thereby contributes to handing over a good environment to the upcoming generation. Adopting green banking policies are directly beneficial for the banks as well. 
Providing loans to firms and companies that abide by environment protection principles and regulations ensures that such clients do not become victims of natural calamities. Reputation and goodwill is very important for banks, and being a green bank provides them a distinct identity and reputation in the society. This also minimizes bad goodwill risk. Along with that, adopting such policies helps the banks avoid the risk of being left with securities like contaminated land as collateral. 
However, green banking is not a piece of cake; there are various challenges in making it a reality. It’s not only about reducing paper use and getting digital; there are strategies that a bank should follow.
The most important step towards this objective is while providing loans. Any entrepreneur would think of green environment only when banks will restrict loans to businesses which might cause environmental degradation. Banks can deny loans to businesses that aim high profits by degrading the environment. The nature of business and its impact on the environment should be carefully considered before approving business loans. On the other hand, banks can offer low-interest loans to businesses that are environment friendly. In this way, banks can play a key role in promoting secondary source of energy like solar energy or bio gas energy.
Next, banks can provide preference to green properties like homes equipped with solar energy, rain water harvesting facility, and properties with better environmental surroundings, for collaterals. And they should give secondary preferences, if at all, to properties such as polluting factory, or buildings emitting harmful waste in 
the environment.
In terms of internal contribution, banks should embrace environment-friendly architectural design. Such designs help in reducing use of air conditioners and lights. Along with that, restricting use of carbon emitting machines, fans, energy inefficient bulbs, should be discouraged. Also, minimizing paper usage and promoting use of electronic transactions through rapid use of ATM cards, debit cards or other vending machines can help in being a green bank. 
Another area, where banks can contribute to green environment is the use of vehicles. Instead of providing sole vehicles to employees, banks should provide pick-and-drop services. This will not only help in reducing carbon emission but would also help in easing city traffic. This will also help in reducing the space needed for parking at banks. The space which would otherwise be used for parking could be used to build gardens and fountains. This will not only help the banks go green at the policy level but will also make it a green bank, literally too. 
As part of their corporate social responsibility (CSR), banks can invest in building and maintaining parks, gardens and forests in and around cities. They can adopt tree plantation as a means to mark their important achievements. This would help in inspiring other business ventures to adopt similar strategies. 
Banks have been providing many services to their customers such as free ATMs, Internet Banking and Any Branch Banking Service (ABBS). They could set up a basket ‘Disaster Emergency Fund’, for their client, in case the latter are victimized. The customers should be given a choice to opt for the fund by agreeing to provide certain amount of their interest to the fund on an annual basis. This would make such customers more secure from the impact of natural disasters on their finance. 
Banking has been a charming job in Nepal, and is regarded a prestigious job. To retain this image, it is necessary for banks to go green. Some of the recommendations made in this article might sound impractical considering the nature of their business and the stiff competition in the market to get better clients, still these measures are for banks which believe in ethical business.
The writer is pursuing his MBA at Jawaharlal Nehru Technical University, Andhra Pradesh, India.

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