Assignment GB Reiad.final

8/2/2019 Assignment GB Reiad.final

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Assignmenon

Prepared By :

Md. Al-Amin Reiad

Arifa Akter Jahan

Md. Rajib Ahmmed

Green Banking :Initiatives, Efforts,

Achievements andLimitations in

Bangladesh


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1.0 Introduction

1.1 Origin of the Study:

Bangladesh Bank arranged a foundation course for the newly recruited Assistant Directors, Batch-

2010 (Even Batch) which started on July, 2011. As part of the foundation program, our team was

assigned to do a study on Green Banking: Initiatives, Efforts, Achievements and limitations in

Bangladesh. Each team was comprised of three trainees selected randomly by the course director.

Assignment of the topic was also done by the course director.

1.2 Objectives of the study:

To provide an overview of Green banking initiatives taken by the bank,

To examine the policy issues outlining Green Banking,

To provide an overview of green banking practices of Bangladesh Bank as the central bank of the

country,

To gain knowledge about the Global initiatives taken by various bodies and finanical institutionsacross the globe,

To identify green banking opportunities and products.

1.3 Scope of the study:

Green Banking is a very new concept in Bangladesh and Banks have just been provided with a

guideline on 27th February, 2011 vide BRPD circular no. 2. In the circular, Banks have been

advised to develop green banking policies and show general commitment on environment through

in-house performance. The time lining given for the actions to be taken under phase-1 should not

exceed 31st December, 2011 while time lining for to address the whole eco-system through

environment friendly initiatives and introducing innovative products under phase-3 should not

Presented By: Md. Al-Amin Reiad, Arifa Akter Zahan, Md. Rajib Ahmmed 2


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exceed 31st December, 2013. As such we can see that scope of the study is limited as green

banking is yet a budding phenomenon.

1.4 Methodology of the study:

1. Websites: Websites were the prime source of the information presented here. Bangladesh

bank website was mosty handy. We browsed through circulars of various departments most

importantly that of BRPD.

2. Seminar: A BIBM seminar on Green Banking initiatives: Opportunities for Bangladesh

was conducted on 17th Setember, 2011. The seminar material collected was a key source in

completing the study

3. Conversation: Another source of information for the study was conversation with a key

person from Bangladesh Bank.

1.5 Limitations of the study:

1. Green Banking is yet to take a shape in Bangladesh so there are not many published studies

on the topic

2. Few banks are practicing green banking in a limited scale as part of their CSR activity

which are mostly undocumented or unavailable

3. Green Banking is in its budding stage in Bangladesh

4. The study could have been richer, if there were opportunities to visit the banks physically

2. Overview



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Global warming is an issue that calls for a global response. The rapid change in climate will be too

great to allow many eco systems to suitably adapt, since the change have direct impact on bio

diversity, agriculture, forestry, dry land, water resources and human health. Due to unusual

weather pattern, rising greenhouse gas, declining air quality etc society demands that business also

take responsibility in safeguarding the planet. Green finance as a part of Green Banking makes

great contribution to the transition to resource-efficient and low carbon industries i.e. green

industry and green economy in general. Green banking is a component of the global initiative by a

group of stakeholders to save environment. The state of environment in Bangladesh is rapidly

deteriorating. The key areas of environmental degradation cover air pollution, water pollution and

scarcity, encroachment of rivers, improper disposal of industrial medical and house-hold waste,

deforestation, loss of open space and loss of biodiversity. In addition, Bangladesh is one of the

most climate change vulnerable countries. In line with global development and response to the

environmental degradation, financial sector in Bangladesh should play important role as one of the

key stake holders.

In response to the above, urgent measures are required by stake holders for sustainable

development and thereby save the planet. Banks hold a unique position in an economic system that

can affect production, business and other economic activities through their financing activities and

thus may contribute to pollute environment. Moreover, energy and water efficiency and wastereduction are of high concern for many big banks. Green banks or environmentally responsible

banks do not only improve their own standards but also affect socially responsible behavior of

other business.

3.0 Concept of Green Banking

3.1 Green Concept

The idea of green is initiated from the following two terminologies;

1. Climate change: It refers to any significant change in measures of climate.



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2. Global warming: It refers to the warming that can occur as a result of increased emission

of green house gases from human activities.

We all know that 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.

Thus the concept of green has been evolved.

3.2 Green Banking

A Green Bank is an ethical bank, a socially responsible bank or a sustainable bank. Green Banking

is to provide innovative green products to support the activities that are not hazardous to

environment and help conserve environment. Green banking is a component of the global initiative

by a group of stakeholders to save environment.

The broad objective of green banks is to use their resources with responsibility avoiding spoilage

and giving priority to environment and society.

4.0 Importance of Green Banking

Until recently, environmental concerns were not considered relevant to the business operation of

banks and financial institutions. Traditionally, banking sectors 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. Although the

banking and financial institutions are not directly affected by the environmental degradation, thereare indirect costs to banks. 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 industries leading to a likelihood of

default to the bank. For example the enactment of Comprehensive Environmental Response,



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Compensation and Liability Act in 1980 (CERCLA) in the US in late 1980s has resulted in huge

loss to the banks in the US as banks held directly responsible for the environmental pollution of

their clients and made to pay the remediation cost.

This is the reason for which banks in the US are ahead of other countries in integrating

environmental concerns into their business operations. In the recent years several other countries

(more in Europe) are seen adopting policies that have made banks responsible for the misdeeds of

their clients. Therefore, the financial institutions need to engage proactively with the stakeholders

on environmental and social policy issues and evaluate the impacts of their clients investment. In

turn, that would force the customers to take care of their management of environmental and social

policy issues relating to investment. This should cover all project financing activities across all

industries.

Legislatively Bangladesh has also made great improvement in policy making issues. All is done,

now just it needs to be implemented and monitor properly to ensure a sustainable development

while preserving environment.

5.0 Green Banking: Initiatives by Global Communities

Global Communities responded to the call of time to do businesses in an eco-friendly way while

preserving the earth for the future generations by doing the following:

Kyoto Protocol

Equator Principles

UNEP Finance Initiatives

Global Reporting Initiatives

5.1 Kyoto protocol:

Kyoto Protocol is a Protocol to the United Nations Framework Convention on Climate Change

(UNFCCC), aimed at fighting global warming. The UNFCCC is an international environmental

http://en.wikipedia.org/wiki/Protocol_(diplomacy)http://en.wikipedia.org/wiki/United_Nations_Framework_Convention_on_Climate_Changehttp://en.wikipedia.org/wiki/Global_warminghttp://en.wikipedia.org/wiki/Global_warminghttp://en.wikipedia.org/wiki/Global_warminghttp://en.wikipedia.org/wiki/Environmental_policyhttp://en.wikipedia.org/wiki/United_Nations_Framework_Convention_on_Climate_Changehttp://en.wikipedia.org/wiki/Global_warminghttp://en.wikipedia.org/wiki/Environmental_policyhttp://en.wikipedia.org/wiki/Protocol_(diplomacy)


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treaty with the goal of achieving stabilization ofgreenhouse gas concentrations in the atmosphere

to prevent the climate system.

The Kyoto Protocol was negotiated in Kyoto, Japan in 1997 with two conditions for

implementation: must be ratified by at least 55 countries and has to represent at least 55 percent of

the worlds total carbon dioxide emissions for 1990. The first condition was met in 2002 and

second in 2004, and Kyoto Protocol entered into force on February 16, 2005.The goal of the Kyoto

Protocol is to reduce worldwide greenhouse gas emissions to 5.2 percent below 1990 levels by

2012.

5.2 UNEP Finance Initiatives

UNEP Finance Initiatives was launched in 1991 with a group of banks to catalyze the financial

industrys awareness on environmental agenda. Now 190 banks and other FIs are cooperating with

UNEP to understand impacts of environmental and social considerations on financial performance.

5.3 Equator Principle

EPFIs use a system of social and environmental categorization, based on IFCs environmental andsocial screening criteria, these categories are:

Category A Projects with potential significant adverse social or environmental impacts those are

diverse, irreversible or unprecedented;

Category B Projects with potential limited adverse social or environmental impacts those are

few in number, generally site-specific, largely reversible and readily addressed through mitigation

measures; and

Category C Projects with minimal or no social or environmental impacts.

http://en.wikipedia.org/wiki/Treatyhttp://en.wikipedia.org/wiki/Greenhouse_gashttp://en.wikipedia.org/wiki/Atmospherehttp://en.wikipedia.org/wiki/Treatyhttp://en.wikipedia.org/wiki/Greenhouse_gashttp://en.wikipedia.org/wiki/Atmosphere


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5.4 Global Reporting Initiatives

GRI develops and publishes guidelines for reporting on economic, environmental, and social

performance. Guidelines are developed through a unique multi-stakeholder consultative process

with reporting organizations and report information users. First published in 2000 and then revised

in 2002, the guidelines have now entered their third generation, referred to as the GRI G3 in

October 2006.

6.0 Green Banking: Legal Initiatives by Bangladesh

BB is helping the government to implement Environment Conservation Act 1995. In 1997, BB

circular (BRPD-No-12), Commercial banks were asked to ensure that steps have been undertaken

to control environmental pollution before financing a new project or providing working capital

financing to the existing enterprises. From the legislative view, Bangladesh is moderately prepared

as she has couple of laws to go forward with green banking. Key legislations include:

Water Pollution Control Ordinance, 1970;

The Environment Pollution Control Ordinance 1977;

The Bangladesh Environment Conservation Act 1995;

The Environmental Conservation Rules 1997; and

The Environment Court Act, 2000;

Government also formulated Environmental Policy in 1992.

Aside from this, Bangladesh is a signatory of the Rio Conventions (RCs), i.e. United Nations

Framework Convention on Climate Change (UNFCCC), Convention on Biological Diversity

(CBD) and United Nations Convention to Combat Desertification (UNCCD).

The industrial units (that may cause environmental pollution) to be established under bank credit

would get permission for opening LC to import machineries only after ensuring that the list of

machines include equipments to set up waste treatment plant .The industrial units (that may cause



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environmental pollution) to be established under bank credit would get permission for opening LC

to import machineries only after ensuring that the list of machines include equipments to set up

waste treatment plant. Also Bangladesh Bank has completed preparing following guidelines:

Policy Guideline for developing Green Banking practices

Guideline for Environmental Risk Management

7.0 Green Banking: Role of the Government

The financial institutions also should make sure that the customer is ready to comply with

environment management plan during the construction and operation of the project and provides

regular reports, prepared by in house staff and third party experts. There should be a direct

communication between the lenders and monitoring group. However, little attention is given for

the environmental risk management after the post transaction period. Recently, western financial

institutions use environmental criteria with credit risk management activities than with formulating

overall lending or investment strategy. With the introduction of ISO 14000 and development of

information network, it is easier now to the credit officers to compare firms and plants regarding

their environmental management and measure the relative environmental liabilities and risks.

Though commercial banking has been more attentive to the investment banking than the

environmental problems, the environmental liabilities would play a larger role in their investment

decision in the near future. Further, the environmental audits are required to determine the

environmental status of a facility, property, and operation and to identify regulatory compliance

status, past present problems and potential environmental risks and liabilities associated with the

project. These should be done by an independent body or by any environment investigation team.

But to ensure all these work, there should be legislation, which will enforce the standards alongwith training and demonstration skills. Government should enact new and implement legislation to

force banks to consider producing a formal environmental policy statement in line with Bangladesh

banks ERM and Green Banking guideline and making this publicly available. From a primary



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study it is found that banks are not hindering the achievement of sustainability, banks can also play

a hindering role for sustainable development because;

(1) They prefer short-terms payback periods where as sustainable development needs long-

term investment

(2) Investment which take into account of environmental side-effects usually have lower

rate of return in short-term.

Therefore, sustainable investments are unlikely to find sufficient funding within current financial

markets. There should be continuous dialogue relating to environmental matters with relevant

audiences, including stakeholders, employees, customers, governments and the public.

8.0 Green Banking: Initiatives of Bangladesh Bank as central Bank

Bangladesh Bank is well aware of the environmental degradation situation as mentioned above 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.

A comprehensive guideline on Corporate Social Responsibility (CSR) has been issued where banks

have been asked to concentrate hard on linking CSR at their highest corporate level for ingraining

environmentally and socially responsible practices and engaging with borrowers in scrutiny of the

environmental and social impacts.

Banks have been brought under the purview of E- commerce with a view to providing thecustomers with online-banking facilities covering payments of utility bills, money transfer and

transactions in local currency through internet as well. Considering the adverse effects of Climate

Change, banks have been advised to be cautious about the adverse impact of natural calamities and

encourage the farmers to cultivate salinity resistant crops in the salty areas, water resistant crops in



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the water locked and flood prone areas, drought resistant crops in the drought prone areas, using

surface water instead of underground water for irrigation and also using organic fertilizer,

insecticide by natural means instead of using chemical fertilizer and pesticides.

8.1 BBs Earlier Initiatives

Banks have been advised to

facilitate their clients with utmost care in opening Letter of Credit (L/C) for installation of

Effluent Treatment Plant (ETP) in the industrial units.

Finance in Solar Energy, Bio-gas and ETP.

Comply with the guidelines on Corporate Social Responsibility (CSR) where banks have

been asked to concentrate on linking CSR at their highest corporate level for ingraining

environmentally and socially responsible practices and engaging with borrowers in scrutiny

of the environmental and social impacts.

Banks have been brought under the purview of E-Commerce with a view to providing the customers

with online-banking facilities covering

payments of utility bills,

money transfer and

transactions in local currency through internet.

BB has launched a refinance programme of Tk 200 crore for Bio-gas plant, Solar Power Plant, ETP

and Hybrid Hoffman Kiln (HHK) in brick field.

Considering the adverse effects of Climate Change, banks have been advised to be cautious about

the adverse impact of natural calamities and encourage the farmers to cultivate salinity resistant

crops in the salty areas, water resistant crops in the water locked and flood prone areas, droughtresistant crops in the drought prone areas, using surface water instead of underground water for

irrigation and also using organic fertilizer, insecticide by natural means instead of using chemical

fertilizer and pesticides.



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Integrated Cow Rearing(4 cows) (including beef fattening) and Bio-gas Plant is a commercially

profitable project where 17 liters of milk, 100 kg organic fertilizer and 100 cubic feet bio-gas may

be produced every day. This has been well addressed in the Agricultural/Rural Credit Policy and

Programme for the FY 2010-201

Tk. 30 lac 80 thousand under Refinance programme of BB has been disbursed for Solar Irrigation

Plant in Barguna District alone. This plant generates 7.860 KW power for lifting 8 lacs liter water

per day for irrigation covering 40 acres of land.

8.2 Adopting Green Banking Policy:

Now it is the high time for the banks to adopt a comprehensive Green Banking Policy in a formal

and structured manner in line with global norms so as to protect environmental degradation and

ensure sustainable banking practices. With a view to developing green banking practices in the

country, an indicative GreenBanking Policy and Strategy framework has been developed for the

banks in thefollowing manner:

Green Banking Policy needs to be covered through time frame work which will besegregated into

3 phases.

8.2.1. Phase-I

Banks are to develop green banking policies and show general commitment on environment

through in-house performance. The time lining for the actions to be taken under Phase-I should not

exceed December 31, 2011.



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8.2.1.1 Policy Formulation and Governance

Bank shall formulate and adopt broad environmental or Green Banking policy and strategy

approved by their Board of Directors. A high powered Committee comprises of directors from the

Board in case of scheduled Bangladeshi Banks and a high powered committee comprises Regional

Chief of Global Office and members from the top management including CEO in case of Foreign

Banks should be responsible for reviewing the banks environmental policies, strategies and

program. Bank shall approve a considerable fund in their annual budget allocation for green

banking.Banks are required to establish a separate Green Banking Unit or Cell having the

responsibility of designing, evaluating and administering related green banking issues of the bank.

A senior executive should be assigned with the responsibility of heading the unit. The unit will

report to the high powered committee time to time.

8.2.1.2 Incorporation of Environmental Risk in CRM

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. Bank shall

incorporate Environmental and Climate Change Risk as part of the existing credit risk

methodology prescribed to assess a prospective borrower. This will include integrating

environmental risks in the checklists, audit guidelines and reporting formats. All of this will help



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mainstream Environmental Risk that cover possible sources of Environmental Risk such as Land

use, Climate change related events (cyclone, drought), animal diseases/pathogens such as avian

influenza, solid waste including waste feed, animal waste, carcasses, sediments, wastewater

discharges, hazardous materials, etc will be reviewed under Environmental Due Diligence (EDD)

checklists.

8.2.1.3Initiating In-house Environment Management

Banks shall prepare an inventory of the consumption of water, paper, electricity, energy etc. by its

offices and branches in different places. Then it should take measures to save electricity, water and

paper consumption. A 'Green Office Guide' or at least a set of general instructions should be

circulated to the employees for efficient use of electricity, water, paper and reuse of equipments. In

place of relying on printed documents, online communication should be extensively used (where

possible) for office management and make sure that the printers are defaulted to duplex for double-

side printing to save papers. Banks may apply Eco-font in printing to reduce use of ink, use scrap

paper as notepads and avoid disposable cups/glasses to become more eco- friendly. Installation of

energy efficient electronic equipments and automatic shutdown of computers, fans, lights, air

coolers etc. will help reducing electricity consumption. Energy saving bulbs should replace normal

bulbs in branches/offices of the banks. Banks should make plan to use solar energy at theirpremises to save electricity. Bank should take steps to save energy from corporate business travel

and encourage employees to purchase energy efficient cars

(that consume less fuel) can reduce gas and petroleum consumption.

8.2.1.4 Introducing Green finance

Eco friendly business activities and energy efficient industries will be given preference in

financing by bank. Environmental infrastructure such as renewable energy project, clean water

supply project, wastewater treatment plant, solid & hazardous waste disposal plant, bio-gas plant,

bio-fertilizer plant should be encouraged and financed by bank. Consumer loan programs may be

applied for promoting environmental practices among clients.



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8.2.1.5 Creation of Climate Risk Fund

Bank should finance the economic activities of the flood, cyclone and drought prone areas at the

regular interest rate without charging additional risk premium. However, banks should assess their

environmental risks for financing the sectors in different areas for creating a Climate Change Risk

Fund. This will be used in case of emergency. The bank would ensure regular financing flows in

these vulnerable areas and sectors. The fund could be created as part of banks CSR expenses.

8.2.1.6 Introducing Green Marketing

Green marketing is the marketing of products that are presumed to be environmentally safe. Green

marketing incorporates a broad range of activities, including product modification, changes to the

production process, packaging changes, as well as modifying advertising. It refers to the process of

selling products and/or services based on their environmental benefits. Such a product or service

may be environmentally friendly in itself or produced and/or packaged in an environmentally

friendly way. Banks should use environmental causes for marketing their services to consumer.

Green marketing is expected to help awareness development among common people.

8.2.1.7 Online Banking

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.

8.2.1.8 Supporting Employee Training, Consumer Awareness and Green Event

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.



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Awareness development among consumers and clients would be a continuous job of a bank under

its public relation department.

8.2.1.9 Disclosure and Reporting of Green Banking Activities

Banks shall report on the initiatives/practices to BB and disclose in their respective websites.

8.2.2 Phase-II

The time lining for the actions to be taken under Phase-II should not exceed December 31, 2012.

8.2.2.1 Sector Specific Environmental Policies

Banks need to formulate strategies to design specific policies for different environmental sensitive

sectors such as Agriculture, Agri-business (Poultry & Dairy), Agro farming, Leather(Tannery),

Fisheries, Textile and Apparels, Renewable Energy, Pulp and Paper, Sugar and distilleries,

Construction and Housing, Engineering and Basic Metal, Chemicals (Fertilizers, Pesticides and



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Pharmaceuticals), Rubber and Plastic Industry, Hospital/Clinic, Chemical Trading, Brick

Manufacturing, Ship breaking etc

8.2.2.2 Green Strategic Planning

A bank should determine green targets to be attained through strategic planning. Bank 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. For in-house

environment management, the target areas should cover attaining energy efficiency in the form of

the use of renewable energy, reduction of electricity, gas, and petrol consumption, reduction of

Green House Gas(GHG) emissions, issuance of e-statements, electronic bill pay, saving papers,

environment friendly office buildings etc. For Green Financing, the target areas should cover

reducing loans for certain environmentally harmful activities, attaining a particular percentage of

environmental loans as percentage of total, introducing eco-friendly financial products etc.

8.2.2.3 Setting up Green Branches

A Green Branch should be featured by the provision of the maximum use of natural light, use of

renewable energy, use of energy saving bulbs and other equipments, reduced water and electricityuse, use of recycled water etc. Such a branch of a bank would be specifically designated as a

Green Branch. A Green Branch will be entitled to display a special logo approved by Bangladesh

Bank. The criteria for certification of a Green Branch will be circulated by Bangladesh Bank in

due course of time.

8.2.2.4 Improved In-House Environment Management

Strategy of reuse, recycling of materials and equipments, and source reduction and waste

minimization strategy should be part of in-house environmental management in Phase-II. Banks

should increasingly rely on virtual meeting through the use of video conferencing in lieu of

physical travel which would help saving cost and energy.



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8.2.2.5 Formulation of Bank Specific Environmental Risk Management Plan and

Guidelines

A bank should develop and follow an environmental risk management manual or guidelines in

their assessment and monitoring of project and working capital loans. In addition to the

compliance of national regulation the bank may set internationally accepted higher environmental

standards. In this connection, Green initiatives by a group of banks will not only be effective but

will also offer competitive advantage. Bank alliances may prepare standard and guidelines for

themselves for improving Green Banking practices.

8.2.2.6 Rigorous Programs to Educate Clients

Clients and business houses should be encouraged and influenced to comply with the

environmental regulations and undertake resource efficient and environmental activities. Banks

should introduce rigorous programs to educate clients.

8.2.2.7 Disclosure and Reporting of Green Banking Activities

Banks should start publishing independent Green Banking and Sustainability reports showing pastperformances, current activities, and future initiatives. Updated and detailed information about

banks environmental activities and performances of major clients should be disclosed.

8.2.3 Phase-III:

A system of Environmental Management should be in place in a bank before the initiation of the

activities of Phase-III. Banks are expected to address the whole eco-system through environment

friendly initiatives and introducing innovative products. Standard environmental reporting with

external verification should be part of the phase. The time lining for the actions to be taken under

Phase-III should not exceed December 31, 2013.



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8.2.3.1 Designing and Introducing Innovative Products

Alongside avoiding negative impacts on environment through banking activities, banks are

expected to introduce environment friendly innovative green products to address the core

environmental challenges of the country.

8.2.3.2 Reporting in Standard Format with External Verification

Banks should publish independent Green Annual Report following internationally accepted format

like Global Reporting Initiatives (GRI) targeting their stakeholders. There should be arrangement

for verification of these publications by an independent agency or acceptable third party.

8.2.3.3 Reporting Green Banking Practices on Quarterly Basis

Banks shall report their initiatives/activities under the said program to the Department of Off-site

Supervision of Bangladesh Bank on quarterly basis. Banks shall submit their first quarterly report

on June 30, 2011 basis within July 15, 2011 and similarly they will be required to continue to

submit reports on the subsequent quarters within the next 15 days of the respective quarter end.



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Banks shall keep their annual report and websites updated with the disclosures on green banking

initiatives/activities.

8.2.3.4 Preferential Treatments

The compliant banks practicing Green Banking will have the following preferential treatments:

(i) BB will award points to banks on Management component while computing CAMELS rating

where there will ultimately be a positive impact on overall rating of a bank.

(ii) BB will declare the names of the Top Ten Banks for their overall performance in green banking

activities in the BB websites.

(iii) BB will actively consider green banking activities/practices of a bank while according

permission for opening new bank branch.

9.0 Green Banking Efforts: Bangladesh Bank Sets Example

Bangladesh Bank has already taken a lead in promoting paperless green banking by issuing a

circular which promotes wide scale automation. Bangladesh Bank does not accept any paper based

communications from banks and financial institutions. They have to send their statements

electronically to Bangladesh Bank. Bangladesh Bank does not accept any paper based applications

from jobseekers. They are to apply electronically. No Paper based tenders are accepted in

Bangladesh Bank. E-tendering is the accepted mode. No cheque travel to Bangladesh Bank from

the scheduled banks. Bangladesh Automated Clearing House (BACH) only clears the images of

the checks. Electronic fund transfer networks now facilitate corporate to pay the salary of their

employees electronically without issuing cheques.

9.1 Automated CIB



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The automated Credit Information Bureau (CIB) in BB now clears electronic applications of bank's

client's credit history in a couple of seconds which used to take weeks previously. No paper

transaction is involved here. The recently introduced mobile banking system will reach every nook

and corner of the country to enhance the drive for financial inclusion of BB. Add to this the

Enterprise Resource Planning (ERP) introduced by BB which is encouraging paperless accounting,

planning, budgeting and payments within BB and also the government in a transparent way of

national switch soon to be introduced will further enhance e-commerce, yet another drive for

electronic payment.

9.2 Issuance of Green Banking Guideline

A detailed guideline on Green banking was issued in February 2011 where banks were advised to

consider environmental issues in their business processes through eliminating paper waste, saving

gas and carbon emission, reducing printing costs and postage expenses. Bangladesh Bank has also

started practicing video conference to communicate with our branch offices which significantly

saves time, energy and cost.

9.3 Installation of Solar Panel and LED Bulbs

BB wants to set an example by practicing green banking as well. As already said, besides

becoming automated and paperless, it is also going solar. It has put up the largest solar panel on its

roof and is using LED bulbs to reduce energy consumption. It is also encouraging other banks to

go green. From now on, no new rural branch can be opened without installing a solar panel. The

other day a bank started solar energy driven ATM. BB has set up a Taka 2000 million (USD 30

million) renewable energy fund for banks and financial institutions investing in green energy

including solar, bio-gas, effluent treatment plant etc. Already solar run irrigation pumps have been

installed out of this refinance. Banks are also encouraged to provide CSR support for

environmental responsive activities including solar panels to poor segments of the society living in

off-grid, remote areas.

10.0 Adoption of Green Banking in Bangladesh



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Major stakeholders need to play active roles for the development of Green Banking practices in

Bangladesh covering environmental management and governance, environmental risk

management, in-house environmental performance, voluntary and leadership activities and

environmental reporting. Following initiatives might be taken for effective green banking

practices.

10.1 Board of Directors

Banks should formulate and adopt broad Environmental or Green Banking Policy and strategy

approved by their Board of Directors. A high powered committee comprises directors from the

board should be responsible for reviewing the banks Environmental policies, strategies and

programs.

10.2Green Banking Unit

A separate Green Banking Unit or Cell should be established and assigned with responsibility of

designing, evaluating and administering related issues of the bank. Employee awareness and

training on environmental risk and the relevant issues should be a continuous process as part of the

banks human resource development.

10.3 Design specific policies

Bank should formulate strategies to design specific policies for different environmentally sensitive

sectors in the country like agriculture, leather, fisheries, forestry, mining, gas, power generation,

pharmaceuticals, constructions, textiles, jute etc.

10.4 Environmental Impact assessment



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It is very logical to identify environmentally sensitive lending sectors for assessing environmental

risks and fix up a comfortable threshold level of lending above which environmental risk

management would be applicable.

10.5 In house environmental management

A Green office guide may be introduced for the employees for the efficient use of electricity,

water, paper and reuse of equipment. In case of relying on printed documents, online

communication should be extensively used. Installation of energy efficient electronic equipment,

reduce gas & petroleum consumption. Strategy of reuse, recycling of materials and equipments and

waste minimization strategy should be part of in house environmental management in near future.

10.6 Eco friendly Business initiatives

Environmental infrastructure such as clean water supply and waste water treatment as well as solid

and hazardous disposal should be encouraged and financed by banks. Eco-friendly business

initiatives and energy efficient industries may be preferred in financing activities.

10.7 Converting to online banking

Converting to online banking is the easiest way to help environment by a bank. Introducing online

banking and e-statement help saving papers as well as tress. Online statement and bill pay not only

eliminate paper waste but also reducing printing costs and postage expenses.

10.8 Awareness development

The most important task of awareness development among consumers and clients should be a

continuous job of a bank under the public relation department. Bank may also support public green

events like campaign, sponsoring educative programs on environment, sponsoring tree plantation.



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10.9 Cooperation among environmental NGOs

Cooperation among environmental NGOs with banks may help bringing a congenial atmosphere

for Green business, products and activities. Bank may support environmental initiatives and

research initiatives through green financial products.

10.10 Social and environmental disclosures

Bank should create disclosure policies and practices that would require clients to make information

about environmental and social impacts available to affected communities. At this stage online

reporting and at least a section in the annual reports should cover environmental activities of

banks.

11.0 Green Banking: Efforts of BB & Different Commercial Banks

On March 30, 2011, Bangladesh Bank had set up a 20.3kw solar power solution for its own

electricity usage in the wake of the severe power crisis Bangladesh Bank provided Tk 35 crore to

Rahimafrooz for producing solar panels (source: www.unbconnect.com).

Dutch-Bangla Bank Limited (DBBL) for the first time introduced its mobile banking service

expanding the banking service from cities to remote areas (source: The Daily star, April 1, 2011

issue).

As per Bangladesh Bank guidelines, BRAC Bank has set up a 'Renewable Energy Desk' in Head

Office which is overseeing finances in the sector. BRAC Bank finances in solar panel, ETP, lightengineering sectors under refinancing scheme of Bangladesh Bank (source: The financial express,

23rd May, 2011 issue).

http://www.unbconnect.com/http://www.unbconnect.com/


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A leading commercial bank financed the environment-friendly energy plant of Palli Layer Farm of

Comilla at a cost of Tk. 1.5 million to the project under refinancing scheme of Bangladesh Bank

(source: The financial express, 23rd May, 2011)

On June 21, 2011 BRAC Bank, one of the country's fastest growing banks, has opened a new

branch in Manikganj that is the first in BRAC Bank's branch network to have solar system as

alternative power support, a unique initiative in the industry manifesting strong commitment to

environment. BRAC Bank is installing solar panels in its SME Unit Offices across the country

(source : Brac Bank website)

Eastern Bank Ltd along with Basic Bank Ltd. has joined hands together for Second Crop

Diversification Project. Second Crop Diversification Project is a follow on to the ADB-assisted

Northwest Crop Diversification Project. This will increase rural income in 25 districts of the

southwest and northwest of Bangladesh through improved efficiency and value addition of HVC

production. The direct beneficiaries will be marginal, small and medium farmers. Landless people

will also be benefited through opportunities of employment generation (source: EBL website)

On July 17, 2011, Al-Arafah Islami Bank distributed free solar panels among the poor of

Madhapur upazila of Habiganj as a part of its corporate social responsibility. Through thisprogramme, the bank has distributed solar panel to 25 families of the area. The bank already

distributed 50000 watt solar panels to 11,00 families through the banks 14 branches (source : Al-

Arafah website).

12.0 Achievements

Bangladesh pledged that 5% of its total electricity generation would come from renewable sources

in 2008, at the Washington International Renewable Energy Conference. In 2009, the BangladeshBank set up a US$29m fund to promote solar power. Private commercial banks and state-owned

banks signed an agreement with the central bank that allowed banks to draw money from this fund

under a refinancing scheme with a low-interest interest rate of 5%. The banks could then lend the

funds to borrowers from the solar power sector at a ceiling interest rate of 10% (source: April 2011



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edition of the Searchlight South Asia newsletter created by Intellecap for the Rockefeller

Foundation).

Bangladesh Bank has recently approved a scheme of Tk 2.0 billion (200 crore) initially in solar,

biogas and purification of wastage sectors for using environment friendly power and for this

project excess demand of power and gas would be met (source : Dr. Atiur Rahmans speech in the

BIBM workshop on Green Banking held on 23rd December, 2010).

In the fiscal year 2010-2011, a new policy has been formed for reducing farmers' loss as

unfavorable weather exists in the country all the year round and commercial banks are asked to

stand by the farmers (source: BB governor speech in BIBM workshop held on 23rd December,

2010).

Commercial banks have started lending to SMEs in Bangladesh, a well established sector in

developed economies, and since social business is still establishing its place in many of those

developed economies, it would be optimistic to assume that commercial banks would see the

opportunities in lending to social business in Bangladesh.

Bangladesh Bank now refinances the commercial banks at 5% interest rate against loans forinstallation of solar power system in both the rural and urban areas. The commercial banks are now

providing loans for installation of solar power system at maximum 10% interest rate (Governors

speech at a function in BB on 29th March, 2011).

To date, about 500,000 rural homes have been equipped with small-scale solar PV panels under the

Bangladesh Rural Electrification Programme. The government of Bangladesh aims to install solar

household systems onto one million rural homes by 2012 (source: A Lee Hong Liang report for

http://www.rechargenews.com published on July 27, 2010).

13.0 Limitations of Green Banking In Bangladesh



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No available fund for individual Bank

Lack of experienced officer in banking sector

Lack of individual bank policy

Limited public awareness

Government subsidy not sufficient

Bureaucracy limitation

Lack of environmental friendly technology

High population create problem to implement environmental risk policy.

Cost of pollution is rising day by day.

No separate supervision sector to monitor green banking achievement.

Unable to collect International climate fund

14.0 Conclusion

In a rapidly changing market economy where globalization of markets has intensified the

competition, the industries and firms are vulnerable to stringent public policies, severe law suits or

consumer boycotts. This would affect the banks and financial institutions to recover their return

from investment. Thus, the banks should play a pro-active role to take environmental and

ecological aspects as part of their lending principle which would force industries to go for

mandated investment for environmental management, use of appropriate technologies and

management systems. Green Banking if implemented sincerely will act as an effective ex ante

deterrent for the polluting industries that give a pass by to the other institutional regulatory

mechanisms. Recently there here been much initiative in this regard by the banks specially

Bangladesh bank and other financial institutions in Bangladesh. However as far as green banking

in concerned, Bangladeshs banks and financial institutions are running behind time. None of our

banks or financial institutions has adopted equator principle even for the sake of records. None of



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them are signatory to the UNEP Financial Initiative statement. It is time now that Bangladesh takes

some major steps to gradually adhere to the equator principles-guidelines that use environment-

sensitive parameters, apart from financial, to fund projects.

15.0 Bibliography

Governors speech at a function in BB March 29, 2011

Governors speech in BIBM December 23, 2010

BRPD Circular No. 2, February 27, 2011

BB CSR Review 2008-09



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www.bb.org.bd

Green Banking opportunities for Bangladesh, by Dr. Shah Md. Ahsan Habib,

BIBM

A Lee Hong Liang report July 27, 2010 for www.rechargenews.com

Searchlight South Asia News Letter, April 2011

Brac Bank website

DBBL website

EBL website

Alarafa Bank website

www.ubconnect.com

The Daily Star April 01, 2011 The Financial Express May 23, 2011

Presented By: Md Al Amin Reiad Arifa Akter Zahan Md Rajib Ahmmed 29
http://www.bb.org.bd/http://www.ubconnect.com/http://www.bb.org.bd/http://www.ubconnect.com/

Documents

Assignment GB Reiad.final