Abstract

Global warming, ozone layer and continuous icebreaking in the earth poles are big time concern of the

environmentalists. First world economy may not be to the justified range, trying to invest a portion of their budget to

negate these climate issues. The wave of climate change touched the periphery of Bangladesh a few years ago. Being

guided and self-driven, Banking Industry also puts its due emphasis. They are financing projects which are

environment friendly. They must promote green banking products to their customers. In this way, they are helping

Bangladesh to attain sustainable green economy.

The main purpose of this study is to find the impact of green banking on banks’ performance. Data have been

collected from banks’ annual report of 2014 and Bangladesh Bank’s annual report on green banking of 2014. Twenty

banks have been selected as a sample from fifty six banks. Five different types of variables are used for this study

namely (1) Loans and Advances, (2) Investments, (3) Assets, (4) Allocation and disbursement of Green Banking and

(5) Profit after Tax. For this study, here I have used the multiple linear regression analysis and also the stepwise

method to find the best relationship between green banking and banks’ performance. Here I have used the software

SPSS and MS EXCEL for analysis. From the analytical results, it is found that Green Banking has a significant

positive impact on banks’ performance. It is also found that in our banking system

Selected sample banks have used 226046.87 million BDT against total allocation of 253,308.32 million BDT for

green banking in 2014. Stated owned commercial banks and specialized banks are far behind in green banking

activities. State owned commercial banks have made1.20%, private commercial banks 80.82%, and foreign

commercial banks 17.98% of total allocation for green banking. 20 banks of Bangladesh allocated taka 253,308.32

million in 2014 for green banking in which almost 96% is for green finance. Green banking score is also given to the

selected bank on the basis of numerous factors. Though our banking sector plays a vital role in green banking

activity, the banking sector has a long way to go at green banking activities.

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Chatpter-1: Introduction

1.1.Introduction

Global warming, ozone layer and continuous icebreaking in the earth poles are big time concern of the

environmentalists. First world economy may not be to the justified range, trying to invest a portion of their

budget to negate these climate issues. The wave of climate change touched the periphery of Bangladesh a

few years ago. The regular visit of natural disasters of our country reminds us that Bangladesh is one the

most vulnerable countries in the world. We cannot fight against the natural disasters. Natural calamities

have done a lot of ransacks to us. Every person of our society must step forward to protect the environment.

Every little contribution can add up and have a big positive impact on the environment.

Banks conduct business with money. Their activities are environment friendly. They do not impact on

environment through their internal operation in terms of emission and pollution. They provide loan to their

customers in different projects. These projects may not be environment friendly. So banks may have

external impact on environment through their customer’s activity.

Banks play a major role in economic development activities. They provide finance in many projects which

ensures the economic growth of the country. As part of the society, banks have to protect the environment.

They have to ensure economic development through environmental protection by promoting

environmentally sustainable and socially responsible investments. This practice of banks can be termed as

“green banking”. Green banking considers all social and environmental factors. The main objective of

green banking is to use the resources in favor of the society and environment.

The green banking concept has been evolved in western world. It has been practicing all over the world.

But it is a recent issue in our country. Today banks have turned their attention to eco-friendly activities.

They want to reduce the carbon footprint from their normal banking activities. This movement from normal

banking activities to green banking activities is driven by banks’ responsibility to society to environment.

Green finance is a part of green banking activities. Green finance is financing in resource-efficient and low

carbon industries. These will have no negative impact on the environment. Various financial services have

been introduced by banks as part of green banking. Online banking is a product of green banking. Online

banking will result in less paperwork, less mail and less driving to branch offices which in turn will have

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positive impact on the environment. As more customers will use online banking, the costs of bulk paper

overload, bulk mailing fees will be reduced. Banks will not need expensive branch banking. They will not

have to hire customer service representatives. Online banking will make banks more efficient and more

profitable.

Today people are more conscious than any other time. People want to conduct business with those who are

responsible to them, who perform their duties properly, who give them better facilities. Banks have

promoted different green banking products. These products include ATM booths, SMS banking, Credit

Card, and Debit Card. If banks conduct green banking activities in large amount, the customers will be

interested to conduct their activities with them which will result in higher profit for banks.

1.2 Green Bank and Green Banking

Green bank is not a different bank. It is just a part of existing banks. Here, banks conduct their normal

business activities. Other than conducting their normal business activities, banks conduct environment

friendly activities to reducing their carbon footprint from their banking activities. It is an environmentally

responsible bank which considers all the social and environmental or ecological factors with a view to

protecting the environment and making sure the best use of natural resources. It is also known as an ethical

bank, a sustainable bank or a socially responsible bank.

Green bank is not just a bank. It’s a socially responsible bank, a socially responsible organization. It is not

an individual but a unit or a group or a team. It is controlled by the same authority. It is a proactive idea and

smart thinking of taking care of the Earth's environment/habitats/resources to ensure future sustainability of

over beloved earth. Green Banking is conducting the banking business in selected area and manner that

helps to reduce external carbon emission and internal carbon footprint. Banks aim to make banking

processes and the use of IT and physical infrastructure as efficient and effective as possible, with zero or

minimal impact on the environment. Banks are financing in green technology and pollution reducing

projects to aid the reduction of external carbon emission. Banks are giving lending priority to those

industries which have already turned green or are trying to go green. Banks are also encouraging to invest

in environment friendly projects. Green banking can be performed in many forms. It includes use of online

banking instead of branch banking, paying bills online, opening up CDs and money market accounts at on-

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line banks, instead of large multi-branch bank, Mobile Banking, SMS Banking, ATM, Remote deposit,

Waste Management, Roof Gardening, and Green Financing etc.

Green banking must be carried forward in two ways. Firstly, all banks must make themselves green. They

have to transform their internal operations green. It means all the banks should adopt appropriate ways of

utilizing renewable energy, automation and other measures to minimize carbon footprint from banking

activities. Secondly, all banks must invest in environment friendly projects, weighting up environmental

risks of the project before making financing decisions and particularly supporting and fostering growth of

upcoming “green” initiatives and projects.

1.3 Objectives of the study

The main objective of this study is to evaluate the green banking activities and its impact on banking

performances (Assets, Liabilities and Profitability). The other objectives can be mentioned as:

1. To find the impact of green banking on banks’ performance.

2. To find out the Bangladesh Bank’s guidelines for green banking activities.

3. To demonstrate the present green banking practices of Bangladesh.

4. To learn about cross-sectional demonstration of green finance, climate risk fund, marketing, training

and development.

1.4 Sources of information

Information was necessary to conduct this empirical study. All this information is called from secondary

sources. All these sources are reliable. We have collected information from banks’ Annual Reports of 2014,

banks’ disclosure on green banking for 2014, banks’ websites, Bangladesh Bank’s Annual Report on Green

Banking of 2014, and green banking related articles and journals.

1.5 Limitation of the study

This study has certain limitations that need to be articulated. These are:

I. All the information is collected from secondary sources.

II. Though all the information is collected from published sources, the reliability of data cannot be

considered as self-evident.

III. The study is focused on an extensive topic.

IV. Green banking is a recent issue which has not been practiced and disclosed much in our country.

V. Again the issue is too broad to complete within the stipulated time period.

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VI. Moreover in some cases the bank‘s annual reports was not furnished with distinct information.

VII. The available data of green banking is just of one year, 2014.

VIII. Green Banking Report -2014 has not been published by Bangladesh Bank.

Chapter-2: Literature Review

The term Green Banking is now popular worldwide now-a-days. It is for stopping the environmental

degradation and making this planet habitable. The concept of Green Banking was developed in the western

countries. Green banking is a general term, which can cover a multitude of areas from a bank being

environmentally friendly to how and also where their money is invested.

Though Green Banking is popular, several literatures and studies have been found regarding Green

Banking in USA, Europe, China, India and Bangladesh from 2000 to 2014. Among them some popular

studies have been reviewed and explained here to support this paper and make the paper literally viable and

sound.

In the book “Sustainable Finance and Banking” (2001), the author Marcel Jeucken has identified four

phases action that banks should take for sustainability. They are sequentially defensive banking,

preventative banking, offensive banking and sustainable banking. In this model, the bank that has several

business divisions is classified as a whole entity. And the first three terms are defined as the stages or

attitudes of banking with respect to environmental issues. His study actually pioneers the path of green or

socially responsible banking system.

The Equator Principles (EPs) (2003) were launched and were initially adopted by some leading global

banks, such as Citigroup Inc., The Royal Bank of Scotland, Westpac Banking Corporation. It serves as “a

set of voluntary standards for determining, assessing and managing social and environmental risk in project

financing” (EPs, 2006). The EPs is based the performance standards on social and environmental

sustainability of the International Financial Initiatives (IFI) and World Bank Groups Environmental, Health

and Safety general guidelines, and it provides a common benchmark and framework for project finance.

The adopting entities, known as Equator Principles Financial Institutions (EPFIs), make their own social

and environmental policies, procedures and standards for their financing activities, and ensure not to give

loans to projects where the borrowers do not comply with the standards stated in the EPs. At the same time,

EPFIs have responsibilities to ensure the borrowers know the content of principles and to guide them on

how to incorporate principles into planned project.

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Atiur Rahman (2010) in his paper focused on the present monetary and credit policy of Bangladesh Bank

towards attaining broader financial enclosure. Bangladesh Bank is carry forwarding with technology

driven, innovative, environment and low cost banking approach; conveying a qualitative change in

banking, preparation of monetary policy, application of advanced banking technology, and use of

Information and Communication Technology (ICT) to extend financial services to the door step of common

people. To ensure access to financial services for all, various initiatives have been taken like trade finance;

digitalization of the financial sector; channeling liquidity into productive and supply augmenting

investments including agriculture, SMEs, Green Banking and CSR activities; expected to lead to more

broad based inclusive growth and therefore lessen poverty; required for pushing the country on course to

the targeted vision of digital Bangladesh by 2021; the year of Golden Jubilee of their independence.

Mohmed Aminul Islam (2010) showed in his report that green Banking is also significant issue in recent

times. While the banking industry is undergoing computerization, networking and offering of on-line

banking is naturally gaining momentum development in this sector.

Green Banking Policy of BASIC Bank Limited, Bangladesh (2011) was go forwarded in response to

increasing consciousness over climate change, environmental degradation, need for urgent measures for

sustainable development to be addressed by some of the stakeholders in the world. Banking system holds a

unique position in an economy that can affect production, business and other economic activities through

their procedure for financing activities which would in turn contribute to protect environment/climate from

pollution. Moreover, efficiency in energy use, water consumption and waste reduction may significantly

contribute for operating cost for many of the large banks of the country.

Bihari (2011) clarified that banks should consider before financing a project whether that project is

environment friendly or not and has any future implication on environment in future. As a part of the

society it is banks’ corporate social responsibility. This green banking can be implemented with the help of

technology and policy.

Mani (2011) indicated that as Socially Responsible Corporate Citizens (SRCC), banks have a major role to

play and responsibility in enhancement of governmental efforts towards substantial reduction in carbon

emission and building a green economy. Banks should practice and take initiative of green banking not

only for the environment but also for sustainable economic development.

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Bangladesh Bank’s Policy Guidelines for Green Banking (2011) has stated the policy every bank must

follow to conduct the green banking activities which is segregated into 3 phases.

In phases-I, bank must formulate green banking policy showing general commitment on environment

through in-house performance within December 31, 2011 which will be completed in nine stages . In Policy

Formulation and Governance stage, Bank shall formulate and adopt broad environmental or Green

Banking policy and strategy approved by their Board of Directors and keep a considerable amount for

green banking in its annual budget. Banks must establish a separate Green Banking Unit or Cell to design,

evaluate and administer green banking related issues of the bank. In Incorporation of Environmental Risk

in Core Risk Management stage, banks must incorporate Environmental and Climate Change Risk as part

of the credit risk according to guidelines on Environmental Risk Management (ERM). Guidelines on

Environmental Risk Management (ERM) are to be considered as green banking policy. In the third stage,

Initiating In-house Environment Management, bank will prepare an inventory of the consumption of water,

paper, electricity, energy etc. by its offices and branches in different places and circulate a “green office

guide” to it employees for efficient use of electricity, water, paper and reuse of equipments. In Introducing

Green finance, bank must give preference to finance in eco-friendly business activities and energy efficient

industries. In Creation of Climate Risk Fund stage, bank should finance the economic activities of the

flood, cyclone and drought prone areas from its corporate social responsibility fund. The sixth stage,

Introducing Green Marketing, bank should use environmental causes for marketing their services to

develop awareness among common people. In the seventh stage, bank must emphasize on online banking to

help environment. In Supporting Employee Training, Consumer Awareness and Green Event stage, bank

must organize training on environmental and social risk and the relevant issues continuously to develop

awareness of both employees and clients. In the last stage, Banks shall report on the initiatives/practices to

Bangladesh Bank and disclose in their respective websites.

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Figure 1: Phase-I of Green Banking

Banks must complete seven stages of phase-II within December 31, 2012. In Sector Specific Environmental

Policies stage, banks need to formulate strategies to design specific policies for different environmental

sensitive sectors. In the second stage, Green Strategic Planning, bank should determine a set of green

achievable targets and strategies, and disclose these in their annual reports and websites. In Setting up

Green Branches, bank should entitle a branch as green branch with a special logo if it uses natural light,

uses renewable energy, uses energy saving bulbs and other equipments, requires reduced water and

electricity use, uses recycled water etc. The fourth stage of phase-II, Improved In-house Environment

Management, tells bank to adopt strategy of reuse, recycling of materials and equipments. In Formulation

of Bank Specific Environmental Risk Management Plan and Guidelines stage, bank should formulate and

follow an environmental risk management manual or guidelines to assess and monitor project and working

capital loans. In Rigorous Programs to Educate Clients stage, Banks should encourage and influence

clients and business houses to comply with the environmental regulations and undertake resource efficient

and environmental activities. In the last stage, Disclosure and Reporting of Green Banking Activities,

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Banks should publish independent Green Banking and Sustainability reports showing past performances,

current activities, and future initiatives.

Figure 2: Phase-II of green banking

Addressing the whole eco-system through environment friendly initiatives and introducing innovative

products and standard environmental reporting with external verification must be done in phase-III within

December 31, 2013. In Designing and Introducing Innovative Products stage, bank must introduce

environment friendly innovative green products to address the core environmental challenges of the

country. In Reporting in Standard Format with External Verification stage, bank must publish independent

Green Annual Report.

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Figure 3: Phase-III of green banking

Among the studies conducted regarding green banking, some studies have been conducted to demonstrate

the green banking practice of a country, some studies have been carried on to discuss the reasons why the

banks should perform the green banking activities, some have addressed the legal results of green banking,

some have asked banks to adopt new green banking policy and promote green banking product, some

studies have suggested ways to make green banking popular. All these studies are qualitative in nature. No

studies have been made to show the quantitative figure of green banking. None has been conducted to show

the impact of green banking on banks’ performance. This drawback has persuaded me to conduct my study

to show the impact of green banking on banks’ performance. I believe this will be helpful for the readers.

Bahl (2012) urged banks to promote different types of environment friendly products which will ensure the

protection of our environment and the profitability of banks in India. Dr. Bahl demonstrated the

significance of providing loan in green technology and pollution reducing projects.

Md. Maruf Ullah (2012) in his study on Green Banking in Bangladesh- a Comparative Analysis denoted

“As per entity concept banks are responsible corporate citizens. Banks believe that every small 'GREEN'

step taken today would go a long way in building a greener future and that each one of them can work

towards to better global environment. Overall Green banking is really a good way for people to get more

awareness about global warming; each businessman will contribute a lot to the environment and make this

earth a better place to live.”

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Islam and Das (2013) have conducted a study highlighting the mobile banking, online banking, green

financing, and guidelines for green banking practices as well as green banking unit. They have found that

though green banking is a new term in Bangladesh, it is a mature issue in developed countries. So banks

should consider the environmental issues of the country as a social responsible person not only to face the

impact of globalization but also to face competition.

Khawaspatil and More (2013) have intended to find the importance of green banking in India. The

industries and firms are vulnerable to stringent environmental policies, severe law suits or consumer

boycotts in the globalized economy. The banking sector may face credit risk and liability risk. The banks

should go green and play a pro-active role to take environmental and ecological aspects as part of their

lending principle, which would force industries to go for environment friendly investments.

Kaur (2014) has told that “go green” is a buzzword in all spheres of life. Banks are also affected by it. So

banks should take environmental issue under consideration to protect the environment.

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Chapter-3: MethodologyThe process used to collect information and data for the purpose of finding solutions to problems. The

methodology may include publication research, interviews, surveys and other research techniques, and

could include both present and historical information. According to Clifford woody, “research comprises of

defining and redefining problem, formulating hypothesis or suggested solutions, collecting, organizing and

evaluating data, reaching conclusions, testing conclusions to determine whether they fit the formulated

hypothesis”

This is the core part of this project paper. The impact of green banking on banks’ performance, correlation

between banks’ budget allocation for green banking and budget utilization for green banking and

comparative analysis are presented at this section.

3.1 Sampling Design.

A sample design is a finite plan for obtaining a sample from a given population. Simple random sampling is

used for this study.

3.2. Universe.

The universe chooses for the research study is the green banking allocation and disbursement as well as

other necessary data of selected banks website.

3.3. Sample and population:

A finite subset of population, selected from it with the objective of investigating its properties called a

sample. A sample is a representative part of the population. There are 56 banks in our country. So the

population size is 56. 20 banks have been chosen from 56 banks. So the sample size is 20 for accomplish

this thesis.

3.4. Methods of Data Collection.

The data’s were collected through Primary and secondary sources.

Primary Sources:

Primary data are in the form of “raw material” to which statistical methods are applied for the purpose of

analysis and interpretations. The primary sources are discussion with some people who work in various

banks. An informal discussion was made with them.

Secondary Sources:

Secondary data’s are in the form of finished products as they have already been treated statistically in some

forms or other. The secondary data mainly consists of data and information collected from records of

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economic data in the website of Bangladesh Bank. Secondary data was also collected from journals &

research paper of other authors about that matter.

Recorded Economical Data of Bangladesh Bank

Different books, training papers, manuals etc. related to the topic.

Bangladesh Bank website and selected banks website.

3.5. Nature of Research

Quantitative research is generally associated with the positivist/post positivist paradigm. It usually involves

collecting and converting data into numerical form so that statistical calculations can be made and

conclusions drawn. Researchers will have one or more hypothesis. These are the questions that they want to

address which include predictions about possible relationships between the things they want to investigate

(variables).

3.6. Variables of the Study.

Profit is dependent variable and others such as Green banking activities (GB) (in million taka) , Total

Assets (TA), Loan and Advances (LA), Investments (IN) (in million taka) are independent variables.

3.7. Tools and Techniques for Analysis.

Two kinds of analytical tools have been used for making this paper. Regression analysis and graphical

presentation have been exhibited in methodology part. SPSS and MS OFFICE have been used for

calculation.

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Chapter-4 Analysis of the report

Analysis part has divided into two portions:

1. Regression analysis.

2. Graphical analysis

4.1. Regression analysis:

In this section there are several statistical analysis including correlation, linear regression, multiple

regression.

4.1.1. Correlation between budget allocation and budget distribution for green banking:

According to Bangladesh Bank’s guidelines for green banking, banks must allocate a considerable amount

in their annual report for green banking. And banks perform green banking activities throughout the year.

To check whether there is a statistical relationship involving dependence between budget allocation for

green banking and budget utilization for green banking, Pearson correlation analysis has been performed.

This analysis is summarized in the following tables.

Table 1: Mean and standard deviation of budget allocation and budget utilization

Descriptive Statistics

Mean Std. Deviation N

Budget Allocation 12665.4159818770.53271 20

Budget

Disbursement &

Utilisation

11302.3435

16442.31926

20

The average allocated amount of banks’ annual budget is TK. 12665.41598 million with a standard

deviation of TK. 18770.53271 million. In case of budget utilization, banks have utilized TK. 11302.3435

million on an average with a standard deviation of TK. 16442.31926 million.

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Table 2: Correlation between budget allocation and budget utilization

The Pearson’s correlation coefficient, r, between budget allocation and budget utilization in our study is

0.998. There is a statistically significant correlation between amount of budget allocation for green banking

and amount of utilization in green banking. This relationship is positive in nature. So if the budget

allocation amount is increased (decreased) in the banks’ annual budget, the utilized amount for green

banking will also be increased (decreased).

4.1.2. Multiple linear regression analysis:

In a simple linear regression model, a single response measurement is related to single predictor (covariate,

regressor) for each observation. The critical assumption of the model is that the conditional mean function is

linear:

a. Relationship among Profit and others:

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Correlations

Budget Allocation Budget Utilization

Budget Allocation

Pearson Correlation 1 .998**

Sig. (2-tailed) .000

N 45 45

Budget Utilization

Pearson Correlation .998** 1

Sig. (2-tailed) .000

N 20 20

**. Correlation is significant at the 0.01 level (2-tailed).

In most problems, more than one predictor variable will be available. This leads to the following multiple

regression model:

Where α is called the intercept and are called slopes or coefficients.

Here profit is dependent variable whereas others (Assets, Loans, Investments and Allocations) consider

independent variables. The mean result and the volatility of all variables including both dependent and

independent of the sample banks are as follows –

Table 3: Mean and standard deviation of profit, assets, loans, investments and allocations

Descriptive Statistics

Particulars Mean Std Deviation Sample size (N)

Profits 2.2758E3 2632.83595 20

Assets 2.8134E5 3.50216E5 20

Loans 7.3217E4 85715.38907 20

Investments 9.2465E4 1.40260E5 20

Allocations 1.2665E4 18770.53271 20

The mean result of the profit and all other independent variables of the sample banks are positive with

higher standard deviation. That means the profit and other independent variables of the sample banks vary

with each other in a significant number.

To check whether there is a statistical relationship involving dependence between profit and other

independent variables, Pearson correlation analysis has been performed. The relationship between profit

and other independent variables of the sample banks are described below –

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Table 4: Correlation among profit, assets, loans, investments and allocations

Correlations

Profits Assets Loans Investments Allocations

Pearson

Correlation

Profits 1.000 .225 .012 .373 .686

Assets .225 1.000 .004 .481 .264

Loans .012 .004 1.000 -.162 -.368

Investments .373 .481 -.162 1.000 .802

Allocations .686 .264 -.368 .802 1.000

Sig. (1-

tailed)

Profits . .170 .480 .052 .000

Assets .170 . .494 .016 .130

Loans .480 .494 . .247 .055

Investments .052 .016 .247 . .000

Allocations .000 .130 .055 .000 .

N Profits 20 20 20 20 20

Assets 20 20 20 20 20

Loans 20 20 20 20 20

Investments 20 20 20 20 20

Allocations 20 20 20 20 20

The Pearson correlation shows the degrees of correlations between the independent variables are

interrelated with other. All the variables have positive correlations with profit. The correlations among the

variables are positive except for the correlation among loans and investment as well as allocation.

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Table 5: ANOVA table of profit and other independent variables

ANOVA

Model Sum of Squares df Mean Square F Sig.

1Regression 9.693E7 4 2.423E7 10.452 .000

Residual 3.478E7 15 2318380.123

Total 1.317E8 19

a. Predictors: (Constant), Allocations, Assets, Loans, Investments

b. Dependent Variable: Profits

Here, the alpha is lower than p value since, we can say that variables have positive impact on profit.

In statistics, the correlation coefficient r measures the strength and direction of a linear relationship

between two variables on a scatter plot. The value of r is always between +1 and –1. R-squared is a

statistical measure of how close the data are to the fitted regression line. It is also known as the coefficient

of determination, or the coefficient of multiple determinations for multiple regressions. It is the percentage

of the response variable variation that is explained by a linear model. The adjusted r square shows how the

degree of variability in one variable can be described or estimated by another variable.

Table 6: Model summary of profit and other variables

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Model Summary

Mod

el R

R

Square

Adjusted

R Square

Std. Error

of the

Estimate

Change Statistics

Durbin-

Watson

R Square

Change

F

Change df1 df2

Sig. F

Change

1.858a .736 .666

1522.6227

8.736 10.452 4 15 .000 1.643

a. Predictors: (Constant), Allocations, Assets,

Loans, Investments

b. Dependent Variable: Profits

Here, the correlation coefficient R is .858. So, the correlation coefficient shows that there is strong positive

straight line correlation between Profit and other independent variables. The R square is.73.6% and

adjusted R square is .666.That means 73.6%of the reasons variability of profit can be described by the

other variable.

b. Relation among score, allocation, disbursement and assets:

The regression among score, allocation, disbursement and assets is given below:

Where α is called the intercept and are called slopes or coefficients. In this regression green banking

score is dependent variable whereas others (Assets, Disbursement and Allocations) consider independent

variables. The mean result and the volatility of all variables including both dependent and independent of

the sample banks are as follows –

Table 7: Mean and standard deviation of GB score, allocation, disbursement and assets

Descriptive statistic

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Particulars Means Std Deviation N

Score 7.6175 1.05896 20

Allocation 1.2665E4 18770.53271 20

Disbursement 1.1302E4 16442.31926 20

Assets 2.8134E5 3.50216E5 20

The mean result of green banking score and all other independent variables (Allocation, Disbursement,

Assets) of the sample banks are positive with higher standard deviation. That means green banking score

and other independent variables of the sample banks vary with each other in a significant number.

To check whether there is a statistical relationship involving dependence between green banking score and

other independent variables, Pearson correlation analysis has been performed. The relationship between

green banking score and other independent variables of the sample banks are described below –

Table 8: Correlation among GB score, allocation, disbursement, assets.

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Correlations

Score Allocation Disbursement Assets

Pearson Correlation Score 1.000 .675 .697 .049

Allocation .675 1.000 .998 .264

Disbursement .697 .998 1.000 .261

Assets .049 .264 .261 1.000

Sig. (1-tailed) Score . .001 .000 .418

Allocation .001 . .000 .130

Disbursement .000 .000 . .133

Assets .418 .130 .133 .

N Score 20 20 20 20

Allocation 20 20 20 20

Disbursement 20 20 20 20

Assets 20 20 20 20

The Pearson correlation shows the degrees of correlations between the independent variables are

interrelated with other. All the variables have positive correlations with green banking score.

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Table 9: ANOVA table of GB score

ANOVA

Model Sum of Squares df Mean Square F Sig.

Regression 10.345 1 10.345 16.988 .001a

Residual 10.961 18 .609

Total 21.306 19

a. Predictors: (Constant), Disbursement

b. Dependent Variable: Score

Here it is seen that the significance level (P value) 0.000 < 0.05, so the test is statistically significant.

In statistics, the correlation coefficient r measures the strength and direction of a linear relationship

between two variables on a scatter plot. The value of r is always between +1 and –1. R-squared is a

statistical measure of how close the data are to the fitted regression line. It is also known as the coefficient

of determination, or the coefficient of multiple determinations for multiple regressions. It is the percentage

of the response variable variation that is explained by a linear model. The adjusted r square shows how the

degree of variability in one variable can be described or estimated by another variable.

Table 10: Model summary of GB score and other variables

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Model Summary

Mod

el R

R

Square

Adjusted

R Square

Std. Error

of the

Estimate

Change Statistics

Durbin-

Watson

R Square

Change

F

Change df1 df2

Sig. F

Change

1 .697a .486 .457 .78036 .486 16.988 1 18 .001 2.387

a. Predictors:(Constant),

Disbursement

b. Dependent Variable: Score

Here, the correlation coefficient R is .697. So, the correlation coefficient shows that there is positive

straight line correlation between Profit and other independent variables. The R square is .486 and adjusted

R square is 0.457. That means 48.6%of the reasons variability of profit can be described by the other

variables.

c. Relationship among green banking allocation, assets, loans and investments:

The regression among score is given below:

Where α is called the intercept and are called slopes or coefficients. In this regression green banking

allocation is dependent variable whereas others (Assets, Loans, Investments) consider independent

variables. The mean result and the volatility of all variables including both dependent and independent of

the sample banks are as follows –

Table 11: Mean and standard deviation of GB allocation, assets, loans and investments

Descriptive Statistics

Mean Std. Deviation N

Allocation 1.2665E4 18770.53271 20

Assets 2.8134E5 3.50216E5 20

Loans 7.3217E4 85715.38907 20

Investments 9.2465E4 1.40260E5 20

The mean results of all the variables are positive. It is found that the variable loan has the highest volatility

among the variables while investment has the lowest volatility.

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Table 12: Correlation among GB allocation, assets, loans and investments

The Pearson correlation shows the degrees of correlations between the independent variables are

interrelated with other. The correlations among the variables are positive except for the correlation between

loans and investment.

Table 13: Model summary of GB allocation, assets, loans and investments

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Correlations

Allocation Assets Loans Investments

Pearson

Correlati

on

Allocation 1.000 .264 -.368 .802

Assets .264 1.000 .004 .481

Loans -.368 .004 1.000 -.162

Investments .802 .481 -.162 1.000

Sig. (1-

tailed)

Allocation . .130 .055 .000

Assets .130 . .494 .016

Loans .055 .494 . .247

Investments .000 .016 .247 .

N Allocation 20 20 20 20

Assets 20 20 20 20

Loans 20 20 20 20

Investments 20 20 20 20

The r and adjusted r square shows the degree to which the variability and correlations among the variables

can be described. Here the result is 0.802 and 0.643, which is positive and means that major portion of

variability of each variable can be described by others.

4.2. Graphically comparative analysis

4.2.1. Banks’ budget allocation for green banking

20 banks of Bangladesh allocated taka 253,308.32 million in 2014 for green banking in which almost 96% is for

green finance, 3% is for climate risk fund and 1% is for marketing, training and capacity building.

Table 14: Budget allocation for 2014

Area Allocation amount (in million taka)

Green Finance 239,807.46

Climate Risk Fund 11,103.26

Marketing, Training & Capacity Building 2,297.60

Total allocation 253,308.32

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Model Summary

Model R

R

Square

Adjusted

R Square

Std. Error

of the

Estimate

Change Statistics

Durbin-

Watson

R Square

Change

F

Change df1 df2

Sig. F

Change

1.845a .715 .661

10925.73

923.715 13.360 3 16 .000 1.821

a. Predictors: (Constant), Investments,

Loans, Assets

b. Dependent Variable:

Allocation

Figure 4: Budget allocation for 2014

4.2.2 Budget allocation according to bank category:

20 banks are chosen as a sample from 56 banks for this work. The budget allocation according to bank

category is given below:

Table 15: Budget allocation according to bank category

Bank

Category

Green Finance (in million

taka)

Climate Risk Fund (in million taka)

Marketing, Training & Capacity Building

(in million taka)

Total

(in million taka)

State Owned

Commercial Banks 2762.1 184.14 122.76 3069.00

Private Commercial

Banks 192445.561 10236.466 2047.293 204729.32

Foreign Commercial

Banks 44599.8 682.65 227.55 45510.00

Grand Total 239807.46 11,103.26 2,397.60 253308.32

State owned commercial banks have made1.20%, private commercial banks 80.82%, and foreign commercial banks

17.98% of total allocation for green banking.

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Figure 5: Budget allocation according to bank category

4.2.3. Budget allocation of State Owned Commercial Banks

State owned commercial banks have allocated 90% in green finance, 6% in climate risk fund and 4% in marketing,

training and capacity building of its total budget allocation.

Figure 6: Budget allocation of State Owned Commercial Banks

4.2.4. Budget allocation for private commercial banks

Private commercial banks have allocated 94% in green finance, 5% in climate risk fund and almost 1% in marketing,

training and capacity building of its total budget allocation.

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Figure 7: Budget allocation for private commercial banks

4.2.5. Budget allocation for foreign commercial banks

Foreign commercial banks have allocated 98% in green finance, 1.5% in climate risk fund and only 0.5% in

marketing, training and capacity building of its total budget allocation.

Figure 8: Budget allocation for foreign commercial banks

4.2.6. Budget allocation for green finance

State owned commercial banks have contributed 1.15%, private Commercial banks 80.25% and foreign Commercial

banks 18.60% of total allocation for green finance.

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Figure 9: Budget allocation for green finance

4.2.7. Budget allocation for climate risk fund

State owned commercial banks have allocated 1.66%, private Commercial banks 92.20% and foreign

Commercial banks 6.14% of total allocation for green finance.

Figure 10: Budget allocation for climate risk fund

4.2.8. Budget allocation for marketing, training and capacity building

State owned commercial banks have used 5.12%, private Commercial banks 85.39% and foreign

Commercial banks 9.49% in their annual budget for green finance.

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Figure 11: Budget allocation for marketing, training and capacity building

4.2.9. Banks’ budget utilization for green banking

In 2014, 20 Banks have utilized taka 226046.87 million for green banking in which almost 100% is used in

green finance.

Table 16: Banks’ budget utilization for green banking

Area Utilization Amount

(in million taka)

Green Finance 223761.70

Climate Risk Fund 1320.71

Marketing, Training & Capacity Building 964.46

Grand Total 226046.87

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Figure 12: Budget Disbursement & Utilization in 2014

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4.2.10. Budget disbursement & utilization according to bank category:

The table and graph of budget disbursement & utilization are referred below:

Table 17: Budget utilization according to bank category

Bank Category Green Finance

(in million

taka)

Climate Risk

Fund (in

million taka)

Marketing, Training

& Capacity Building

(in million taka)

Total (in

million taka)

State Owned

Commercial Banks 1,198.14 12.35 24.70 1235.20

Private

Commercial Banks 182,458.65 1,105.81 737.21 184,301.67

Foreign

Commercial Banks 40,104.90 202.55 202.55 40,510.00

Grand Total 223,761.70 1,320.71 964.46 226,046.87

State owned commercial banks have financed 0.55%, private commercial banks 81.53% and foreign

commercial banks 17.92% of green banking.

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Figure 13: Budget disbursement and utilization according to bank category

4.2.11. Budget utilization of state owned commercial banks

State owned commercial banks have contributed almost 100% in green finance of its total budget

utilization.

Figure 14: Budget utilization of state owned commercial banks

4.2.12. Budget utilization of private commercial banks

Private commercial banks have contributed almost 100% in green finance of its total budget utilization.

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Figure 15: Budget utilization of private commercial banks

4.2.13. Budget utilization of foreign commercial banks

Foreign commercial banks have also contributed almost 100% in green finance of its total budget

utilization.

Figure 16: Budget utilization of foreign commercial banks

4.2.14. Green Banking Score:

It is given based on green banking allocation and disbursement, total assets, total investments, total loans,

investment of total projects of green banking. Foreign commercial banks and private commercial Islamic

banks get higher score than any other bank.

Table 18: Green banking score sheet of 20 banks

Serial NO. Name of Banks Green Banking Score (0 to 10)

1. Janata Bank 7.50

2. BDBL 7.90

3. Rupali Bank 7.10

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4. National Bank Limited 6.50

5. AB Bank 7.80

6. City Bank 8.60

7. SIBL 7.00

8. Dhaka Bank 7.25

9. Dutch Bangla Bank 5.00

10. EXIM Bank 8.30

11. Mercantile Bank 6.40

12. NCC Bank Limited 7.80

13. Primier Bank 7.50

14. Trust Bank 8.10

15. Islamic Banking 9.50

16. Shahjalal Islamic Bank 8.10

17. EBL Bank 8.20

18. Midland Bank 7.90

19 SCB 9.50

20. HSBC 9.00

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Figure 17: Green Banking Score

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4.2.15. Allocation of GB to Total Assets:

Total allocations of GB by 20 banks during 2014 were 253,308.32 million taka against total assets of

5,626,766.62 million taka. It means 4.50 % of the amount of the total assets is distributed in green banking

activity.

Table 19: Total allocation of GB against to total assets

Figure 18: Total allocation of GB against to total assets

4.2.16. Allocation of GB to total loans:

Total allocations of GB by 20 banks during 2014 were 253,308.32 million taka against total loans of

1,464,337.88 million taka. It means 17.30 % of the amount of the total loans is distributed in green banking

activity.

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Particulars Total amount ( BDT in million)

Total allocation of GB 253,308.32

Total Assets 5,626,766.62

Table 20: Total allocation of GB against to total loans

Figure 19: Total allocation of GB against to total loans.

4.2.17. Allocation of GB to total investment:

Total allocations of GB by 20 banks during 2014 were 253,308.32 million taka against total loans of

1,849,298.82 million taka. It means 13.70% of the amount of the total investments is distributed in green

banking activity.

Table 21: Total allocation of GB against to total investments

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Particulars Total amount ( BDT in million)

Total allocation of GB 253,308.32

Total loans 1,464,337.88

Particulars Total amount ( BDT in million)

Total allocation of GB 253,308.32

Total investments 1,849,298.82

Figure 20: Total allocation of GB against to total investments.

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Chapter-5: Findings and Recommendation

5.1 Findings

The following matters have been found through the research:

1. Green banking activities have a significant impact on banks’ performance.

2. Budget allocation for green banking and budget utilization for green banking has a positive higher

degree of correlation.

3. Foreign commercial banks lead the way of both budget allocation and budget utilization on an

average.

4. Private commercial banks are highest volatile in budget allocation and specialized banks are in

budget distribution.

5. The banks should have given larger amount loan in the effluent treatment plant. But they have given

larger amount of loan in projects having effluent treatment plant.

6. There is a positive relationship between allocation of GB and disbursement of GB.

7. Profit of the banks is greatly influence by the activity of GB.

8. Banks have allocated only 3% and 1% of their total budget allocation for climate risk fund and

marketing, training & capacity building.

9. Specialized banks have allocated smaller amount (2% of the total allocated amount for green

banking) for green banking in their annual budget.

10. Governmental banks are lagging behind in budget allocation for green banking.

11. Banks have used little amount of money (11,103.26 million BDT of their allocated amount for

climate risk fund) in climate risk fund.

12. Banks have just used 2,297.60 million taka of their allocated amount for marketing, training &

development activities which is very insignificant amount.

13. People are not aware about green banking.

14. Top level management is not aware about the green banking activities of their respective banks.

15. There is a lack of culture of green banking activities among banks.

16. The government has not taken necessary steps to encourage people at environment friendly projects.

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5.2 Recommendation

Banks have initiated their effort for green banking. They have not been fully successful in this matter.

Some steps can be taken to make betterment of this sector. Following are some of the suggestions that can

be adopted by the banks to promote green banking in Bangladesh.

1. As part of the green banking activities, banks must give larger amount of loan in effluent treatment

plant. Because it is their green banking activities.

2. Banks should try to utilize their whole budgeted amount.

3. Banks must allocate larger amount in climate risk fund and marketing, training & capacity building.

4. Rest of the banks need to formulate their green banking policy soon.

5. Banks’ green banking unit should play an active role in conducting business.

6. More branches must be brought under solar/renewable energy.

7. Government banks need to step forward to make their branches online.

8. All banks must start SMS banking so the customers can get banking facilities through SMS.

9. Banks need to establish more ATM booths to make green banking fruitful.

10. Banks should use solar/renewable energy.

11. To set an example before general people, banks must manage their ATMs powered by

solar/renewable energy.

12. Bangladesh Bank needs their monitoring and supervision more extensive in terms of green banking.

13. Government banks must step forward in green banking activities.

14. Bangladesh government should encourage people about environment friendly projects.

15. Banks need to inform general people about green banking.

16. Coordination among top level management must be made to make green banking activities

successful.

17. Different types of green banking products must be promoted.

18. Government and Banks must award their customer for their environment friendly projects.

19. Banks must apply green banking guidelines and environmental risk management guideline in an

efficient manner.

20. Banks should develop an environment friendly culture within the organizations.

21. Banks may follow the global green banking practices.

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22. Credit risk management should be further integrated into credit risk methodology.

23. Banks may encourage and train their customers to use different green banking tools.

24. Banks should develop a database for technical issue.

25. Banks must make their infrastructure green based.

26. The activities of decision makers must be coordinated to make an overall green economy.

27. Banks must focus on sectorial lending policy and procedure.

28. Bangladesh Bank must develop a quantitative approach for more justified rating.

29. Banks must disclose more about green banking in their annual report and websites.

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Chapter-6 Ending remarkWith increasing concern about global warming and conserving environment, banks have initiated their

efforts towards green banking. They are becoming more and more responsive towards the green aspirations

of their customers. But they are far behind of their counterparts from developed countries in this regard.

Even the government banks are far behind of the private commercial banks within the country. As green

banking is a new issue in our country, banks must make their customers aware of green banking. Banks

must take new initiative and promote different green banking products. They must adopt different

environment friendly policies. They should take different effective green banking strategies to make green

banking successful. Green banking will ensure the efficient use of resources of the country which will

ensure energy conscious world. Banks must consider green banking as a necessity rather than desirability.

They can make themselves bank of third generation through conducting green banking activities. Banks

should conduct green banking activities more to increase their profitability. This will create sustainable

growth for them in the long run. This will result in sustainable green economy in our country. If all parties

of the world including banks act responsibly, we can make this world a better place to live for our next

generation.

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Chapter-7: References

BAHL, Dr. Sarita. 2012. Green Banking - The New Strategic Imperative.

BAHL, Dr. Sarita. 2012. The role of green banking in sustainable growth.

BANK, Bangladesh. 2011. Policy Guidelines for Green Banking. Dhaka.

BANK, Bangladesh. 2012. Annual Report on Green Banking, 2012. Dhaka.

BANK, Bangladesh. 2015. Quaterly Report on Green Banking, 2015. Dhaka.

DRAPER, N. R. and H SMITH. 1981. Applied Regression Analysis. New York: John Wiley &

Sons. Inc.

HOSSAIN, Md. Sharif. 2011. Panel estimation for CO2 emissions, energy consumption, economic

growth, trade openness and urbanization of newly industrialized countries. Energy Policy., pp.6992-

6994.

HOSSAIN, Md. Sharif and Rajarshi MITRA. 2013. Revisiting the Phillips Curve and the Lucas

Critique. Journal of Economics and Behavioral Studies. 5(4), pp.222, 224.

ISLAM, Md. Shafiqul and Prahallad Chandra DAS. 2013. Green Banking practices in Bangladesh.

ISLAM, Mohammad Tanjimul, Abdullah Ishak KHAN, and Farzana AFROZ. 2013. Green banking

in Bangladesh:Synchronous metamorphosis in banking action. Singapore.

KAUR, Ms. Jasdeep. 2014. Green banking in India.

KHAWASPATIL, S. G. and R. P. MORE. 2013. Green Banking in India. Maharashtra.

ANNUAL REPORTS of 20 banks in 2014.

Policy and guideline of green banking by BB.

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