Promoting green finance

Dr. Atiur Rahman
Governor, Bangladesh Bank :
Better collaboration and partnerships among leading businesses, investors and key public institutions can lead to new models of inclusive, green and sustainable growth. A rapid, large-scale green transition is required for maintaining a global economic growth that may ensure green economy through simultaneous reduction of greenhouse gas emissions, adaptation to climate change and promoting sustainable use of resources available. This transition to a green economy has the potential to unlock new growth engines and spur business opportunities. Improving resource efficiencies and greening the value chain, as means of creating major growth opportunities, generating new markets and jobs, and promoting social and environmental benefits are inevitable for sustainable development. Improving the efficient use of resources and minimizing the negative impact on sustainability requires an examination of the entire life cycle of a product or process, as well as consideration of how to ensure sustainable and efficient use of resources while minimizing, or even reusing, waste.
While the international banking communities are embracing the new way of doing business, we must also work on the sustainability of the principles themselves. For genuine commitment to sustainability, the larger society has to provide the enabling environment for it to thrive. In absence of such an enabling environment, it is possible that we may see a reversal of the principles.
Green technology may be an effective way to improve resource efficiency and coordinating the different processes responsible for green growth. It is the potential solution to reduce the adversity of environmental degradation and climate change. By condensing the detrimental effects of global warming, green technology can contribute in trimming down carbon emission. To foster the development of green technology, appropriate financing mechanism is essential from banks and financial intermediaries. Widespread implementation of green initiatives and energy saving technologies can facilitate Bangladesh clean its environment. But access to finance is vital for the successful implementation of green initiatives. An unencumbered flow of financing can expedite the growth of green industry. Availability of cost effective technologies is also essential for successful green mission in Bangladesh which is latent place for the development of green industries. This is high time for the banks and financial institutions to move forward with research and development which is indispensable for exploring appropriate technologies and techniques and new green products. Awareness building initiatives must be there to enlighten masses about green initiatives and I believe, participants of this event certainly will be in a position to add value to their level of current understanding.
Green banking has been identified as one of the major drivers of sustainable economic growth in developing countries. Array of issuance of guidelines and instructions on sustainable banking issues like green banking, environmental risk management, corporate social responsibilities and financial inclusion have been persuaded by Bangladesh Bank since 2008. Of course, the pace has been accelerated in recent years. We are committed to pursuing digital, nearly paperless, sustainable, green banking operations by making best use of the information technology and related professional skills. Our different initiatives particularly IT based green banking activities through online banking, e-banking, e-commerce, online CIB, automated clearing house, e-tendering, e-recruitment, NPS etc are moving ahead in full swing.
Green financing requires thorough due diligence under Environmental Risk Management. This is indeed a socially responsible mode of financing. Energy efficiency has received significant attention of Bangladesh Bank in recent years. BB began this by launching an initiative of mainstreaming socially responsible corporate ethos and objectives in the financial sector to set motivations right; following up with two thrusts on financial inclusion and environmentally sustainable ‘green’ financing. All banks and financial institutions, local and foreign owned, private and public sector, have engaged enthusiastically in both the thrust initiatives. In green banking lenders routinely take up environmental impact assessment of investment proposals, factoring in environmental risks in their financing decisions; denying financing for environmentally risky undertakings lacking in adequate mitigation measures. Besides this environmental screening of borrowing proposals, green financing promotes adoption of new energy efficient, GHG emission minimizing output processes and practices. Banks in Bangladesh have been advised to finance solar energy, bio-gas plant, ETP and Hybrid Hoffman Kiln (HHK) in brick field under refinance programs. In order to bring further momentum in this mode of financing, we have already introduced Taka 2.0 billion refinance line against bank loans for investments in 16 green products. Of late, the off-take from this green fund has started acquiring desirable momentum.
Now, I would like to focus on the challenges ahead. All banks have their general credit policy for the lending sectors. But the nature of the different sectors is different from the environmental perspective. For example polluting industries like tannery differs from the investment in poultry. So, preparing sector specific environmental policy guideline for the banks is a big challenge. Quantifying environmental risk rating is another challenge. But we need to be determined to convert challenges into opportunities. Hence capacity building on environmental issues for both the central and the commercials bankers for structured green banking practices and Global Reporting Initiatives (GRI) is a pre-requisite.
However, the biggest challenge is greening of the mindset. We all have to be green in mind and for a start the mind-set amongst bankers should not be that environmental guidelines are damaging for growth of the business and a hindrance. Rather, it is in your own interest too for long run growth of your profits. I think we have invested sufficiently in hardware in our banking sector but we now need to make that cultural shift among ourselves and for that we need to ensure that senior management team the sector is on board with this type of e-communication and commitment to reducing our carbon footprint.
My special thanks go to the implementing partner for a nice arrangement here. I also thank the resource persons, media and other dignitaries for their presence. Last but not the least I would like to thank Deputy Governor, Mr. S.K. Sur Chowdhury and his active team of officials of Green Banking & CSR Department for organizing this timely and significant event. I am sure this key conference for sustainable banking will generate valuable insights and ideas for the policymakers to pursue Green Banking in a more effective manner. I must also thank media in advance to take this green cause forward.