Green banking practices

by Dr. Dhanuskodi Rengasamy

Banks play a very important role in the economic development of nations. As economic development is a dynamic and continuous process, banks are the main stimulus for the economic progress of a country.

A strong banking sector provides for the creation of jobs, generation of wealth, eradication of poverty, entrepreneurial activity, and overall prosperity of the country. Along with socio-economic activities, banks are increasingly involved in environmental protection and activities to reduce carbon omission by introducing green banking practices.

Green banking
A new emerging mantra often discussed within the banking sector is going green. Green banking is one of the banking activities that concentrates on socio-economic and environmental (ecological) factors with an aim to protect the environment and conserve natural resources.

Green banking also refers to ethical or sustainable banks that promote environmentally-friendly practices and put effort into reducing their carbon footprint. An example of green banking is where customers are asked to practice online banking instead of visiting local bank branches.

Green banks function like normal traditional banks but with the basic intention of protecting the environment. The differences are mainly in their operations where green banks focus on the environmental and social aspects, providing financial assistance that would benefit the environment.
Alice Mani (2011), who conducted a study entitled ‘Green banking through Green lending’, indicated that such banks have a major role and responsibility in substantial carbon omission.

Suresh C.B. (2011) investigated the social responsibility of banks relating to green banking activities and the study elucidated that green banking promotes the corporate social responsibility of the banks. The first green bank is based in Mt. Dora, Florida, USA, the first of its kind to promote environmental and social responsibility.

Strategies of green banking
Generally speaking, green banking refers to the efforts of the banking sector to keep the environment green and to minimise greenhouse effects through in-house operational activities and green finance. According to Md. Shafiqul and Prahalled (2013), green banking activities involve two major approaches, that is, green transformation of internal operations and environmentally responsible financing.

Banks are one of the important professional institutions that interact with the masses. They are able to adopt green activities within their organisations and influence their customers to care about the environment.