Matiur RahmanAs appeared in the central bank’s annual report for the first time recently on ‘green banking’ practices, local as well as foreign banks have responded rather spontaneously to the efforts of Bangladesh Bank to make banking practices what is called ‘environment-friendly’. According to the report, the banks disbursed Taka 27,092 crore in 2012 on promoting ‘green banking’ and safeguarding the environment from unusual weather patterns, rising greenhouse gases, and declining air quality.In fact, the central bank has proactively come forward to put in place a fund to refinance lending for renewable energy generation and other environmentally beneficial projects such as effluent treatment plants and energy efficient kilns for brickfields across the country. Those who prepared the first annual report for the central bank observed that the Bangladesh Bank rather with a ‘clear vision’ on promoting green banking has embarked on this for safeguarding the environment from unusual weather patterns, effects of rising greenhouse gas concentrations, and declining air quality. The banks are required to report on their green banking activities on a quarterly basis. As reported all scheduled banks have formulated their own green banking policies and formed green banking units.
The central bank in this regard mentioned the guidelines it has already formulated titled ‘Environmental Risk Management for assessing environmental risks and do not intend to squeeze investment but ensure sustainable finance, as mentioned in the report. According to the guidelines, the green finance includes both direct and indirect finance. Banks direct green finance may be for renewable energy and environment friendly projects. Indirect green finance means financing the projects having effluent treatment plants or similar systems. The Bangladesh Bank governor is quoted to have said, green banking is not only limited to creating awareness but also in practice and banks are responding spontaneously. He also expressed the hope that the financial sector, green banking initiatives in Bangladesh would keep attracting yet wider recognition and attention also from outside.
According to experts, Bangladesh being one of the most climate-change vulnerable countries does not have any other option but to adapt to a system that would help play an important proactive role rather just coping with the varying consequences of environmental degradation. Banks in this regard are required to protect their financing from the risks of a deteriorating environment and ensure sustainable lending practices. In this regard, the banks started ‘environmental risk rating’ in July 2011 besides conducting risk rating in 12,088 projects in 2012, three times more than the projects rated in 2011. The state-owned commercial banks and specialised development banks, on the other hand, lagged behind other banks in financing green projects last year.
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