Greenwatch ReportThe Bangladesh Bank on Wednesday issued a set of detailed policy guidelines for Green Banking for the banks scheduled in 2013 asking the banks to introduce green banking in three phases ending in June 2015 – by developing green development policies, formulating strategies to design specific policies for different environmental sensitive sectors putting in place a system of environmental management with the ultimate objective of addressing the whole eco-system through environment friendly initiatives and introducing innovative products.The central bank had earlier by a circular on 27 February 2011 and a curcular letter on 22 July 2012 on the issued Policy Guidelines for Green Banking for banks and a reporting format were issued.
The green banking policy guidelines seeks to address issues of global warming, promote resource efficient and low-carbon businesses and help reduces the process of environmental degradation. The policy guidelines say the compliant banks would be rewarded by the central bank in the form of better rating which is expected to benefit their business.
The police guidelines say, the rapid change in climate will be too great to allow many eco-systems to suitably adapt, since the change have direct impact on biodiversity, 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 and 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 roles as one of the key stake holders.
In response to the above, urgent measures are required by stakeholders for sustainable development
and thereby save the planet. Banks as financial intermediary 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 waste reduction are of high concern for banks. Green banks or environmentally responsible
banks do not only improve their own standards but also affect socially responsible behavior of other
business.
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 the environmental from degradation and
ensure sustainable banking practices. With a view to developing green banking practices in the country, an indicative Green Banking Policy and Strategy framework has been developed for the banks in the following manner:
Green Banking Policy needs to be covered through time frame work which will be segregated into 3 phases.
Under phase one, the Banks are to develop green banking policies and show general commitment to environment through in-house performance. The time-lining for the actions to be taken under Phase-I should go beyond June 30 next.
Banks shall formulate and adopt broad environmental or Green Banking policy and strategy approved by their Boards of Directors. A high powered Committee comprising directors from each bank Board should be responsible to review the banks’ environmental policies, strategies and program.
Banks 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 banks. 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.
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. Banks shall incorporate Environmental and Climate Change Risk as part of the existing overall credit risk methodology prescribed to assess a prospective borrower from both credit and environmental risk point of view. This will include integrating environmental risks in the checklists, audit guidelines and reporting formats.
All of this will help to 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.
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 reduce electricity consumption. Energy saving bulbs should replace normal
bulbs in branches/offices of the banks. Banks should make plan to use solar energy at their premises
to save electricity. Banks 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. 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.
As per BRPD Circular No. 18 dated November 29, 2012, solar energy system has to be in place in
SME/Agricultural branch.
Eco friendly business activities and energy efficient industries will be given preference in financing
by banks. Environmental infrastructure such as renewable energy project, clean water supply
project, wastewater treatment plant, solid and hazardous waste disposal plant, bio-gas plant, bio-
fertilizer plant should be encouraged and financed by banks. Consumer credit programs may be
applied for promoting environmental practices among clients.
Banks 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. Banks would ensure regular financing flows in these
vulnerable areas and sectors. The fund could be created as part of banks’ CSR expenditures.
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.
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.
Employee awareness development and training on environmental and social risk and the relevant
issues should be a continuous process as part of the banks’ Human Recourse Development.
Awareness development among consumers and clients would be a continuous job of a bank under
its public relation department.
Banks shall report on the initiatives/practices to Green Banking and CSR Department of Bangladesh Bank in specified format on quarterly basis and disclose in their respective websites. Banks have to submit the report within the next 15 days of each quarter.
The time lining for the actions to be taken under Phase-II should not go beyond December 31, 2014.
Banks need to formulate strategies to design specific policies for different environmental sensitive
sectors such as Agriculture, Agri-business (Poultry and 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
Pharmaceuticals), Rubber and Plastic Industry, Hospital/Clinic, Chemical Trading, Brick
Manufacturing, Ship breaking etc.
A bank should determine green targets to be attained through strategic planning. Banks 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.
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 electricity
use, 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.
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.
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 banks 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. Banks’ alliances may prepare standard and guidelines for themselves for
improving Green Banking practices.
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.
Banks should start publishing independent Green Banking and Sustainability reports showing past
performances, current activities, and future initiatives. Updated and detailed information about
banks’ environmental activities and performances of major clients should be disclosed.
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 June 30, 2015.
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.
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.
Banks shall report their initiatives/activities under the said program to Green Banking and CSR
Department of Bangladesh Bank in specified format (Annexure-A) on quarterly basis. Banks shall
submit their first quarterly report on September 30, 2013 basis within October 15, 2013 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.
Banks shall keep their annual report and websites updated with the disclosures on green banking
initiatives/activities.
The compliant banks practicing Green Banking will get 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.
