Green Banking in light of COVID-19
In today's world, where we are facing severe environmental crises and climate
changes, it becomes essential for businesses to regulate their activities and
adhere to the norms of the environment to reduce the carbon footprints in the
surroundings. Here banks play a crucial role as they are the regulator of the
businesses by investing in them and also are a regulator of the money supply in
the economy. Due to this, no economy can function without a bank.
To save the
environment from depletion, the concept of green banks has come into the picture
to save the environment from depletion. Green banking is a much new concept that
evolved over a decade in the last years. Green bank is a term used to signify
the responsibility of the banks towards the environment.
The term green banking
signifies that the banks are more responsive towards the issues concerned with
nature and are taking steps to at least improve their strategies that negatively
affect the environment. Green banking means explicitly to use ays that reduce
the carbon footprints of the banks into the environment. The concept of green
banking entitles the banks to use more environment-friendly techniques which
reduce the carbon emissions into nature and, at the same time, are advantageous
for the business and the bank.
Banks play a significant role in the economy's sustainable development of the
economy, and therefore in this context, green banks have become vocabulary in
this context. The practice of green banking is nothing special but a standard
bank only, with the only difference being that it considers the factors relating
to the environment and society.
Green banks are also known as sustainable banks
or ethical banks. As the name suggests, these banks started to protect the
environment, and the same authorities controlled them as regular banks. Green
banking comprises three components, i.e., green product management, green
corporate social responsibility, and green internal processing. Green product
management includes services such as providing green loans, loans for green
constructions, green mortgages, online payment channels, solar ATMs, loans for
environment-friendly vehicles, investing in businesses that are eco friendly.
Their investments are basically in heavy pollution control technology. Green
corporate social responsibility includes investing in campaigns such as tree
plantation, organizing marathons for the bank's customers, maintaining parks in
the society, organizing wellness camps, educating people about internet banking,
etc. Lastly, green internal processing includes using fewer lights and more
daylight in the bank, installing rainwater harvesting, a waste management
disposal system, conducting green audits, etc.
The system of green banking
involves the use of various products, which are known as green banking products.
They include providing green loans, green mortgages, green savings accounts, and
green credit cards. All these techniques help the banks go green and reduce
their environmental carbon footprints.
Green banks are an emerging trend in society. The concept of a green bank was
first seen in the State of Florida in 2009. The first bank in India to introduce
the concept of green banking was the State Bank of India (SBI) by invested in a
wind farm project in Tamil Nadu. After the initiative taken by SBI, many public
and private banks such as:
Punjab National Bank, ICICI Bank, Canara Bank, Bank of
Baroda, HDFC Bank, IndusInd Bank, Yes Bank, and many others also stepped into
green banking and have taken various initiatives till now for the sustainable
development of the environment.
But in a country like India, with a literacy
rate of almost 70%, it is very challenging to implement green banking
effectively and efficiently because people here are unaware of the concept of
green banking. Also, some banks are incorporated explicitly for the development
of rural areas. Most of the population in rural areas is not well educated about
green banking or any such development because of a lack of education and
awareness among the masses
Some other challenges that banks face in
implementing green banking strategies are that some banks are still startups and
have not gained a lot of popularity amongst people in the last 3-to 4 years and
which makes them novices or an amateur in the field of green banking and,
therefore it becomes difficult for them to choose the path of sustainable
development by opting for green banking.
Secondly, private banks are
institutions in the market for making profits apart from government-owned banks.
Because the investment cost of green banking is higher as they require
specialized talents and skills, the expected returns are long-term, making it
difficult for a bank to opt for it. Thirdly the risks involved in hiring
specialized labor become challenging for a bank to invest so much at the initial
Also, the risks are about the loss of goodwill to the bank if, after
going green, they invest in some big project causing damages to the environment,
the bank is likely to face a lot of criticism from everywhere, including the
customers of that bank. Apart from these, there are other challenges that a bank
faces while going green that are also to be considered.
But in a situation such as the COVID-19 virus that has almost crippled all the
world economies, caused losses to the government all over the globe, proving to
be the worst wave and also fatal for a million the people across the globe, it
is not only advisable but also the need of the hour to create a sustainable
environment for the people around the world that ensures security not only
economically but also for the lives of lakhs of people surviving this deadly
To achieve this goal, the governments and institutions are
wholeheartedly working towards it. Still, green banking is also a way to make a
sustainable environment. Ultimately, the goal of green banking is reducing the
carbon footprints in nature,e which in turn would help the environment become
sustainable. Despite all these, the implementation of green banking in the
Indian economy is not prevalent s in times of COVID-19 when people are advised
to stay indoors, many of them are using online banking as a medium to pay their
bills and all other necessary payments sitting at home, but at the same time,
there are a lot of people who are not habitual with this payment method and also
do not trust the process because of the prevalent cybercrimes in such areas.
is also difficult for the banks with less technology or is not fully advanced to
provide such regular services to their customers. Despite all these hurdles in
implementing green banking, there are a lot of advantages of green banking that
can not only make the environment sustainable and healthier but also make the
lives of the individuals merrier due to the adoption of green banking by the
banks. Green banking tends to produce more employment opportunities that a lot
of people need as they have lost their jobs due to COVID-19, and also post
COVID-19 period, it would help a lot of people to get employment.
submitted by the Asian Development Bank states the post-COVID-19 needs that the
banks need to incorporate into their, and green banking is among them. As stated
above, green banking helps in creating employment; it also helps in creating a
stable climate policy which is of urgent need. Depleting land for agricultural
use, oceans and forests are the areas of concern nowadays; unencumbered
industrialization has caused all these major natural issues; therefore, if banks
can create a limit to investing in such projects and try more to invest in
environmentally friendly projects, that will not only cause a significant surge
in the sustainability of the environment but also is an excellent method for
long term investment for all such banks.
A green framework by the authorities is not only beneficial for the environment
but also for the country's economy as well. India, a developing country, needs
more such initiatives to be taken seriously by the banking sector as banks are
considered the backbone of any economy. For an economy to work efficiently, it
must have a strong backbone.
Therefore, green banking is one such step towards
making the climate better and more sustainable and also boosting the economy by
making fuller and better utilization of the resources available rather than
wasting them. Green banking is one such field that is not just attracting the
banks but also some significant industries and non-banking financial
institutions so that among the crisis of COVID-19, they can contribute some
effort towards the sustainability of the environment and help reduce the climate
problems and also enhance their image as green banks and also solidify trust
with their customers as well as stakeholders.
Green banking has become the need of the hour, and in times when the whole world
is facing a pandemic and economies are trying to recover from the critical
damage that the environment, as well as the economies, have faced, it becomes
necessary to adopt a concept such as green banking. Green banking will not only
help the financial stakeholders and pave new opportunities for the non-banking
financial institutions so that they can contribute toward the society's
sustainable development goals and build a society that is not generating any
carbon together footprints for the generations to come.
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