Status of Green Financing and its Impact on Bank Profitability in Bangladesh

Abstract

As a small part of green banking, green financing is still a new phenomenon from the perspective of Bangladesh. All commercial banks in four categories must adopt green financing initiatives to promote environmentally friendly projects in their mainstream investment. Almost all banks established green banking units in time, though there is a lack of seriousness in implementing green banking policies set by Bangladesh Bank. Naturally, all commercial banks are motivated by making profits, but it is necessary to investigate the relationship between green financing and bank performance. In the present situation, climate change, sustainability, the environment, etc., have become major global concerns. There is no other planet in the universe for human beings and other animal habitats with ecological harmony. According to the Global Climate Risk Index (GCRI)-2021, Bangladesh is the 7th most vulnerable and disaster-prone country in the world, though it’s minimal contribution to the problem. This research aims to examine the current status of green financing and investigate the impact of green financing on banks’ profitability in Bangladesh. This paper identifies the data regarding green finance, such as renewable energy, energy efficiency, alternative energy, liquid waste management, recycling and manufacturing of recycling goods, HHK, green environment-friendly establishments, etc. This study provides an inclusive overview of green financing status with a special focus on renewable energy(RE), energy efficiency(EE), liquid waste management(LWM), recycling and manufacturing of recycling goods(RRG), environment-friendly brick production(EFBP), and green environment-friendly establishments(GEE) and its impact on bank profitability in Bangladesh. This study also gathered quarterly published data by Bangladesh Bank and compared it with the target set by the controlling regime.