GREEN BANKING PRACTICES AND ITS IMPLICATION ON FINANCIAL PERFORMANCE OF THE COMMERCIAL BANKS IN BANGLADESH

Abstract

Green banking means incorporation of environmental issues in all sorts of
banking activities ranging from communication to clients, marketing, service
delivery, in house operations to selection of projects to finance. The central bank
of Bangladesh insists all commercial banks to implement green banking policy
guidelines and make green investments. This study examines the implementation
status of the green banking policy guideline and the impact of green banking
practices on the financial performance (ROA, ROE, ROI) of the commercial
banks in Bangladesh. By analyzing 3 years’ (2016-2018) annual reports of the
commercial banks listed in Dhaka Stock Exchange the study found that over
90% of the banks have implemented majority (above 60%) of the green banking
policy guidelines provided by the central bank. However, the practices of certain
policies such as periodic reporting of green banking practices with standard
format and external verification (policy 3.2), client education program (policy
2.5) and creation of climate risk fund (policy 1.9) are not at satisfactory level.
Less than 70% of the banks have adopted these policies. Results of correlation
and regression analysis indicate that green banking practices positively
influence financial performance.