Green Banking Helps Fight Climate Change

Ghanshyam Khanal

Going green, in recent days, has been a buzzword for both global banking and financial sectors and for the general public in fighting climate change and protecting the environment. Green banking as a part of ‘going green’ is a new way of performing banking businesses considering the clean environmental issues as well as corporate social responsibility of banks.

It refers to the environmental- friendly practices that reduce the carbon footprint by using online services for banking activities to contribute to environmental protection with green banking products.
Rationalizing the strategies, policies and activities about banking services, businesses and in-house operational activities, the banks can run the efforts of green practices to keep the environment green and to minimize greenhouse effects. To adopt the green banking concept in banks, a basic understanding of proper environment management, its strategies and policies are the essentials.


Financing, at present, is essential to the rapid deployment of clean energy. Green Banks make it easier to finance projects in new markets, geographies and technologies that otherwise couldn’t be built. This means cheaper and cleaner energy for customers and more investment for private capital providers is the crux of green banking.
When we look at the history of green banking, the first green bank named “First Green Bank”, was established in Mt. Dora, Florida, the United States in 2009.

“Bangladesh Bank was the first bank to initiate the concept of green banking conceptually in 2011.
In the context of Nepal, Laxmi bank is the initiator of green banking concepts and strategies, and later on, other banks namely Standard Chartered Bank, Civil Bank and Nepal Investment Bank, etc. are also supporting the green banking practices. In the scenario of changing climate, the reasons for going green in Nepal are manifold.

Fighting climate change at the moment is not only a concern of environmentalists rather of the corporate world largely because they are producing carbon emissions in the environment. In this limelight, green banking holds numerous advantages. First, it tries to avoid as much paperwork as possible and rely on online or electronic transactions for processing i.e. less paperwork, less cutting of trees.

Second, it aims to do an environmentally-friendly business by creating awareness to business people about environmental and social responsibility. Third, as a proactive idea benefitting future generations, it adopts and implements environmental standards for lending. Last but not the least, it significantly saves time using online banking performances rather than branch banking/physical visit.

Green Banking practices can be followed in varied ways. First, Green Banks can attract more private capital at affordable rates through credit enhancements. Financing structures, such as loan loss reserves or loan guarantees, help de-risk investments for private investors, enabling more capital to flow to clean energy projects.
If a private investor is hesitant to enter a new market or is only willing to offer unfeasibly high-interest rates, a credit enhancement can provide security to a lender and improve deal economics for the borrower.

The second method is going online. Such banking as a developing concept helps in the conservation of natural resources saving paper, energy and expenditure of natural resources. It also helps customers to save money by avoiding late payments and also save their time in visiting the branches.

Banking Methods

The use of green checking accounts and credit cards is another method of green banking practices. Customers can check their accounts on the ATM. They can avail themselves services including online payment, debit cards and online statements. Moreover, some banks use green credit cards; by using it the banks will donate funds to an environment-friendly non-profit organisation.

Other techniques include mobile banking, saving paper, online banking, direct deposits etc.
Because the concept of green banking has just entered the discourse, its challenges and benefits are not still being realized visibly in the Nepalese context. The bankers as well as the customers are less aware of green banking performances. Higher operating cost is a challenge as Green banks require talented, experienced staff to provide proper services to customers. Experienced loan officers are needed with additional experience in dealing with green businesses and customers.

Likewise, credit risk can also pose a threat to green banks. Credit risks arise due to lending to those customers whose businesses are affected by the cost of pollution, changes in environmental regulations and new requirements on emissions levels. It is higher due to the probability of customer default as a result of uncalculated expenses for capital investment in production facilities, loss of market share and third party claims.

Moreover, formulating appropriate policies such as sector division according to hazard or environmental risk by the banking and financial sector in Nepal will be an arduous job because the ground reality is the policymakers have to work in opposition to strong corporate bodies. Ensuring supervision of projects by government personnel of corresponding sectors and creating a homogenous environment for all the FIs/ banks in the green financing/ banking implementation process will be another challenge.

Similarly, FIs should be able to offer attractive green products like green deposits, green mortgages and loans, green credit cards, green reward checking accounts, mobile banking etc. to the public. Corresponding authorities should try their level best in imposing enforcement to move environmentally hazardous industries to remote areas. The formation of special monitoring cells for the most hazardous industries such as the brick-making fields and the dyeing industry can help the best in supervision and monitoring.

Creating awareness to business people about environmental and social responsibility enabling them to do an environmentally friendly business practice is very essential. As the Government of Nepal and Nepal Rastra Bank have not yet formulated the effective and distinctive policies and strategies regarding “Green Banking”, now is the prime time they have to go for it.


Amid a deteriorating environment, there is an urgent need to create awareness and follow green banking in today’s business scenario of innovative technologies to make our environment human friendly. “Go Green” is an organisation-wide initiative that is moving towards banks, their processes and their customers.

The purpose is to provide cost-efficient automated channels and to build awareness and consciousness of the environment, nation and society. In this sense, green banking is a really good way for people to get more awareness about global warming and clean energy; each businessman has to contribute a lot to the environment and make this earth a better place to live.

(Khanal teaches economics at a Kathmandu college)

The Rising Nepal

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