Green Banking Practices
Green Banking Practices (GBPs) lack a universally accepted definition but broadly refer to a bank’s commitment to environmentally sustainable operations and investments. This umbrella term covers various aspects, from a bank’s environmental awareness to its investment strategies, promoting eco-friendly policies and reducing the carbon footprint of banking activities.
GBPs have evolved from the broader concept of Sustainable Development, with a specific focus on environmental sustainability. This emerging approach integrates environmental management with banking operations, bridging environmental policy and socio-economic development. By doing so, GBPs play a vital role in reshaping the financial industry toward a more sustainable future.
Adaptation of GBPs by commercial banks in Sri Lanka.
Sri Lankan-licensed commercial banks began adopting Green Banking Practices (GBPs) around 2015. However, a recent study on the adaptation of GBPs in local licensed commercial banks revealed that only a few have fully embraced these practices. The research employed a two-stage analysis for a comprehensive assessment. The first stage involved a content analysis of annual reports from 2015 to the present, while the second stage utilised a semi-structured questionnaire distributed among employees responsible for sustainability or sustainability units within the banks.
Green Banking Practices (GBPs) were initially adopted around 2015 in a limited capacity. However, their implementation grew significantly between 2016 and 2019, likely driven by global sustainability efforts, including the adoption of the United Nations’ Sustainable Development Goals (SDGs) in 2015. The momentum slowed in 2020 due to the impact of the COVID-19 pandemic but rebounded in the following years as sustainability initiatives regained focus.
Digital and paperless banking initiatives—such as online banking, debit card and QR payments, ATM usage, online documentation, and reduced paper consumption—have been among the most widely adopted Green Banking Practices (GBPs) from the early stages of implementation to the present. The rise of technological advancements and digitalisation has further accelerated the adoption of these practices.Other key GBPs include investments in renewable energy—such as solar, hydro, and wind power—and carbon management, which focuses on reducing greenhouse gas (GHG) emissions and improving energy efficiency.
These initiatives have played a significant role in minimising the carbon footprint and overall environmental impact of banks.
Green Banking Practices (GBPs) related to waste management and recycling, such as e-waste management and recycling initiatives, as well as environmental conservation and resource management, including tree plantations and efficient resource utilisation, have seen moderate levels of adoption.
However, green infrastructure and facilities, such as green buildings, eco-friendly branches, and rainwater harvesting, along with green policy and process implementation, including green policies, partnerships, and sustainable banking principles, remain at a lower level of adoption.
Green financing and investments, which encompass responsible lending and green financial products, were initially adopted slowly but have gained momentum over time. While the number of such initiatives remains relatively lower compared to other GBPs, their overall financial value and impact have significantly increased.
The new developments in GBPs
GBPs have been focused by the local licensed commercial banks to develop; knowledge marketing, sustainable supply chain financing, environmental conservation and impact financing, empowerment and inclusion of the youth and women entrepreneurs on GBPs, and sustainable financial instruments such as green bonds (fund projects related to environmental sustainability like renewable energy), blue bonds (preserving and managing marine and ocean resources), and nature-based swaps.
Why did banks adapt to the GBPs?
Most of the banks have adapted the GBPs due to many benefits of the GBPs such as carbon emission reduction, environment conservation, cost reduction, market penetration, to get revenue opportunities, to have efficient resource allocation for sustainable development, to have triple bottom line in the bank, to increase the reputation, to become a responsible financial institution and social responsible citizen, higher employee morale, and to enhance ESG( Environment, social, and Governance) in the banks.
What is the influence of the SDGs on GBPs?
It can be seen that the SDGs have realigned the GBPs in a more structured manner. Therefore, the implementation of SDGs has positively impacted the increase of the GBPs.17 SDGs address different aspects. These aspects can be categorised as the 5Ps: People, Planet, Prosperity, Peace, and Partnership.
Among those 17 SDGs based on the research study, the following SDGs have more allocation of GBPs.
The highest GBPs allocations are SDG7 (Affordable and Clean Energy), SDG12 (Responsible Consumption and Production), SDG13 (Climate Action), and SDG15(Life on Land), while SDG2 (Zero Hunger), SDG3 (Good Health and Well-Being), SDG4 (Quality Education), and SDG5 (Gender Equality) have lower allocations with GBPs.
Furthermore, in SDG7, most GBPs are renewable energy, green infrastructure, and financing, and in SDG12, most GBPs are digital initiatives, waste management, and resource conservation. Further, SDG13 emphasises renewable energy, carbon management, and conservation, and SDG15 prioritises land resource management and green policies.
The positive impacts that banks can get through the alignment of GBPs with SDGs are they can create a more resilient economy, create a low-carbon economy, enhance financial and operational benefits, and improve customer and community engagement, and the growing the focus one sustainable finance options. Further, it will shape the future of GBPs through evolving green finance and innovation, risk and compliance management, improving stakeholder engagement and social responsibility, and acting as a catalyst for sustainability.
In conclusion, Sri Lankan licensed commercial banks have made significant strides in adopting Green Banking Practices (GBPs). Among these, the most prominent practices include digital and paperless banking, as well as renewable energy and carbon management initiatives. The adoption of GBPs has been positively influenced by the Sustainable Development Goals (SDGs) Framework. As a result, these practices not only enhance the overall sustainability of the banks but also contribute to the country’s broader sustainable development efforts. With ongoing and emerging developments in GBPs, there is a promising future for their continued growth in Sri Lanka’s licensed commercial banks.
