green banking in india research paper

Green banking and sustainability – a review

Arab Gulf Journal of Scientific Research

ISSN : 1985-9899

Article publication date: 7 September 2022

Issue publication date: 15 September 2022

The purpose of this article is to study green banking practices, its methods of adoption and importance of practicing green banking. This study also includes the role and contribution of banks in environmental sustainability and UN Sustainable Development Goals.

Design/methodology/approach

The current research paper is conceptual in nature, based on a thorough literature review, websites of financial institutions and literature evaluations among other sources. This study has been supplemented by a variety of research journal articles. The websites of many banks including SBI (State Bank of India) and MayBank (Malaysia) were used and reviewed to know about various green banking practices both nationally and internationally and their contribution toward sustainability.

The devastating effects of recent flooding, droughts and extreme temperatures that several people all over the world have experienced compelled everyone to begin thinking about global warming and its consequences, and to do everything that can be done to address this problem. Governments, businesses and individuals all play a part in preventing global warming and creating a more sustainable world. People have to deal with financial institutions, particularly banks, which play a vital role in this environment by assisting in the development of a robust and successful low-carbon economics. They should make more use of environmental data when extending credit and making investment decisions. The project will assist them in proactively improving their environmental performance while also adding long-term value to their company. Businesses having a bigger carbon output may be viewed as riskier in the future, and banks may shy away from funding such businesses in favor of innovative technology solutions that absorb or reduce carbon emissions. As a result, green banking is the order of the day, a source for sustainable development and it will undoubtedly benefit banks, industries as well as the environment at large.

Research limitations/implications

The theoretical implications can be summed in the following points: (1) there is no universally accepted framework for green or sustainable banking so far. However, green banking practices are at different stages of development across countries. As per the case of India, green banking practices are at a development phase in India, and green processes have a significant impact on sustainable development. (2) The study is one of the first of its kind in the academic literature as it links green banking practices with sustainability besides discussing green banking practices of the top public sector Bank of India and top commercial bank of Malaysia. Despite the significant contributions made by this study, many disadvantages should be addressed for future research. The present work was chosen for comfort, it was restricted to green banking practices of two banks only, which limits conclusion and interpretation of outcome to some extent Future research can be conducted by a comparative study with the top green banks or with the cleanest country of the world or green banking practices by those banks toward sustainability in that country can also be a good area for research

Practical implications

Managerial implication: The study is extremely helpful to the banking industry in determining the scope of green banking initiatives in sustainable development. This study is a prime study in India to interrelate banking industry towards sustainability and two UN SDGs besides green banking practices of banks. This paper has noted the areas where the banks can make progress for the greener, sustainable economics. It has also aided the banking industry in identifying areas for development so that it may focus on improving social satisfaction and satisfaction of stakeholders across its operating areas. The study is also very helpful for banks to comprehend how vital these green initiatives, especially green processes, are to improve sustainability.

Social implications

The study will serve as a gauge for banking actions toward greener nations and a greener world since these are the efforts toward Carbon Free World, Efforts for controlling global warming, efforts for the greener planet in general which undoubtedly is a significant long-term service to society a reason for better climate and better tomorrow.

Originality/value

This paper identifies the need for green banking in sustainability. This article also summarizes the notion of green banking besides outlining some methods and analyzing green banking initiative by SBI (State bank of India) of India, MayBank of Malaysia & UNSDG .

• Sustainable development
• Environment-friendly
• Green banking
• UN Sustaianble development goals

Mir, A.A. and Bhat, A.A. (2022), "Green banking and sustainability – a review", Arab Gulf Journal of Scientific Research , Vol. 40 No. 3, pp. 247-263. https://doi.org/10.1108/AGJSR-04-2022-0017

Emerald Publishing Limited

Copyright © 2022, Ajaz Akbar Mir and Aijaz Ahmad Bhat

Published in Arab Gulf Journal of Scientific Research . Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode

Introduction

Green banking is becoming a global standard speedily for adopting socially and environmentally acceptable business operations. This banking is environmentally benign by preventing environmental deterioration and making the earth more habitable. In the last few decades, green banking has become a catchphrase in the area of sustainable banking. In reality, green banking is recognized as sustainable banking, which plays a part in protecting the world from environmental damage with the goal of guaranteeing long-term economic prosperity ( Islam, Roy, Miah, & Das, 2020 ). To protect and make our environment greener, we must take some practical initiatives, which should focus at the business level and appropriate center to focus on environmental factors and implement greening efforts at the corporate level ( Islam, 2020 ). Imbalanced industrialization has harmed the environment and resulted in natural and industrial calamities ( Rehman et al. , 2021 ). As per ( Bangladesh Banladesh Bank, 2020 , www.bb.org.bd ), green banking is a type of banking with the main goal of protecting the environment and sustainable development (SD)while taking into account all social and environmental aspects. Therefore, the term “sustainable development” has spread throughout the development community and is now used by international agencies, development planners, academics and advocates for environmental and SD ( Ukaga, Maser, & Reichenbach, 2011 ). SD has developed as a new growth model in accomplishing the underlying future goal since 1992. In a larger sense, SD is defined as “long-term cultural, socioeconomic, and environmental wellness,” with the focus on “long-term,” “together with the necessity of integrating our social, economical, and environmental well-being.” ( Rahman & Rahman, 2020 ) interpreted that SD is based on enlightened self-interest, and it frequently involves the triple bottom line of economic, social and environmental concerns. Environmental sustainability, SD and climate change are the crucial parts of comprehensive socioeconomic development in developing nations and can be managed by green banking to a large extent ( Monirul Alam, Alam, & Mushtaq, 2018 ). Green banking has been characterized in a variety of ways by academics, but the overall focus has been on complete banking systems that ensure significant economic growth while simultaneously improving environmental-friendly practices ( Lalon, 2015 ). Banks must take a more significant role related to climate change through green banking and it is effective ( Sarker, Khatun, & Alam, 2019; Stephens & Skinner, 2013 ). Bai (2011) defines green banking as environmentally friendly baking and a set of practices and responsibilities that establishes a business being ecologically friendly. Green banking, often known as moral financial services, is a broad term that refers to environmental-friendly and socially responsible banking activities ( Goyal & Joshi, 2011; Sarker, Peng, Yiran, & Shouse, 2020 ). Companies are becoming more interested in environmental integrity issues as a result of increased external pressure from a variety of stakeholders, including government banking firms, socially conscious investors and society lobby groups (i.e. members of host communities), among others, in accordance with this trend, the recent surge in environmental costs has prompted businesses to include environmental considerations into all levels of management ( Shuvro, Saha, & Alam, 2020 ). Khawaspatil & More (2013), Ajaz & Aijaz (2021) concluded that Indian banks remain further behind in green banking services execution, despite a lot of opportunities in green banking and RBI notifications, hence strict measures are required to be taken regarding implementation besides awareness and training to customers and bankers must be provided. Only a few banks have taken the initiative in this area. All banks have a lot of potential, and they cannot only preserve our planet but also convert the entire globe to be more energy conscious. Banks must educate their consumers about green banking and implement all techniques to help save the environment while also improving the bank's reputation. After studying research conducted both in India and overseas, it is clear that the majority of banks are gearing up their efforts to acquire SD through the use of green practices.

Literature review

Green banking is a type of banking activity where banks make the effort to carry out their everyday operations as conscientious members of society by taking internal and external environmental sustainability into consideration and these banks are termed as green or sustainable banks Hossain, Rahman, Hossain, and Karim (2020) . Choudhury, Salim, Bashir, and Saha (2013) highlighted that in today's banking competition every bank should step up to the plate to produce a new green product with higher stakeholder involvement and SD. However, Dharwal and Agarwal (2013) while outlining risks found that green banking is a key to mitigate many types of risks such as legal risk, credit risk and reputation risk. They also recommended several green practices, such as carbon credit businesses, green financial goods, green mortgages, carbon emissions mitigation, energy awareness, green construction and social responsibility contributions to society. Ahmad, Zayed, and Harun (2013) investigated that one of the most important aspects of green banking in Bangladesh is to maintain financial viability, which is mandated by the Bangladesh Bank. Meena (2013) identified four benefits of green banking: it reduces deforestation, raises environmental consciousness among staff and consumers, provides advantage of the lower rate and changes corporate activities in an environmentally beneficial manner. Ullah (2013) , Bangladesh, arguably the least developed country, is the worst victim of global environmental pollution caused by Western countries' industrialization. Jaggi (2014) investigated SBI and ICICI bank's green banking program and strategies. SBI has implemented a number of initiatives in this area, including the Green Channel Counter, increased commitment to reaching carbon neutrality, online money transfer, wind farms, and so on. ICICI Bank's Green products and services strategy comprises internet banking for anytime, anywhere banking, auto finance and home finance. Furthermore, these banking institutions have taken initiatives to conserve energy, such as depletion (two-sided printing), recycling and using compact fluorescent lighting (CFLs), among other things. Chaurasia (2014) found that there haven't been many green banking services initiatives in India, according to investigators, who recommend that banks should practice greener financing and consider economic and environmental elements as a part of their financing principles, forcing industries to make mandated investments in SD for the greater good of society. ( Ortiz-de-Mandojana, Aguilera-Caracuel, & Morales-Raya, 2016 ) examined that due to institutional pressures, banking institutions are implementing green rules and using green transparency to become more respectable in society. Managers are encouraged to achieve environmental sustainability via institutional forces. Zhixia, Hossen, Muzafary, and Begum (2018) claimed that the Bangladesh bank's enforcement of precise criteria would lead to the successful development of sustainable lending in Bangladeshi banks. The study also showed that a barrier to green growth could be the slower rate of technology advancement, financial innovative products and widespread lack of social and ecological conscience among banking firms. ( Volz, 2018 ) found sustainable banking where investment and lending decisions are made based on environmental monitoring and risk assessment to fulfill sustainability criteria along with insurance services that address environmental and climatic risk which are significant components of green finance. Bukhari, Hashim, and Amran (2020) while pivoting on green banking adoptions model based on environmental social and governance considered where affinity of variables impacted environmental sustainability. This study found that the process is influenced by a variety of environment factors and banks can wangle the adoption by applying certain operations in a consecutive and analogous manner. Alsayegh, Abdul Rahman, and Homayoun (2020) claimed that the idea of sustainable banking entails using green banking techniques to take ethical, social and environmental concerns into account. Khairunnessa, Vazquez-Brust, and Yakovleva (2021) described that the Bangladeshi banks through their investments in numerous environmental-friendly projects, lessen the negative consequences of climate change and play a vital part in the nation's economic sustainability. Additionally, banking institutions play a significant role in financing numerous industrial projects that could have significant detrimental social or environmental effects. Zheng, Siddik, Masukujjaman, Fatema, and Alam (2021) outlined that the Green Financing is seen as a crucial component of sustainable banking, having a significant influence on the growth of a eco-friendly economy and industry generally. Therefore, it can be said that in enhancing the sustainability practices of the financial sector, the banking sector should focus on ensuring the funding for environment-conscious projects through financially viable banking in order to enhance the competitive edge of banks, generate more earnings, improve existing assets and save on invested capital and other costs. Until recently, green banking appeared to be merely an idea, and environmental concerns did not appear to be particularly relevant to a bank's operations. Initially, a bank evaluating a client's environmental suitability would have been regarded as intruding into their private affairs. However, the current view is that this poses a risk to their business. Although financial organizations are not directly impacted by environmental degradation, they, nevertheless, incur indirect expenses. Unless such measures are adopted, credit, legal and reputation problems will continue to hound these banks. The growing economies are yet to embrace the conceptualization. Amir (2021) argues that the number of studies on the green banking is scarce in developing countries; hence there is a compelling need to unlock the concept in totality. Similarly, Sharma and Choubey (2022) shared the concern for the dearth of studies in green banking space. Moreover, Chandran and Sathiyabama (2020) described that green banking practices have not gained currency in developing countries in general and Indian banks in particular. However, green banking has drawn a lot of attention in developed countries but underdeveloped countries have mostly neglected it ( Weber, 2016; Jeucken, 2010; Khan et al. , 2015; Roca & Searcy, 2012 ) and in nations like India research on green banking is virtually non-existent ( Prakash, Kumar, & Srivastava, 2018 ). Research has also shown that Indian banks are not ideally suited to carry out green banking practices ( Rajput, Kaura, & Khanna, 2013 ). The Reserve Bank of India plays a significant role in advancing environmental standards. A developing nation such as India needs to put more emphasis on the social aspect of banking and link it to economic development ( UNEP FI, 2016 ). On the other hand, in India, the majority of research focuses on corporate social responsibility and environmental management ( Narwal, 2007; Biswas, 2016; Rajput et al. , 2013; Sharma & Mani, 2013 ; Sahoo & Nayak, 2007 ), green banking strategies ( Bahl, 2012; Tara & Singh, 2014 ) and green practices adopted by private and public sector banks ( Bahl, 2012; Bihari, 2010 ). There is a significant gap between what banks seek to promote and what the public perceives them to be doing in terms of green banking ( Jayadatta & Nitin, 2017 ). Resultantly, there is a dearth of literature pertaining to green banking in India ( Sharma & Choubey, 2022 ) not much research has been conducted on role of green banking in SD overall, green banking practices by SBI (India), Maybank (Malaysia) and the contribution in achieving UN SDGs for the country. MayBank of Malaysia has been first-lined for the study due to its top commercial activities in Malaysia and State bank of India preferred for this review owing to the first bank to focus on green banking initiatives. Kaur and Sandhu (2019) since most of the studies conducted on green banking predominantly concentrated on green banking practices or on perception of customers or bankers. This gap justifies the need to investigate the problem stated. Therefore, the present study is an endeavor and an attempt to fill the research gap in this regard.

Online bill payment: Paying bills online is a significant lifestyle change, but it is possible. Payments for telephone, television and utility payments, as well as credit card and mortgage, could all be made electronically. In fact, several clients have completely abandoned their paper cheque books in favor of online payments. Not only is bookkeeping a lot easier, but a lot of paper is saved as well.

Net banking: Customers who use online banking do the majority of basic banking duties without having to enter the bank physically. For online banking clients must have a unique internet banking ID and password issued by the concerned bank.

Online saving accounts: The simplest method of using green banking services and protecting the environment is to open an online savings account and use mobile banking. Opening up direct deposit for your pay cheques, obtaining electronic statements via your bank, and making payments online are all examples of green banking. All these techniques can help your bank cut down on the amount of paper it produces. Internet banking and mobile banking are also excellent tools for staying on top of your finances and avoiding late fees. Other banking action you may take is to advise that your employer subscribe for a “Remote Deposit” program. To make a deposit, remote consumers must physically present each check to their bank. Banks can also clear payments digitally via remote deposits.

Paperless banking: All banks are moving to the CBS or ATM platform, and they are also offering online financial products and services. As a result, there is a lot of room for banks to become paperless banking. Private and foreign banks use electronic communication in their offices, but PSU banks continue to rely heavily on paper. Paper fewer statements, on the other hand, are those statements sent by mail to the concerned stakeholders of the bank to avoid huge wastage of paper. Most banks offer people the option of receiving their statements digitally through a protected log-in when they sign up for internet banking. Electronic copies of financial records and statements can therefore be stored rather than paper files. The risk of identity theft is further reduced when statements are received online.

Green deposits: The majority of firms will allow employees to get their pay cheques electronically. This mostly expedites the accessibility of your funds and saves customers a trip to the bank, but it also saves paper, a bunch of paperwork involved and so on.

Green finance or green loan: Banks can create creative green-based products or offer low-interest green loans. A green credit loan or green finance is being issued for projects that benefit nature and the environment i.e. finance provided for Renewable Energy and Clean Energy projects, Resource Recycling projects, Waste Disposal, Pollution Prevention and Control projects, Green Agriculture Development projects, Industrial Energy Conservation, Water Conservation and Environmental Protection projects, Green Transport projects, Energy Conservation and Environmental Protection Services projects, etc.

Green building and CSR: Banks have residential dwellings, branches and ATMs, they may choose to develop green buildings to protect the environment. Indian banks should launch numerous social responsibility activities as part of their green banking program, such as tree planting camps, park upkeep, and pollutant check-up camps, etc.

Importance of green banking: Green building and CSR: Banks have residential dwellings, branches and ATMs, they may choose to develop green buildings to protect the environment. Indian banks should launch numerous social responsibility activities as part of their green banking program, such as tree planting camps, park upkeep and pollutant check-up camps, etc.

Importance of green banking

Green banking is regarded as one of the processes for guaranteeing sustainability in which business operations have no adverse impact on the environment. Moreover, environment management is identical to risk management. It is extremely important for both banks and the economy since it avoids numerous hazards in the banking sector. Banks play an intermediary part in the economy because banks have the capacity to contribute significantly to SD. Green banking not only secures the greening of sectors, but it also helps banks improve their asset quality in the future. Green banking enhances the image of the bank by demonstrating and serving its environmental commitment; reduces operational costs due to less utilization of office stationery, energy and water; increases employee productivity and efficiency through skilled and optimum use of technology; and reduces dangers by installing eco-friendly equipment. It saves a lot of forestry by minimizing paper usage; reduces greenhouse gas emissions by teleconferencing and arranging a transportation pool for employees; assists in developing customers' environmental consciousness by organizing awareness program; and reduces the extent of non-performing assets by investing in less risky projects. Green banking involves technical advancements, operational improvements and a shift in client behavior in the banking industry. Green banking program typically include energy efficiency, recycling, ride sharing and environmentally responsible lending. Due to severe environmental regulations enforced by competent authorities throughout countries, industries would be required to observe particular standards in order to conduct business. It improves the mental capabilities of officials and customers to reflect green sensibilities. Green banking saves money and energy by lowering costs and raising the country's GDP.

Green banking initiatives by MayBank Malaysia

Conservation alliance for tigers (MYCAT): MayBank worked with the Malaysian Conservation Alliance for Tigers (MYCAT) in 2011. Over the course of two years, donation of RM 1 million has been made to support research programs aimed at ensuring the effective preservation of wild tiger environment in Malaysia.

Carbon disclosure project (CDP): The CDP is a non-profit organization that gives stakeholders with an in-depth look into how the planet's major corporations are tackling climate change. Companies that participate in the CDP gain better understanding of how to protect ourselves from the effects of climate change and thus become more environmental friendly. Maybank is one of merely two Malaysian banks to partake in the CDP since 2010. The CDP rating indicates a company's degree of loyalty and experience with emissions disclosure. They achieved a total number of 58 for the 2012 CDP assessment, an increase over the past year's score of 37.

Green financing and environmental-friendly projects: Maybank ventures announced a US$500 million renewable energy fund in November 2011, with the goal of capitalizing on the increased interest in clean and renewable energy. Its 10-year private equity fund consists of a series of diversified renewable energy project holdings across the Asia-Pacific region, with a concentration on China, India, Indonesia, Malaysia, Thailand, the Philippines, Vietnam, Cambodia and Laos. They also support the Malaysian government's Green Technology Financing Scheme (GTFS), which was created to encourage environmental friendly funding. MayBank participated in four major photovoltaic (PV) power plant projects in 2020 as part of a sustainable financing drive, with a total funding of around RM 1.3 billion. These projects, which will be installed in West Malaysia, will have total output of 390 MW and are expected to be commercially active by the end of 2021 or early 2022, allowing them to replace traditional coal or gas-powered stations in the local energy system and reduce carbon emissions.

Maybank is also contributing RM 70 million to the Sun Lease project to build 30 MW rooftop solar systems for the creation of cheaper power. The bank has increased its environmental concentration in recent years to help the development of a sustainable financial sector, launching its first green fund in 2020 and assisting in the issuance of several green securities across the area. In keeping with its mission to facilitate sustainable economic activity, Maybank has continued to offer funding for sustainable energy and other green infrastructure projects ( MayBank Sustainability Report, 2021 ).

Supporting innovation through financing Waste-to-Energy Projects: In 2020 Maybank refinanced the creation of a waste-to-energy project in Negeri Sembilan with about RM 374 million in financing waste-to-energy initiatives which enhance waste management attempts by blowing up municipal solid refuse to generate steam for power production. This project is expected to convert 600 tons of garbage per day and generate up to 25MW of electricity, with the capacity to expand in the future. Besides, from waste-to-energy capabilities, this plant will also include waste segregation and reusing materials, leachate treatment and a safe disposal.

Paper consumption and disposal: Paperless strategy is implemented throughout marketplaces by digitalizing all its internal procedures. Almost 136,570 kg of sensitive papers were securely recycled throughout Malaysian and Singaporean locations.

Raising awareness and reducing carbon emission: Maybank runs awareness programs and campaigns through posters, banners, e-bulletins and other regular communications regarding environmental clean consciousness. In 2020 a campaign was lunched ‘Don't be a Plastic Addict: Bring your Own Container'. The bank also encourages people to switch off their computers, water coolers and other electrical appliances when not in use through different platforms. MayBank reduced electricity consumption by 8.5% to 50,102,311 kWh compared to 2019 as an initiative to reduce carbon emission across its seven strategic buildings in West Malaysia. In 2020, water consumption was reduced by 54,786 m 3 or 11.7% compared to 466,769 in 2019.

Waste management: All garbage is responsibly disposed of, with efficient collection, recycling and disposal systems in place, all of which are overseen by licensed contractors to ensure compliance with government regulations. They also hire professionals to properly dispose of outdated electrical gadgets.

Green banking initiatives by State Bank of India

Green financing and environmental-friendly projects: SBI is investing in Eco environmental Projects and Renewable energy projects like Solar Roof (INR 91.37 Billion), Wind Energy (INR 20.93 Billion), biomass (INR 940 Million) and on some Hydro Projects (INR 1.65 Billion) as part of sustainable Banking as on 2021 Financial year SBI, India's first bank to create green electricity, has constructed ten windmills with a combined capacity of 15 MW across Tamil Nadu, Gujarat and Maharashtra. Not only that, but the programs would be advanced further with the installation of 20 MW additional capacity in Gujarat. The initiative's primary goal is not just to be economically advantageous but also to protect the environment by reducing reliance on non-renewable resources. Although the installation cost of a 1.5 MW windmill is projected to be over 10 crores, the running cost for the windmills will be almost nothing, proving to be cost efficient. Suzlon Energy has taken up the installation of these windmills with the goal of encouraging Indian banks to go green. Banks will also assist the firms by funding these initiatives at cheaper interest rates. These loans will be dubbed “Carbon Credit Plus” ( ET Bureau, 2010 ).

Green housing: Green housing is another key program launched by the State Bank of India to promote a low-carbon society. The bank has taken on the obligation of providing financing to people interested in green projects. Green buildings, via improved design and operation, are reducing the negative influence on the environment. Leadership in Energy and Environmental Design (LEED) INDIA, Indian Green Building Council (IGBC) and TERIGRIHA from TERI-BCSD India are the agencies in India with the ability to certify green buildings. SBI, the first bank in India to enter this market, has introduced the “SBI Green Home Loan” as a new product. The bank offers a home loan with a 5% margin concession and a 0.25% interest rate with no processing charge. Natural lighting and reclaimed water were used as conservation strategies ( Jaggi, 2014 ).

Rooftop solar project financing: SBI has begun to promote the green movement by giving huge amounts of credit to projects involving the installation of solar roofs. It would fund 100 MW of solar panels for Rs. 400 crores. The State Bank of India will carry out this development initiative with the assistance of the World Bank ( moneycontrol.com , 2017).

Counter for the green channel: On July 1, 2010, SBI took another step toward green banking by transitioning from paper-based banking operations to green channel counters in a number of its locations ( SBI, 2010 ). GCC is presently present at 7,052 SBI branches, with a daily transaction average of more than 100,000. This is the most essential action conducted by the bank because the majority of the bank's disposal is generally paper, which generates tremendous waste. As a result, trees are being chopped down at a rapid pace, causing environmental devastation.

Long term loans: The bank makes loans at low interest rates to project executors who have environmental goals and considerations, particularly in the case of manufacturing operations ( Vadrale & Katti, 2016 ). SBI's key endeavor is a cooperative arrangement between SBI and the Export and Import Bank of India (EXIM) to grant a long-term credit to the Aston field Renewable Resources and Group T-Solar Global SA, a Spanish enterprise. Banks have issued a 14-year loan with the aim of constructing a solar power plant in India ( Yadav & Pathak, 2013 ). In addition, the bank has introduced a new loan product called “Carbon Financing Plus”, with the express objective of providing credit to Clean Development Mechanism (CDM) projects ( Janakiraman & Karthikeyan, 2016 ).

Green marathon: SBI has recently proposed hosting marathons every year to promote environmental goals. In February and March 2019, the marathon was conducted in six cities: Delhi, Bangalore, Chennai, Ahmedabad and Chandigarh. The marathon was themed “Race for Green,” and each participant received a sapling to plant after finishing the run for a green city. In addition, the majority of the materials utilized in the marathon's organization were environmentally friendly. The primary goal of this marathon was to raise awareness about the critical need to embrace green practices ( India CSR Network, 2018 , https://indiacsr.in ).

Green bonds: The introduction of green bonds onto the market is a significant step on the part of the bank. The issue was created in order to collect funding for environmentally beneficial projects. In September 2018, the bank raised a total of $ 650 million. Furthermore, a subscription three times the real value was obtained ( Das, 2018 ). The bank intends to invest the funds in projects involving renewable energy, low-carbon buildings, energy-efficient goods, projects involving sustainable mobility and projects involving pollution and waste disposal. To regulate the goal, a dedicated green bond committee was constituted with qualified people.

Retail and digital banking development initiatives: SBI has developed YONO as a source to distribute awareness about the bank's omni-channel banking and lifestyle platform activities in order to promote green banking. SBI recognized much digital advancement in Bhopal in September 2018, including SBI “YONO” an omni-channel and lifestyle platform, State Bank Buddy wallet, anywhere banking comprising mobile banking, “SBI INTOUCH” a digital branch and more (the pioneer, 2018).

Solar ATMS: SBI claims to be the country's largest employer of solar ATMs. Since its inception in 2008, this initiative has been effective in reducing CO 2 emissions by 2000 tons per year. Until September 2018, the bank has built 1200 solar-powered ATMs and has built over 250 ATMs with lenders covering the roofs of 150 buildings with solar panels. It has a projection to construct approximately 10,000 ATMs in the next two years (businesstoday.in). The main goal of this initiative is to significantly reduce carbon footprints and ameliorate carbon emissions. In order to save energy, the bank has implemented efficient time management systems, automated systems and an effective lighting system in addition to ATMs.

Annual reports in electronic format: Another component that contributes to environmental preservation is the distribution of electronic annual reports to shareholders. Paper waste was enormous as a result of mailing annual statements on paper. It was started at the request of the shareholders and for a little fee that is donated to a charity. In 2014, the bank generated Rs. 3.09 Cr. By charging Rs. 100 for every report, it contributed to the SBI Children's Welfare Fund.

Project on carbon disclosure: SBI joined the CDP along with 550 other institutions with the goal of developing and enforcing stringent policies to reduce carbon footprints and encourage green banking practices.

Comparison of green banking initiatives of Maybank and SBI

It is clear that SBI has 1200 solar-powered ATMs and has built 250 ATM covering the roofs of 150 buildings with solar panels. However, enough solar-powered ATM by Maybank of Malaysia was not found under study and such kind of ATMs with more quantity should be installed by this Malaysian bank towards saving energy to control carbon emission. It is pertinent to mention that both these banks are signatories of CDP that helps companies and cities to disclose their impact on the environment. SBI is doing well by investing in eco-environmental projects and Renewable energy projects like solar roof (INR 91.37 billion), wind energy (INR 20.93 Billion), biomass (INR 940 million) and on some hydro projects (INR 1.65 billion) as part of sustainable banking as on 2021 financial year. Maybank is not that much behind in green finance and has announced a venture of US$500 million toward clean/renewable energy and RM70 million towards Sun Lease project for solar power generation. Moreover, it supports Malaysian Governments' GTFS. Maybank refinanced to create a waste-to-energy project in Negeri Sembilan with an amount of about RM374 million under waste-to-energy initiatives, but we could not find any such scheme by SBI in India. MayBank decided to go paperless by way of digitalization, and it has also adopted paper recycling process across Malaysian and Singaporean locations. SBI is also in the process of paperless, but the paper recycling process has not been started yet. As per Maybank website and sustainability report, it was found that a well-placed recycling system has been upkept across all branches for collection and recycling of wastage of its branches though such facilities was not found discussed for any SBI branches.

The UN Sustainable Development Goals

The 2030 agenda is an action plan with a commitment to leave nothing behind to carry out the revolutionary actions required to move the world toward an egalitarian, sustainable and resilient path. It identifies 17 goals, which include 169 targets and followed by 232 indicators to gauge how well they are being implemented. However, the Millennium Declaration, which preceded the 2030 Agenda having eight Millennium Development Goals (MDGs), the framework for global development that was finalized in 2015, is built upon by tackling complex and pressing issues of poverty, rising inequality, climate change, instability and fragility. The SDGs have greatly outpaced the MDGs. The SDGs are committed to ensure everyone is treated with dignity and are based on human rights. The SDGs apply worldwide: The 17 goals have to be carried out across the world whether they are developing or developed nations. The idea of universality also expresses a dedication to regional and international collaboration as well as understanding how to deal with similar problems. Given the disparate degrees of development in the region, this is especially crucial for Asia and the Pacific. The motto “leave no one behind” is a distinctive aspect of the 2030 Agenda; it is a call to action that no goal will be regarded to have been accomplished if it is not attained for all members of society; improvement in national averages is not sufficient. Each goal requires targets that pledge to progress on important enabling variables and methods for achieving, such as new data, technology and resource mobilization, which are required to produce favorable results, in addition to outlining time-bound commitments. Two important goals which the researcher found very much interrelated to green banking have been discussed along with achievement, steps, process of India and Malaysia toward these two goals.

Toward achieving seven and eleven UN Sustainable Development Goals

UN Sustainable Development Goal 7 (Affordable and Clean Energy): (SDG) 7 emphasizes a global effort to guarantee that everyone has access to affordable, efficient, renewable and modern energy. Availability of safe, modern, long-term energy is vital for enhancing the health and lives of billions of people worldwide.

Over the last decade, the percentage of people globally who have access to power and clean fuel have climbed significantly. In 2018, 90% of the global population had access to power, up from 82% in 2008, and 63% had access to clean fuel and cooking technology, up from 55% previously. At the current rate of progress, the world is not yet on schedule to meet the SDG 7 objective of guaranteeing affordable, dependable, sustainable and modern energy access by 2030. Globally, 733 million people still do not have access to electricity and 2.4 billion people continue to cook using those fuels which are harmful to their wellbeing and the environment ( World Bank Tracking SDG 7 – The Energy Progress Report, 2022 ).

Indian contribution: India has demonstrated a strong commitment to and achievement in household electrification and it is on track to meet the aim of providing universal access to electricity to every household. According to the Saubhagya dashboard of the Ministry of Power, over 99.99% of houses were lighted at the end of March 2019. Except for Chhattisgarh, all states have achieved 100% electricity. Clean cooking fuel: As of July 2020, the country had 2,824 lakh liquefied petroleum gas (LPG) connections and 72 lakh piped natural gas (PNG) connections; with Gujarat leading in PNG connections (26 lakh), while West Bengal has no PNG connection yet. Among the UTs, Delhi leads in both LPG with 49.8 lakh and PNG with 9 lakh connections.

UN Sustainable Development Goal 13: climate change

Floods, storms, droughts and extreme weather are all indicators of a changing climate. The global climate is changing. The reason is well-recognized: greenhouse gas emissions caused by human activities such as the use of fossil fuel for heat, electricity and transportation; industrial operations and land use changes. Climate change has the potential to stymie progress in practically every aspect of human existence. It puts agricultural production, water resources, ecosystems, energy supplies and infrastructures at risk. More than 216 million people may be pushed to migrate within national borders by 2050 in time to prevent the worst consequences of climate change ( World Bank, 2021 ). To fight with climate change, India has committed to an Intended Nationally Determined Contribution (INDC) goal of 40% non-fossil fuel energy generation by 2030, with an objective of 450 GW from renewable sources. India has also launched Unnat Jyoti, a project of affordable LEDs for All (UJALA) to control carbon emission low-cost LED lamps are being distributed under this project. By converting to these LED bulbs, India has saved around 38.6 MtCO 2 (Mt metric ton Carbon di oxide) by December 2020. Niti Ayog (Niti Ayog.in).

The State Bank of India also recognizes these risks of human pain or economic loss caused by climate change and is working to make renewable energy more widely available in order to lessen its impact. The SBI Group is also working on efforts to assist rejuvenate regional economies by incorporating and managing natural energy resources using area resources, increasing energy self-sufficiency, and developing sustainable communities with local production for local consumption. SBI ENERGY, in particular, is developing and pushing the spread of solar sharing (farming-type solar power production), which produces energy on farmland without interrupting farming, in addition to solar power generation, micro hydropower production and biomass (biogas) power generation ( www.sbigroup.com ).

MayBank of Malaysia is also doing better towards achieving UN SDG 7 and 13. MayBank has almost financed RM 3.45 billion to green energy projects to increase resilience and adaptability to climate-related danger and to provide sustainable and modern energy services.

Green banking has significant contribution toward sustainability

Green banking is a new idea that integrates environmental management and banking operations with the goal of changing the financial industry and creating new, sustainable business models ( Yadav & Pathak, 2013 ). Mumtaz and Smith (2019) analyzed the process of green finance for SD in Pakistan found that scope of green finance is immense as it helps to curb environment issues in addition to making firms more accountable and competitive in reducing carbon emission. ( Jeucken & Bouma, 1999 ) studied relationship between banks and sustainability found that banks are taking more dynamic approach since last 20 years toward attaining sustainability across the world ( Bhardwaj & Malhotra, 2013 ) explained green banking, an initiative by the banks to encourage the development of environmental-friendly enterprises and also helps in the process of natural environment restoration However, green banking, according to the Indian Banks Association, is standard banking system that takes into account all social and environmental elements in order to promote ecological sustainability and the best possible use of natural resources ( Sahi & Pahuja, 2020 ). ( Masukujjaman & Aktar, 2013 ) refers to green banking to environmentally friendly banking system that helps to prevent environmental deterioration in order to make this world more livable. ( Khatun, Mitra, & Sarker, 2021 ) recounted those institutions as banks can make a significantly positive contribution to sustainable economic. When banks engage in sustainable banking programs, it adds to its value creation and is also part of the strategy for banks ( Tyl, Vallet, Nancy, Bocken, & Marion, 2015 ). Green banking being strikingly important toward achieving the UN set sustainable goals; therefore, the implementation of green banking is the main focus of the Central Bank of Bangladesh as found by ( Akter, Siddik, & Mondal, 2018 ). In the Indian city of Coimbatore, GB practices (environmental training of workers, energy-efficient operations, green policy and overall green initiatives) had a favorable impact on banks' environmental performance found in the study done by ( Vidyakala, 2020 ) The goal of green banking is to achieve sustainability, growth and the development that is sustainable through eco-friendly and sustainable banking system ( Brundtland, 1987 ) and sustainability can also be achieved using online banking, e-banking and adhering to the 3D strategy (de-materialization, de-carbonization and de-mobilization) in the bank's daily operations ( Hossen, Uddin, & Hossain, 2014 ). After reviewing the above literature, it can easily be assessed that green banking and sustainability has a positive and significant relationship towards sustainable growth and development across the world. Therefore, previous literature supports the idea that despite having substantial risk exposure, the financial sector has responded to the sustainability issue very perfectly as being the intermediate function in the economy; hence, it is concluded that green banking can never be ignored to achieve sustainability.

We are currently confronted with big difficulties such as global warming, heavy electrical waste, and pollutants. Green banking can help in fighting all these challenges. It is one of the most important pillars toward achieving sustainability. Banks are one of the most significant professional bodies that engage with the general public and have potential for the country's long-term development by raising public awareness and offering education. The influence of banks on the environment could be seen in two different ways: internally and externally. Internal activities such as the use of electricity, water, paper and the quantity of various waste produced during banking operations. It is, however, low in comparison to other areas, but it should not be overlooked. External activities, on either hand, do not directly destroy the environment, but they do implicitly impact the environment by being included in other activities such as investing, lending, risk management and so on. Some internally and externally driving forces can help banks support greening. Employees, investors and directors are internal driving factors who can be driven to greenery and create green products and services, as well as make environmentally friendly policies, and, therefore, contribute to sustainability. External factors include competitors and customers, and sustainable growth can be achieved by raising awareness and demonstrating positive attitudes toward green financing. The green marketing plan is now being used by banks to indicate a responsible corporate marketing activity that views environmental concerns as possibilities for development and growth and verifies them throughout all operations.

The devastating effects of recent flooding, droughts and extreme temperatures that several people all over the world have experienced compelled us to begin thinking about global warming and its consequences, and to do everything we can do to address this problem. Governments, businesses and individuals all play a part in preventing global warming and creating a more sustainable world. We have to deal with financial institutions, particularly banks, which play a vital role in this environment by assisting in the development of a robust and successful low-carbon economics. They should make more use of environmental data when extending credit and making investment decisions. The project will assist them in proactively improving their environmental performance while also adding long-term value to their company. Businesses having a bigger carbon output may be viewed as riskier in the future, and banks may shy away from funding such businesses in favor of innovative technology solutions that absorb or reduce carbon emissions. As a result, green banking is the order of the day, a source for SD and it will undoubtedly benefit banks, industries, as well as the environment at large.

Theoretical implications

The theoretical implications can be summed in the following points: (1) there is no universally accepted framework for green or sustainable banking so far. However, green banking practices are at different stages of development across countries. As per the case of India, green banking practices are at a development phase in India, and green processes have a significant impact on SD. (2) The study is one of the first of its kind in the academic literature as it links green banking practices with sustainability besides discussing green banking practices of the top public sector Bank of India and top commercial bank of Malaysia. Despite the significant contributions made by this study, many disadvantages should be addressed for future research. The present work was chosen for comfort, it was restricted to green banking practices of two banks only, which limits conclusion and interpretation of outcome to some extent Future research can be conducted by a comparative study with the top green banks or with the cleanest country of the world or green banking practices by those banks toward sustainability in that country can also be a good area for research.

Managerial implication

The study is extremely helpful to the banking industry in determining the scope of green banking initiatives in SD. This study is a prime study in India to interrelate banking industry toward sustainability, and two UN SDGs besides green banking practices of banks. This paper has noted the areas where the banks can make progress for the greener, sustainable economics. It has also aided the banking industry in identifying areas for development so that it may focus on improving social satisfaction and satisfaction of stakeholders across its operating areas. The study is also very helpful for banks to comprehend how vital these green initiatives, especially green processes, are to improve sustainability. To the society: The study will serve as a gauge for banking actions toward greener nations and a greener world, since these are the efforts toward carbon free world, efforts toward controlling global warming which undoubtedly is a significant long-term service to society and a reason for better climate and better tomorrow.

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Green banking initiatives: a qualitative study on Indian banking sector

Meenakshi sharma.

Department of Management, Birla Institute of Technology, Mesra (Ranchi), Noida Campus, A-7, Sector- 1, Gautam Buddh Nagar, Noida, 201301 India

Akanksha Choubey

The environmental concern is on rise in all types of business; however, banking assumes a special niche due to its ability to influence the economic growth and development of the country. The present study proposes conceptual model of Green banking initiatives and studies the impact of three Green banking initiatives, viz. green products development, green corporate social responsibility and green internal process on two possible outcomes, viz. Green brand image and Green trust. The study is qualitative in nature comprising of semistructured in-depth interviews conducted with 36 middle- to senior-level managers of twelve public and private Indian banks. Banking sector can play a crucial role in greening the banking system by enhancing the availability of finance and serve the needs of a “green economy”. The findings of the study revealed that 63% of the total respondents were of view that their bank indulges in development of several green banking products and services, 53% of the bankers said that their bank incorporates green internal processes in their daily activities, and 78% respondents said that their bank undertakes several green corporate social responsibility initiatives. This investigation further highlights that more than 60% respondents believed that Green banking initiatives have positive role in restoring customer trust through enhanced Green brand image. With dearth of studies on green banking in India, the present qualitative study contributes to the body of knowledge and paves way for future research in green banking for sustainable development.

Introduction

Sustainability today is an “emerging mega-trend” (Lubin & Esty, 2020 ) and a very important business objective to drive green business innovation (Raska & Shaw, 2012 ; Royne et al., 2011 ). Companies like Cisco, HP and Walmart have successfully integrated it into their business practices (Sheth et al., 2010 ). The relevance of green marketing in existent scenario is conspicuous because of environmental concerns amongst marketing researchers and practitioners (Chamorro et al., 2009 ; Peattie & Crane, 2005 ; Ottman et al., 2006 ; Lee, 2008 ; Polonsky, 2011 ; Sharma, 2018 ). Industrialization has resulted in ecological inequality, and corporates are blooming at the expense of local community (Porter & Kramer, 2014 ). Uneven industrialization has disturbed ecological balance and has resulted in natural and industrial disasters (Rehman et al., 2021 ). High levels of environmental pollution have raised social concern over environmental issues (Chen, 2010 ). This environmental concern is surging in divergent businesses. Manufacturing, technology, electronics and IT industries (Bae, 2011 ) all are willingly accepting environmental dedication as a paramount business responsibility (Chen et al., 2006 ).

Banks play a pivotal role in sustainable development of a country, and green banking today has become a phraseology. Due to financial, economic and environmental changes, financial services market is re-shaping and an all-inclusive engagement of ethical proposal and values into banking practices is taking place (Lymperopoulos et al., 2012 ; San-Jose et al., 2009 ). Banking sector facilitates adaptation of environment friendly strategies, mitigates climate risks and supports recovery by diverting funds to climate-sensitive sectors (Part & Kim, 2020 ). Today, environmental and green banking has become synonym with sustainability (Kärnä et al., 2003 ), so banks are broadcasting corporate social responsibility (CSR) activities (Scholtens, 2011 ). Banks globally are investing substantially in green strategies (Evangelinos et al., 2009 ) to create green image. Greening of bank is further reducing carbon footprints from banking activities, and this is mutually beneficial to the banks, industries and the economy (Bihari & Pandey, 2015 ).

Many relevant studies have been conducted on green banking before. Scholtens assigns green bank marketing as a component of larger CSR concept. Economic agents banks play an important role in financing environment-friendly projects (Nizam et al., 2019 ) and thus contribute towards society (Rehman et al., 2021 ). Kärnä et al. ( 2003 ) and Grove et al. ( 1996 ) explained association between green marketing and CSR, in non-banking sector. Lymperopoulos et al. ( 2012 ) tested the favorable impact of green bank marketing and green image ; for Evangelinos et al. ( 2009 ) development of green services was the prime focus. Kumar and Prakash ( 2018 ) also opine that implementing sustainable banking practices can be a strong stimulus to sustainable development and points towards scarcity of studies related to sustainable banking in Indian banks. Nizam et al. ( 2019 ) emphasized the need for implementing Green banking initiatives in routine operations, whereas Masukujjaman et al. ( 2017 ) talked about pivotal role played by green banking in developing economies at social, corporate and environmental level.

Developed nations have attracted major research on green banking though developing nations have ignored them (Khan et al., 2015 ; Jeucken, 2015 ; Amacanin, 2005 ; Scholtens, 2011 ; Roca & Searcy, 2012 ; Weber, 2016 ), and in countries like India research on green banking is relatively undiscovered (Prakash et al., 2018 ). Majority of research in India is on corporate social responsibility and management of environment (Biswas, 2011 ; Narwal, 2007 ; Rajput et al., 2013 ; Sahoo & Nayak, 2007 ; Sharma & Mani, 2013 ), green banking strategies (Bihari, 2010 ; Bahl, 2012 ; Jha & Bhoome, 2013 ; Tara & Singh, 2014 ) and green practices adopted by public and private sector banks.

Equator Principles (EPs) and United National Environmental Protection Finance initiative (UNEPF1) and Equator Principles (EPs) promote sustainable development through financial institutions. It has been embraced by more than 200 member nations, and India also being a member nation is following the guidelines of RBI (Reserve Bank of India, 2017). However, despite taking vigorous steps by Indian government, sustainability is yet to dribble down to ordinary people.

Communication gap between the various stakeholders, lack of awareness, lack of green image of the banks and lack of trust are amongst the various reasons why the outcome of the green outreach by the banks is not as expected. Lymperopoulos et al. ( 2012 ) empirically validated that green bank marketing positively influences green image of the bank. However, no such study has been conducted in Indian scenario. The impact of Green banking initiatives to enhance the Green trust and further Green brand image has not been studied so far in Indian scenario.

Henceforth, there is a need to develop a framework that will fill the research gaps by asking following research questions:

What are the Green banking initiatives of leading Indian public and private banks?

What are the major challenges for Indian banks towards “going green”?

How the Green banking initiatives contribute towards creation of Green trust?

How the Green banking initiatives contribute towards creation of Green brand image?

The remaining of this paper is organized as follows: the next section discusses literature review which throws light on green banking, Green banking initiatives in India and challenges of implementing Green banking initiatives in India. Thereafter, the outcomes of Green banking initiatives, viz. Green brand image and Green trust, are discussed as subsections. Afterwards, the research methodology is explained with the help of techniques used for data collection and data analysis. Thereby, findings are discussed which elucidate how research questions are answered. The study is concluded by highlighting the implications and limitations of the research.

Literature review

Green banking.

Green banking was initially introduced in the year 2009 in State of Florida. In India, SBI (state bank of India) being the largest commercial bank took a lead towards setting higher standards of sustainability and undertook foremost step towards “green banking” initiative. SBI was the first bank to inaugurate wind farm project in Coimbatore.

Green banking is a form of banking activity where the banks take initiative to do its daily activates as a conscious entity in the society by considering in-house and external environmental sustainability. The banks who do such type of banking activities are termed as socially responsible and a sustainable bank or green bank or ethical bank (Hossain et al., 2020 ; Zhixia et al., 2018 ).

A green bank is a bank that promotes and enacts green technologies in bank operations both internally and externally to minimize carbon footprints and facilitates environment management (Bose et al., 2017 ). It is an influencer for holistic growth of economy in the nation (Jeucken & Bouma, 1999 ; UNEP FI, 2016 ). Green banks adopt social and economic aspect into their strategies and progress towards sustainable practices (UNEP FI, 2011 , 2017 ).

According to Indian Banks Association, green banking refers to a normal banking system which involves all environmental as well as social factors with an aim to ensure ecological sustainability and optimum use of natural resources (Scholtens, 2009 ; Lymperopoulos et al., 2012 ; Kumar & Prakash, 2018 ; Sahi & Pahuja, 2020 ). Hermes et al. ( 2005 ) said that banks involve a shift from traditional towards sustainable practices and social, governance and environment criteria are being integrated into their core strategy. Scholtens ( 2009 ) has explained the concept of green corporate social responsibility in banking and pronounces that a green bank offers savings accounts to stakeholders, ensuring that the savings will finance sustainable projects. He developed a framework to assess the social responsibility of global banks and further tested it on 30 institutions and concluded that there is a positive and significant association between a bank’s CSR score and its financial size and quality. As per Evangelinos et al. ( 2009 ), development of green products like green financial products, loans for renewable energies, greener technologies, green lending and environmental management strategies is green marketing in bank. This improves banks’ reputation and contribute towards sustainability. This has motivated several banks implementing green strategies to invest in developing environmental image to better prepare for future challenges.

Lymperopoulos et al. ( 2012 ) verified empirically that banking initiatives that are green result in a favorable, green image. His green bank marketing construct is comprised of green corporate social responsibility (GCSR), green internal process (GIP) and green product development (GPD).

According to (Dewi & Dewi, 2017 ), green banking promotes environment-friendly practices in banking sector. He further postulated that green banking guides the bank’s core operation towards sustainability. Kumar and Prakash ( 2018 ) have studied the adoption level of sustainable banking tools and categorized 40 criteria into five heads. They further used content analysis to evaluate the sustainable practices of Indian banks and concluded that green banking adoption is still at the nascent stage in Indian banking.

As a part of Green banking initiatives, several banks throughout the globe and NBFIs have adopted eco-friendly mechanisms for financing as well as green transformation of internal operations. For instance, banks in nations like Bangladesh, Brazil, Columbia and Indonesia have started practicing green banking relatively along the lines of the policy framework (Bahl, 2012 ; Rahman & Akhtar, 2016 ). Bank of Ceylon in its annual report of 2015 stated that all their services and goods are driven towards more technology-oriented platforms which helps in reduction of carbon footprints. Also, peoples bank has initiated a paradigm shift to its old model of banking (Oyegunle & Weber, 2015 ). Banks in China, Turkey, Mongolia, Vietnam, Indonesia, Kenya and Peru have also introduced green banking concepts like SmartGen with mobile and internet-oriented passbook free application, fortune branches being installed and initiation of smart zones (Scholtens, 2009 ; Bank of Ceylon, 2015 ; Herath & Herath, 2019 ).

Currently, Indian banks are seen being desirable towards entering global markets (Laskowska, 2018 ; Nuryakin & Maryati, 2020 ; Paramesswari, 2018 ), and it has become important that they recognize their environmental and social responsibilities (Prasanth et al., 2018 ; Sahi & Pahuja, 2020 ; Zhixia et al., 2018 ). As a result, green strategies have become prevalent, not only amongst smaller alternative and cooperative banks, but also amongst diversified financial service providers, asset management firms and insurance companies (Allen & Craig, 2016 ; Gopalakrishnan & Priya, 2020 ; Hossain et al., 2020 ; Kapoor et al., 2016 ).

Green banking initiatives in India

Green initiatives may be referred to as developing green products which consume less energy, and accordingly distribution, pricing and communication strategies follow. Peattie and Charter ( 1994 ) have defined green marketing as a comprehensive process of management which identify, anticipate and satisfy the needs of customers and society, in a fruitful and sustainable way.

Banking defines green marketing in a similar manner as other industries do. Evangelinos et al. ( 2009 ) defined green bank marketing as developing an innovative environment-friendly financial product like green loans that finance clean technology, and green strategies, like waste management programs and energy efficiency to augment banks’ green reputation and performance.

Green marketing by banks or green initiatives forms a favorable eco-friendly image that satisfies the customer’s green needs and green desires (Chang & Fong, 2010 ) and contributes towards sustainable development (Portney, 2008 ). Several banks are already implementing green banking, green strategies and building their green image to handle existing confrontation. Such green actions can help banks to procure environmental reputation and inculcate their environmental concern (Evangelinos et al., 2009 ; Lymperopoulos et al., 2012 ; Portney, 2008 ).

Green marketing in banks should address green methods and process (Kärnä et al., 2003 ) that suggests green communication also be a part of green initiatives. Evangelinos et al. ( 2009 ) suggest three aspects of green bank marketing in banking literature: lending decisions of banks should be based on environmental criteria; bank environmental management strategies; and developing environmental financial products. He suggested that “green” marketing refers to development of new green financial products that improves banks reputation and performance.

Lymperopoulos et al. ( 2012 ) empirically validated that green bank marketing which comprises of green product development (GPD), green corporate social responsibility (GCSR) and green internal processing (GIP) is a complex concept, is crucial for the bank’s green image (Hartmann et al., 2005 ) and critically contributes in developing customer loyalty and satisfaction (Chang & Fong, 2010 ).

Role of CSR in banks in creating Green brand image has not been explored much (Lymperopoulos et al., 2012 ). CSR is decision making in business, and it has ethical values, compliance with law and regards for environment, communities and people, communities attached to it. Banking relates to CSR with reference to cause-related marketing, ethical issues concerning minority and environment and quality of life (Donaldson & Dunfee, 2002 ). GCSR in banking has been emphasized by Scholtens ( 2009 ), as a socially responsible bank that safeguard savings that are financing environmental projects.

In the contemporary circumstances in market, financial service sector has been reshaped, demanding fresh marketing insight with an aim to provide instructions for successful practice. Going ecological has become a massive trend in the banking industry worldwide. The idea of green banking has encouraged banks to familiarize with paperless, technology driven goods and services while curtailing ecological impacts and performing their role as a corporate citizen on country’s development. The need of the hour is to understand the demand for green initiatives because the eventual success or even failures of these investments are influenced by apparent satisfaction of green consumers. They also assist banks to develop environmental reputation and concern, which is has become imperative today.

Several issues of green marketing like green corporate social responsibility, green product development and green internal processing are addressed by previous studies (Scholtens, 2009 ; Evangelinos et al., 2009 ; Lymperopoulos et al., 2012 ; Herath & Herath, 2019 ) and are long established by several experts, as measurements of Green banking initiatives. Additionally, the outcomes of several qualitative research underline the major contribution of GCSR as an accomplishment for green banks, thereby backing up several former studies (Grove et al., 1996 ; Kärnä et al., 2003 ). Green communications also form an important part of green initiatives as the success of implementation depends upon how well they are communicated to the masses. Lymperopoulos et al. ( 2012 ) also pointed out that environmental awareness can be included in green banking.

India lags other market economies that are in emerging stage in terms of distinctive sustainability policy for their banking practices. Ministry of Finance and RBI together are focusing on developing a policy framework specifically for Indian green banking sector (Roy, 2017 ; Kumar & Prakash, 2018 ). The present study has clubbed the Green banking initiatives of leading Indian private and public sector banks in Indian banking into three categories, viz. green product development, green corporate social responsibility and green internal process (Scholtens, 2009 ; Evangelinos et al., 2009 ; Lymperopoulos et al., 2012 ) as presented in Table ​ Table1. 1 . Table ​ Table1 1 explains the three categories of Green banking initiatives, viz. GPD, GCSR and GIP, and different products introduced by different banks under each category.

Green banking initiatives

Green product development

Green product development has actually become the major strategic consideration for several firms throughout the globe because of the ecological regulations and public awareness of eco-friendly practices (Nuryakin & Maryati, 2020 ; Paramesswari, 2018 ). Green product development can be defined as development of business loans for green logistics and waste management, renewable energy sources, loans granted to produce organic products, green mutual funds, stimulating purchase of hybrid cars and other green products, installing photovoltaic systems and investing in production of eco-friendly products (Lymperopoulos et al., 2012 ), green mortgages and green bonds (Campiglio, 2016 ; Kumar & Prakash, 2018 ) and climate fund (Jeucken, 2001 ; Scholtens, 2009 ; Islam et al., 2016 ; GRI G4-FSS1,8, EN6). GPD emphasizes on “end of pipe technology” where organizations are well aware of environmental issues via procedure of production and product design. As per Chen (2001), the product designed to minimize the use of non-renewable resource and avoid toxic materials and renewable resource during its whole life-cycle would be the most effective to display green technological development (Driessen et al., 2013 ; Fraccascia et al., 2018 ; Gopalakrishnan & Priya, 2020 ; Nuryakin & Maryati, 2020 ; Prasanth et al., 2018 ; Yan & Yazdanifard, 2014 ).

Green corporate social responsibility

Green corporate social responsibility (GCSR) can be described as the environmental aspect of CSR—the duty to cover the environmental implications of the company’s operations and the minimization of practices that might adversely affect the enjoyment of the country’s resources by future generations (Laskowska, 2018 ; Nuryakin & Maryati, 2020 ). It can be defined as development of community involvement program (GRI G4-26; Mitra & Schmidpeter, 2017 ; Hossain & Reaz2 007), charity and sponsoring (Jeucken, 2001 ; Scholtens, 2009 ; GRI G4-EC1; Islam et al., 2016 ; Shukla & Donovan, 2014 ) and health care and sanitation program (Hossain & Reaz, 2007 ; Narwal, 2007 ). Access points for financial services in low populated or remote areas of the country (GRI FSS 13; Kumar et al., 2015 ) improve access to financial services for disadvantaged people (GRI FSS 14; Hossain & Reaz, 2007 ; Sarma & Pais, 2011 ). GCSR can decrease business risk, rally reputation as well as afford opportunities for cost savings .  Thus, GCSR is no longer a luxury but a requirement . While much of the drive for sustainability has come from regulatory directives, research has shown that if implemented constructively, GCSR can drive business performance improvements in many areas ( Allen & Craig, 2016 ; Nuryakin & Maryati, 2020 ) .

Green internal process

Green internal process can be defined as relevant strategies for maximizing the utilization of bank’s resources and preserving energy such as saving paper and water, recycling and providing eco-friendly equipment; appropriate curriculum for personnel training to safeguard environment; and upgraded internal functions in to insulate the environment.

Challenges of implementing Green banking initiatives

Implementing Green banking initiatives in India involves a lot of problems. There is a lack of awareness amongst the customers and the bank employees about the concept of “green banking” and even if they are aware, the information they have is inaccurate (The Boston Consulting Group, 2009 ; Jayadatta & Nitin, 2017 ; Sharma et al., 2014 ; Maheshwari, 2014 ; Rastogi & Khan, 2015 ; Sindhu, 2015 ). A huge gap has been found in what banks want or try to spread and what people think of banks to be doing regarding green banking (Jayadatta & Nitin, 2017 ; The Boston Consulting Group, 2009 ). Green washing has led consumers to doubt towards environmental advertising and has led to increase in skepticism that has negative influence on green brand equity (Alniacik & Yilmaz, 2012 ; Shrum et al., 1995 ). It was found that almost three-fourth of people using online facilities provided by their banks were unaware of the term green banking or misunderstood it with digital banking (Sharma et al., 2014 ; Maheshwari, 2014 ; Rastogi & Khan, 2015 ; Sindhu, 2015 ). Awareness of green banking is especially less within middle and senior age groups (Sahoo et al., 2016 ). Henceforth, significant gap in terms of studying the impact of demographic exists.

Inclusive growth of economy requires a robust and healthy banking practices (Kumar & Prakash, 2018 ) Most of the activities of a green bank in India are focused on ATMs, internet banking, paperless banking, etc. (Biswas, 2011 ). It is also researched that Indian banks are not so well equipped to implement Green banking initiatives (Rajput et al., 2013 ), and they still have a long way to go (Kumar & Prakash, 2018 ). Reserve Bank of India is a major contributor in facilitating environmental policies. A developing country like India requires more thrust on the social dimension of banking and couples it with economic growth (UNEP FI, 2017 ). Limited Indian banks have advocated the green banking principles as per international standard. There is a need to improve regulatory framework (UNEP FI, 2011 ).

Outcomes of Green banking initiatives

Green brand image.

Chang and Fong ( 2010 ) defined green corporate image as “the perceptions developed from the interaction among the institute, personnel, customers and the community that are linked to environmental commitments and environmental concerns”. If the green products of a company are reliable and stable, they converge with the environmental needs of consumer, enjoy excellent environmental performance and have green reputation that company will relish green image. According to Chen ( 2010 ), Green brand image is when a product is perceived by the customers as having green commitment and green concerns. It is accepted via its competence in green reputation, success in sustainable achievement and trustworthiness of environmental promises. Chen ( 2010 ) also endorsed that green marketing positively influences a company to obtain competitive advantages, enhance corporate image and product value and hunt for innovative opportunities in market and augment the product value with reference to information technology products. Hartmann et al. ( 2005 ) posit that an efficiently chalked out green positioning strategy can provide direction towards more appreciative brand perceptions.

In the banking studies, green bank image is related to bank superiority substantially and reputation in their environmental endeavor vis-a-vis competition (Lewis & Soureli, 2006 ). This clubbed with the impression of the customers plays an important role in describing Green brand image (Nguyen & LeBlanc, 2001 ). Further, green bank image can help in retaining the customers, winning back the lost and attracting new ones, thus leading to banks’ prosperity and future sustainability. Thus, it can be presumed that corporate image has a substantial impact on customer loyalty and achieving the fundamentals of green marketing (Chaudhuri, 1997 ; Chen & Chang, 2013 ; Lewis & Weigert, 1985 ; Mitchell et al., 1997 ).

Green trust

Rotter ( 1971 ) defined trust as the extent to which a party can entrust on another party’s word, statement or promise. Hart and Saunders ( 1997 ) believe that trust is the assurance that others would behave as is conventional based on integrity, ability and benevolence (Schurr & Ozanne, 1985 ), a degree of willingness to believe another party based on ability, reliability and benevolence (Ganesan, 1994 ). Green trust is a willingness to rely on a product, brand or service or expectation arising out of its ability and credibility because of its environmental performance (Chen, 2010 ). Prior research has shown a positive relationship between trust and long-term consumer behavior (Lee et al., 2011 ) and purchase intentions (Harris & Goode, 2010 ; Schlosser et al., 2006 ) and is an antecedent of the same (Van der Heijden et al., 2003 ). Chen and Chang ( 2013 ) endorse that green initiatives can enhance customer trust and their willingness to purchase a product or service (Gefen & Straub, 2004 ).

Henceforth, it can be concluded that Green banking initiatives will have positive influence on Green trust and customers’ green expectations. However, exaggerating the green performance can also lead to reluctance of customers to trust (Kalafatis et al., 1999 ). For a bank to gain Green trust of its customer, its environmental performance, expectations and promises should be reliable, dependable and trustworthy (Chen, 2010 ); more information about the “greenness” of product should be shared with stakeholders (Chen & Chang, 2013 ); else it can give rise to mistrust (Jain & Kaur, 2004 ). Table ​ Table2 2 summarizes the various items of the major constructs of the study, viz. Green banking initiatives, Green brand image and Green trust.

Summary of constructs

Proposed framework

This research develops a conceptual framework (Fig.  1 ) that illustrates the impact of Green banking initiatives on Green brand image and Green trust. Green banking initiatives consist of three items, viz. green product development, green corporate social responsibility and green internal process (Lymperopoulos et al., 2012 ). The outcomes of Green banking initiatives are Green brand image measured by four items in the scale by Chen ( 2010 ) and Green trust measured by five items in the scale given by (Chen & Chang, 2013 ) (Table ​ (Table2 2 ).

Conceptual model of Green banking initiatives

Green banking initiatives positively influence Green brand image (Lymperopoulos et al., 2012 ), and Green banking initiatives enhance customer trust and their willingness to purchase a product or service (Gefen & Straub, 2004 ).

Methodology and case study

As mentioned before, there is dearth of extensive study on green banking in India. Henceforth, the need for exploratory research is realized and chosen for the present study. Qualitative research provides a deep-seated understanding of the experience or case under observation and study by illuminating uncovering loosely connected insights and taking forward the casual relationship. Use of qualitative research is more apt for formulization and theory dissemination in the background when not much is public about the elemental variance. According to Eisenhardt ( 1989 ), developing a case study method which is based on theory is the favored investigation technique which assist not only in testing but also provoke innovative policy in new arenas.

The present analysis is based on multiple case study where the same phenomenon is investigated in multiple situations. However, the multiple cases shall be selected in such a careful manner so that it either anticipates analogous outcome or anticipates contradictory outcome for anticipated inference (Yin, 2003 ). The above-mentioned twin conditions are addressed in the present study by taking into consideration more than one branch of the same bank and branches from different banks. Henceforth, the findings obtained from analysis of each case from contrasting groups (between State bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BOB), Canara Bank, ICICI Bank Ltd, HDFC Bank Ltd, Axis Bank Ltd, Kotak Mahindra Bank, IndusInd Bank, YES Bank, IDFC Group, IDBI) were regarded as object of comparison and the results from each case from similar group (amongst three branches of SBI or three branches of PNB) are findings which further exaggerate the understanding of Green banking initiatives of Indian banks.

In comparison to a single case study, multiple case study provides more sturdy, persuasive and conclusive results. Furthermore, the findings from multiple case study can be hypothesized to a larger extent and collaborate in theory building. Henceforth, a study based on multiple case study is more accurate, logical, and sound (Ray & Sharma, 2019 ). The findings accomplished from multiple case study method are more robust and trustworthy (Baxter & Jack, 2008 ). They allow for a comprehensive development of research questions and academic transformation. The results validate the described complementary and comparative findings to enrich the knowledge base of green banking.

Exploratory interviews

As the study is exploratory in nature, the research questions focused on what (do you […], e.g., believe?), how (do you […], e.g., feel?), why (do you […], e.g., believe?), in contrast to how much and how many and other quantifiable question. Exploratory interviews were found to be more fruitful technique of providing relevant information deemed necessary for developing a new theory (Amaratunga et al., 2002 ; De Ruyter & Scholl, 1998 ). Several probing questions like “what are the Green banking initiatives used by your bank?”, “what are the problems faced in communicating Green banking initiatives?” …….” Were asked to reveal as much information as possible. The benefit of asking such practical questions was that they provided a structure for reference and conceded the researcher to explore deeper and get analytical. Laddering and funneling techniques were used (Eisenhardt & Graebner, 2007 ; Kvale & Brinkmann, 2009 ) to discover the hidden meaning. The questions were semistructured so had flexibility of words and sequence guided by interviewee’s response. Divergent themes and subthemes were explored dictated by interviewee’s interest and expertise. The focus of the conversation was on green initiatives, their impact on Green brand image and Green trust. This directed the study to conduct interviews in the form of conversation, which were deemed apt for the study’s exploratory nature. It was also considered relevant to conduct detailed analysis (Flick, 2009 ).

Data collection

Exploratory research design has been used in the present study, and data have been collected by interviewing 36 middle to senior level bank employees from 12 public and private sector banks. Twelve banks that were targeted were State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BOB), Canara Bank, ICICI Bank Ltd, HDFC Bank Ltd, Axis Bank Ltd, Kotak Mahindra Bank, IndusInd Bank, YES Bank, IDFC Group, IDBI from Delhi NCR region. From each bank three middle-level managers were selected using purposive sampling and were interviewed using semistructured questionnaire method. The chosen respondents with their knowledge and expertise answered the semistructured questionnaire, and this helped in gathering critical points and in-depth knowledge of different aspects of green banking. The theoretical insights that emerged increased the likelihood to expand based on emergent theories (Baker, 2002 ; Eisenhardt & Graebner, 2007 ). As not much research has been done in green banking in India, if analysis had considered a sample up to twelve for conducting in-depth interviews it was considered sufficient (Carson et al., 2001 ). However, this investigation conducted in-depth semistructured interviews with 36 banking sector employees. The detailed profile of the respondents is provided in Table ​ Table3 3 .

Respondents profile

The details of the interview were duly recorded and were written on paper. The interview lasted for 50 min on an average, varying from 30 to 90 min (total number of hours exceeding 30 h). Interviews were conducted face to face, and each interview was classified into tables encompassing the most relevant headings under research (as explained earlier), to organize the data. This phenomenon focused attention on distinctive opinions and segregated those from customary perspective shared. Repetitive and interpreted logic produced strong hypothesis development. With the help of in-text, entwined with germane literature, the liaison between factual documentation and emerging theory was established (Amaratunga et al., 2002 ; Eisenhardt & Graebner, 2007 ).

Data analysis

After reaching the point of exhaustion when no contribution was done by new interviews, data analysis was done. The data were analyzed based on conceptual framework (Fig.  1 ) once interview material was transcripted. Thereafter, process of data analysis was initiated wherein for each item in the interview detailed content analysis was performed (Flick, 2009 ) to remove the crucial facets. It was followed by an interesting exercise of highlighting the cut-outs and freezing the nucleus statements in association with the conceptual framework in Fig.  1 (Saldaña, 2012 ). Characterization was performed for each interview, cut-outs found intriguing were underlined, and further important statements were frozen in association with the conceptual framework (Saldaña, 2012 ). A characterization emerged out of each interview. Then intensity analysis was performed wherein excellent responses were analyzed further to compare the phenomenon under study.

This step involved following robust quality criteria. Every phase was documented, memos were critically written, and motivation for each interpretation was worked upon. Coding of the interview took place in two cycles, and the crucial facets of the findings were assigned to the major categories of Green banking initiatives, Green brand image and Green trust. Next, the extensive interview material was immersed as it was private investigation of an exclusive interview. The objective of such technique was to point at the trends emerging and to reinforce them all with fitting justifications. In summation, demonstration was for the main constructs explained at the time of interviews in a pattern (i.e., putting together coding cycles) (Fig.  1 ). Consequently, the indicators were categorized. Content analysis and topic-based analysis together justified and verified the authenticity of the analysis.

The qualitative data for the study were collected with the help of in-depth personal interviews conducted with the bank employees. The data developed thereafter provided relevant insight. Numerous green marketing issues, such as GPD and GIP already addressed before by previous research (Evangelinos et al., 2009 ; Lymperopoulos et al., 2012 ), were confirmed as components of green marketing by the practitioners. The findings of qualitative analysis conducted in the study highlighted the role of GCSR as a crucial factor for success of green bank marketing (Grove et al., 1996 ; Kärnä et al., 2003 ; Lymperopoulos et al., 2012 ).

Findings and discussion

The present study aims to provide answer to the following research questions:

The process adopted in the paper is depicted with the help of flowchart in Fig.  2 . The study begins with the introduction and now has moved to the findings and discussions by answering the research questions identified in the beginning of the study.

Workflow of the research paper

The Green banking initiatives in the paper are divided into three major categories: green products development, green corporate social responsibility and green internal process. They are further summarized in detail in Table ​ Table1 1 along with different products introduced under different heads by different banks under consideration. All the 36 respondents agreed that the twelve public sector and private sector banks are using these Green banking initiatives.

One branch manager of a leading public sector bank stated: The bank has come up with several green products and services like green loans/green financing of energy efficient projects, promote renewable energy, green vehicle finance, loans for constructing green buildings etc .

Another branch manager stated: My bank is involved in several green corporate social responsibility activities as a part of green initiatives like tree plantation campaigns, maintenance of parks, promoting environmental literacy etc .

One of the regional managers commented: Bank is implementing responsible waste management disposal systems, rainwater harvesting, use of more daylight, using emails and internal network communication instead of paper-based documentation.

Another AGM said: Implementing green banking has always been a major issue but it plays an important role in the development of a developing nation like India .

Majority of the bank employees agreed that now both public and private sector banks are taking steps to implement Green banking initiatives. They also commented about the reputation risks involved from financing environmentally objectionable projects (Sahi & Pahuja, 2020 ; Zhixia et al., 2018 ).

In a country like India with literacy rate of 70% on an average, green banking is still at a nascent stage and desired results have not been achieved (Kumar & Prakash, 2018 ). The analysis revealed that there were multifold reasons attributed to it. The bank employees provided very valuable and honest insight during the semistructured interviews.

One of the regional managers commented: People have trust issue with green goods and services. Most of the customers are uncomfortable adopting new tools and technologies.

Branch manager said: Many customers are not aware of several green tools and technologies resulting in no use or less use of them .

Another commented: Elderly and uneducated people are less adaptable towards green products and services.

There were several other comments as mentioned below:

• Staff training is a major task as few older staff are reluctant towards the change.
• Green goods and services increase bank’s cost at least initially though reduces administrative cost in the long run.
• The major problem bank faces in this process is of customers not accepting the online transactions happily.
• Customers are skeptical towards safety in transactions undertaken online; however, educated people easily adopt green technologies.

Majority of the bank employees agreed that a proactive way of future sustainability is Green banking, but banks in India are running far behind their counterparts from developed nations because of lack of education, lack of awareness and lack of preparedness of Indian banks to implement green initiatives (Jayadatta & Nitin, 2017 ; The Boston Consulting Group, 2009 ). However, there was a consensus that a lot needs be done till green banking percolate to grassroots level and this was not possible till all stakeholders, i.e., government, bankers and customers work in union to achieve it (Kumar & Prakash, 2018 ).

Green trust is a willingness to rely on a product, brand or service or expectation arising out of its environmental performance. The Green banking initiatives if successfully explained and implemented will enhance customer’s trust in bank and will positively influence their purchasing decisions.

One of the bank managers stated: Bank’s priority must be to make customers do everything themselves digitally without being dependent on bank. This will increase their confidence and enhance their trust on the bank.

Another bank employee stated: My bank undertakes several green corporate social responsibility activities like tree plantation, maintenance of parks etc . They enhance our reputation and reliability.

Regional manager said: One of our customers told me that he participated in the marathon sponsored by our bank. He very proudly told other participants that he has account in our bank, and we are very committed to the environmental cause.

Another employee stated: One customer came to me and said that he read in the newspaper that our bank is a signatory to UNEP F1 and adhere to UN Global Compact Principles. He said that he was very much impressed that our bank keeps promises and commitments for environmental protection.

Hence, based on comments received it can be affirmatively concluded that Green banking initiatives in the form of green products and services, green corporate social responsibility and green internal process can go a long way in creating Green trust of all stakeholders (Chen, 2010 ).

Researchers studied the relation amid green banking and Green brand image resulting to the conclusion that a positive relation actually exists amid the banks undertaking Green banking initiatives and the development that takes place in terms of improving the banks brand image (Chang & Fong, 2010 ; Hartmann et al., 2005 ; Lymperopoulos et al., 2012 ).

One manager stated: Green initiatives have influenced all our eco-friendly and environmentally concerned consumers and they through positive word of mouth have augmented bank’s green image within the society.

Regional manager Commented: Steps taken to create environmental awareness has created Green brand image amongst our ecofriendly customers. This in future will be a driver of satisfaction and loyalty. Bank green corporate social responsibility initiatives like sponsorship for protection of wildlife, development of school fees collection modules etc . augment the banks green image.

One bank employee said: One of the customers told me that he saw two ambulances donated by this bank outside an eye hospital. A slogan on environmental protection was painted on the ambulance. He was very touched. His impression of our bank’s reputation got enhanced.

The above reviews guide the researchers to conclude that Green banking initiatives in the form of green products and services, green corporate social responsibility and green internal process contribute towards creation of Green brand image of the bank (Chaudhuri, 1997 ; Chen & Chang, 2013 ; Lewis & Weigert, 1985 ; Mitchell et al., 1997 ).

On the basis of content analysis in Table ​ Table4, 4 , it can be concluded that 63% of the total respondents were of view that their bank indulges in development of several green banking products and services; 53% of the bankers said that their bank incorporates green internal processes in their daily activities; 78% respondents said that their bank undertakes several GCSR actions like marathon for promoting sustainability, reduction of carbon footprints, green loans, green mortgages etc.; and 22% of respondents were of view that their bank still has a long way to go for fulfilling its green corporate social responsibilities. Though 84% of bankers believe that their bank is concerned as a benchmark for ecological commitment, 16% bankers said that their bank is far away from setting a standard for Green banking initiatives. Majority, i.e., 70%, of bankers feel that their bank is very professional when it comes to environmental protection, but 30% said that their bank is still an amateur in undertaking green initiatives and thereby fails to embark on environmental protection. Though when it comes to fulfillment of ecological performance and success in the same, half of the respondents agree and half disagree to this fact. Majority of respondents, i.e., 63%, said that their bank undertakes many actions to build its establishment towards environmental concern and approximately same, i.e., 65% bankers also said that their bank seems to be trustworthy when it comes to environmental argument that it puts amongst its customers. A widely held belief observed amongst bankers was regarding reliability of bank’s environmental commitments, to which 84% agreed and, merely 16% denied. Same results were attained when it came to dependability on the bank’s environmental performance. Even though bankers feel that their banks try and perform as much as possible towards ecological concerns, and even 63% felt that their bank keeps its promises for environmental performance, yet majority of them feel that expectations are yet not fulfilled and almost all the bankers were of view that banks face a lot of challenges like difficulty in gaining trust, lack of ease with digital forms, cybercrimes, hacking risks, etc., while implementing green initiatives. Results of content analysis are also depicted using bar graphs in Fig.  3 .

Results of the content analysis (to be inserted here)

Results of the content analysis using bar graphs

Conclusions

To facilitate the market transformation demanded in Paris agreement, green banks play a critical role to meet the goal of restricting global warming (Ihlen, 2009 ; Kolk & Pinkse, 2005 ; Miah et al., 2020 ). Banks needs to apply morality of sustainability and responsibility to their business model. By adopting the environmental factors in their lending activities, banks can gain public trust and also fulfill their responsibility towards the society. Green banking, if implemented sincerely, will act as an effective measure for attaining people’s trust and building bank’s brand image (Chen, 2010 ).

Countries like USA, UK, Australia, Japan and Malaysia have embedded Green banking initiatives, guidelines and principles in their banking system (Meng et al., 2019 ; Thompson & Cowton, 2004 ); however, India has a long way to go vis-a-vis their developed counterparts (Scholtens, 2009 ; Bank of Ceylon, 2015 ; Herath & Herath, 2019 ) and require strong motivation and reinforcement to do so. In such a backdrop, the present study has relevant theoretical, social and managerial implications.

The present study proposed conceptual model of Green banking initiatives in Fig.  1 with three antecedents of Green banking initiatives, viz. green products development, green corporate social responsibility and green internal process with two green banking outcomes: Green brand image and Green trust with themes and dimensions as described in Table ​ Table2. 2 . Based on the findings of semistructured interviews and discussions; thereafter, the proposed relationship in the conceptual model was appropriately concluded. This investigation highlights the role of Green banking initiatives in restoring customer trust through enhanced green image. The study has successfully answered all the four research questions posed in the beginning of the study.

In response to RQ1, the study suggests that majority of public and private sector banks are implementing Green banking initiatives in the form of Green product development like Green loans, green financing, green mortgages, loans for green construction, etc.; Green corporate social responsibility like green credit cards, internet banking, green savings account, payment of school fees through ATM, solar ATM, green CDs, green awareness programs; and green internal process like use of more daylight, employee training on green initiatives, conducting energy audits, using internal network communication (Herath & Herath, 2019 ; Lymperopoulos et al., 2012 ; Sudhalaksmi & Chinnadorai, 2014 ).Quantitative analysis revealed that 63% of the total respondents were of view that their bank indulges in development of several green banking products and services; 53% of the bankers said that their bank incorporates green internal processes in their daily activities; and 78% respondents said that their bank undertakes several GCSR.

The study revealed very valid information regarding the major challenges for Indian banks towards “going green”. It was found that there are lack of awareness, lack of education and presence of green washing (The Boston Consulting Group, 2009 ; Jayadatta & Nitin, 2017 ; Shrum et al., 1995 ; Alniacik & Yilmaz, 2012 ; Sharma et al., 2014 ; Maheshwari, 2014 ; Rastogi & Khan, 2015 ; Sindhu, 2015 ) because of which Indian banks were not able to meet international standard. Need for improved regulatory framework and collaborated efforts of all stakeholders was also found imperative in achieving the required goals (Miah et al., 2020 ). Previous studies clearly point out towards multi-stakeholder involvement in facilitating green building adoption (Bukhari et al., 2020 ).

Bank employees revealed that engaging in green corporate social responsibility activities like tree plantation, organizing marathons, undertaking green internal processes like reducing paper usage, using digital banking safely, launching green counters and green credit cards all enhance consumer’s trust in green activities of banks and create Green trust (Chen, 2010 ; Lymperopoulos et al., 2012 ; Hossain et al., 2020 ).

The study revealed a positive relationship between Green banking initiatives and Green brand image. The bank employees confirmed that eco-friendly consumers were very proud of Green banking initiatives and also created positive word of mouth that helped in creation of Green brand image that helps in achieving customer loyalty and the fundamentals of green marketing (Chaudhuri, 1997 ; Chen & Chang, 2013 ; Lewis & Weigert, 1985 ; Mitchell et al., 1997 ).

On the basis of in-depth interviews, the study further concludes that 63% of the total respondents were of view that their bank indulges in development of several green banking products and services; 53% of the bankers said that their bank incorporates green internal processes in their daily activities; and 78% respondents said that their bank undertakes several green corporate social responsibility initiatives. This investigation further highlights that more than 60% respondents believed that Green banking initiatives have positive role in restoring customer trust through enhanced green image.

Suggestions and implications of the study

The theoretical implication of the present research is to validate using qualitative research the positive relationship between Green banking initiatives, Green trust and Green brand image of the Indian banks. The semistructured interview of thirty-six middle- to senior-level bank managers of twelve banks has very lucidly thrown light on the challenges and the proposed conceptual framework comprising of three constructs, viz. Green banking initiatives, Green trust and Green brand image. With dearth of studies on green banking in India, the present qualitative study makes valuable contribution to the body of knowledge and paves way for future research in green banking for sustainable development.

The present study’s managerial implications are wide ranging. The investigation clearly states that if Green banking initiatives are implemented effectively, augmenting environmental reputation and reinforcing environmental concern will no longer be a utopia. So, through efficient resource planning of green activities, new and interesting opportunities can be created by the bank which can boost their prominence and help to win trust of current and prospective customers. The study will motivate the banking sector to be engaged in green corporate social responsibility as “social banking” is an important aspect of “green banking” and use green internal process to create awareness amongst the divergent stakeholders. The study has great relevance for environmentalist, policy makers and all stakeholders in developing effective and efficient green banking strategies.

The limitations and directions for future studies

The proposed relationship in this qualitative study can be further validated quantitatively, and the impact of demographics on it can also be investigated. The study has been conducted in Delhi NCR region in India, and an exhaustive study in different countries at different stages of development can provide valuable insight. The proposed framework can also be studied from the point of view of other stakeholders apart from bank employees.

The study has very placidly explained how use of green initiatives by banks can enhance Green brand image and solidify trust with stakeholders. The research results provide relevant and divergent insights into government, strategist and academician to chalk out effective green banking strategies for “green economy”. The State of Green Bank Report ( 2020 ) also declares that for a sustainable economic recovery during the global COVID 19 crises as well as for reducing emission before 2050 “climate-resilient green banks” are the need of the hour.

Acknowledgement

The authors acknowledge the supports provided by Indian Council of Social Science Research (ICSSR) India for funding this research.

Declaration

The study has no conflict of interest.

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Contributor Information

Meenakshi Sharma, Email: ni.ca.arsemtib@ihskaneem .

Akanksha Choubey, Email: moc.liamg@88yebuohcahsknaka .

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Green banking initiatives: a qualitative study on Indian banking sector

Affiliation.

• 1 Department of Management, Birla Institute of Technology, Mesra (Ranchi), Noida Campus, A-7, Sector- 1, Gautam Buddh Nagar, Noida, 201301 India.
• PMID: 33967597
• PMCID: PMC8088406
• DOI: 10.1007/s10668-021-01426-9

The environmental concern is on rise in all types of business; however, banking assumes a special niche due to its ability to influence the economic growth and development of the country. The present study proposes conceptual model of Green banking initiatives and studies the impact of three Green banking initiatives, viz. green products development, green corporate social responsibility and green internal process on two possible outcomes, viz. Green brand image and Green trust. The study is qualitative in nature comprising of semistructured in-depth interviews conducted with 36 middle- to senior-level managers of twelve public and private Indian banks. Banking sector can play a crucial role in greening the banking system by enhancing the availability of finance and serve the needs of a "green economy". The findings of the study revealed that 63% of the total respondents were of view that their bank indulges in development of several green banking products and services, 53% of the bankers said that their bank incorporates green internal processes in their daily activities, and 78% respondents said that their bank undertakes several green corporate social responsibility initiatives. This investigation further highlights that more than 60% respondents believed that Green banking initiatives have positive role in restoring customer trust through enhanced Green brand image. With dearth of studies on green banking in India, the present qualitative study contributes to the body of knowledge and paves way for future research in green banking for sustainable development.

Keywords: Green banking; Green banking initiatives; Green brand image; Green trust; Indian banking sector.

© The Author(s), under exclusive licence to Springer Nature B.V. 2021.

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Conflict of interest statement

Conflict of interestThe study has no conflict of interest.

Conceptual model of Green banking…

Conceptual model of Green banking initiatives

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• Published: 06 March 2020

Transition towards green banking: role of financial regulators and financial institutions

• Hyoungkun Park 1 , 2 &
• Jong Dae Kim 3  

Asian Journal of Sustainability and Social Responsibility volume  5 , Article number:  5 ( 2020 ) Cite this article

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This paper provides an overview of green banking as an emerging area of creating competitive advantages and new business opportunities for private sector banks and expanding the mandate of central banks and supervisors to protect the financial system and manage risks of individual financial institutions. Climate change is expected to accelerate and is no longer considered only as an environmental threat because it affects all economic sectors. Furthermore, climate-related risks are causing physical and transitional risks for the financial sector. To mitigate the negative impacts, central banks, supervisors and policymakers started undertaking various green banking initiatives, although the approach taken so far is slightly different between developed and developing countries. In parallel, both private and public financial institutions, individually and collectively, are trying to address the issues on the horizon especially from a risk management perspective. Particularly, private sector banks have developed climate strategies and rolled out diverse green financial instruments to seize the business opportunities. This paper uses the theory of change conceptual framework at the sectoral, institutional and combined level as a tool to identify barriers in green banking and analyze activities that are needed to mitigate those barriers and to reach desired results and impacts.

Introduction

The latest IPCC report (IPCC 2018 ) reaffirmed that human activities caused global warming and are likely to further accelerate it by reaching 1.5 °C above pre-industrial levels between 2030 and 2052 based on a business-as-usual scenario. The IPCC report set highly ambitious targets of reducing global net anthropogenic CO 2 emissions by approximately 45% from 2010 levels by 2030 and reaching net zero around 2050 to meet 1.5 °C of global warming. Limiting global warming to 1.5 °C certainly requires social and business transformations and emissions reductions across all sectors. Whilst the National Climate Assessment (USGCRP 2018 ) was more limited in scope by focusing its findings on the United States, it reached similar conclusions and suggested measures to reduce risks through emissions mitigation and adaptation actions. These findings prove that there is still a long way to go despite negative impacts arising from climate change and global warming (Doran and Zimmerman 2009 ; Cook et al. 2013 ).

To achieve such a structural transformation, the magnitude of the investment required is enormous. The IPCC report projected USD 2.4 trillion in clean energy is needed every year through 2035 and between USD 1.6 and USD 3.8 trillion in energy system supply-side investments every year through 2050, which is equivalent to USD 51.2 and USD 122 trillion exclusively for energy investments. Considering the significant investment needs, the financial sector is expected to play a pivotal role in providing necessary financial resources as it is the backbone of the real economy (OECD 2017 ). The role of the banking sector is central in meeting financial needs of the private sector and delivering credit to households and individuals (Beck and Demirguc-Kunt 2006 ; Wang 2016 ). The banking sector also plays a critical role in supporting a country’s adaptation to climate change and enhancing its financial resilience to climate risks. Banks can help reduce risks associated with climate change and sustainability, mitigate the impact of these risks, adapt to climate change and support recovery by reallocating financing to climate-sensitive sectors.

Climate change is affecting the financial system because of its far-reaching impact across all sectors and geographies, and the high degree of certainty that risks will emerge and have irreversible consequences if no actions are taken today. However, climate-related risks are not yet fully assessed and factored into current valuation of assets (NGFS 2019 ). The role of banks in financing the transition to a green economy is to unlock private investments, to bridge supply and demand while considering the entire spectrum of risks and to evaluate projects from both an economic and environmental perspective (EBF 2017 ). Although several banks have demonstrated their leadership in financing green or climate projects, the green portfolio of most banks is still very low. The International Finance Corporation (IFC) estimated the total green loans and credits of banks in developing countries to the private sector in 2016 to be approximately USD 1.5 trillion, or about 7% of total claims on the private sector in emerging markets (IFC 2018a , 2018b ). This outcome results from both a lack of the necessary regulatory and supervisory framework and failure to integrate environment and climate change risks into banks’ strategies and risk management systems. Additionally, the current financial framework often makes the required investment difficult to be met due to barriers exist at the sectoral and institutional level (Mazzucato and Semieniuk 2018 ). In response to the lack of regulatory and supervisory framework, a growing number of central banks and regulators around the world are becoming aware of their role and potential mandate in addressing climate change and environment risks faced by the banking and financial sector and taking actions (Volz 2017 ). For example, a group of central banks and supervisors launched the Networking for Greening the Financial System (NGFS) in 2017 to contribute to the analysis and management of climate and environment-related risks in the financial sector, and to mobilize mainstream finance to support the transition toward a sustainable economy (NGFS 2018 ). In parallel, more banks, especially private sector commercial banks, have started greening their operations by integrating environmental and climate change risks into their strategies and risk management systems and rolling out green financial products to expand their business horizons.

While green banking is still a new concept in the field of climate finance, it can serve the United Nations Framework Convention on Climate Change (UNFCCC)‘s objectives by financing climate change mitigation and adaptation activities in collaboration with the private sector. This paper aims to identify the challenges that climate change presents to the financial sector and describes and analyzes various tools for financial institutions that can help manage climate and credit risks while developing business opportunities in parallel.

The paper proceeds as follows. Section 2 introduces the topic of green banking and reviews the relevant literature. Section 3 shows the green banking initiatives being undertaken by central banks and regulators and recent discussions about the mandates of central banks in their efforts to make the bank’s operations green and sustainable. It will also analyze the key difference in the approaches taken by developed and developing countries. This is followed by a discussion of the range of strategies, policies, tools and instruments that are being adopted and deployed by banks and presents the framework in Section 4. Section 5 introduces the theory of change conceptual framework as a tool to analyze current barriers and gaps, activities to be performed to mitigate the barriers and expected results and impacts that can be created. The final section discusses implications for academia, policy makers and practitioners and provides directions for future research.

Overview of green banking

Definition of green banking.

There is no universally accepted definition of green banking (Alexander 2016 ) and it varies widely between countries. However, some researchers and organizations tried to come up with their own definition. The Indian Institute for Development and Research in Banking Technology (IDRBT), which is established by the Reserve Bank of India, defined green banking as an umbrella term referring to practices and guidelines that make banks sustainable in economic, environmental and social dimensions (IDRBT, 2013 ). Green banking is similar to the concept of ethical banking, which starts with the aim of protecting the environment, as it involves promoting environmental and social responsibility while providing excellent banking services (Bihari 2011 ). The State Bank of Pakistan defined green banking as promoting environmentally friendly practices that aid banks and customers in reducing their carbon footprints (SBP 2015 ). Green banking can be also called social or responsible banking because it covers the social responsibility of banks towards environmental protection, illustrating that social issues often intersect with environmental issues. Social banking is broadly defined as addressing some of the most pressing issues of our time and aiming to have a positive impact on people, the environment and culture by meaning of banking (Kaeufer 2010 ; Weber and Remer 2011 ). Similarly, responsible banking encompasses a strong commitment by banks to sustainable development and addressing corporate social responsibility as an integral part of its business activities. Finally, green banking can be a subset of sustainable banking which tends to capture broader environmental and social dimensions (Dufays 2012 ). Global Alliance for Banking on Values (GABV) is an independent network of banks and banking cooperatives with a shared mission to use finance to deliver sustainable economic, social and environmental development. GABV has endorsed the principles of sustainable banking which include triple bottom line approach (social, environmental and financial aspects) at the heart of the business model, grounded in communities and transparent and inclusive governance (GABV 2012 ). There are many overlaps between these definitions and concepts which can be confusing to some extent. To make the scope and definitions a little clearer, UNEP provided a good comparison on respective definitions of green vs. sustainable vs. socioenvironmental (UNEP, 2016 ), as shown in Fig.  1 . According to UNEP, sustainable finance is the most inclusive concept which contains social, environmental and economic aspects while green finance includes climate and other environmental finance but excludes social and economic aspects.

A simplified schema for understanding broad terms. Source: UNEP, 2016

Whilst the definition of green finance in the UNEP paper was used to address environmental concerns in general and therefore became broader than the definition of climate finance, the scope of this paper will only apply to banking activities related to climate change mitigation and adaptation. In this respect, the concept of green banking is similar to that of climate finance defined by the UNFCCC which refers to finance that aims at reducing emissions and enhancing sinks of greenhouse gases and aims at reducing vulnerability of, and maintaining and increasing the resilience of, human and ecological systems to negative climate change impacts. In this paper, green banking is defined as financing activities by banking and non-banking financial institutions with an aim to reduce greenhouse gas emissions and increase the resilience of the society to negative climate change impacts while considering other sustainable development goals such as economic growth, job creation and gender equality.

Need for green banking as a risk assessment and management tool

IPCC rightfully claimed that there is no clear scientific evidence on how the banking sector will be affected by the impacts of climate change (IPCC 2001 ). Whilst there may not be clear scientific evidence, central banks, regulators and the academia have been analyzing the climate change challenges from a financial risk and stability point of view (Kim et al. 2015 ; Carney 2015 ; Battiston et al. 2017 ; Volz 2017 ). Prudential Regulation Authority (PRA) within the Bank of England identified two primary financial risk factors associated with climate change: physical and transition (PRA 2018 ). Physical risk is defined as the first-order risks which arise from climate and weather-related events, such as floods, storms, heatwaves, droughts and sea-level rise with the vulnerability of exposure of human and natural systems (PRA 2015 ; Batten et al. 2016 ; PRA 2018 ). Physical risks can lead to higher credit risks and financial losses by impairing asset values. Transition risks are those that can arise while adjusting, frequently in a disorderly fashion, towards a low-carbon economy (Carney 2015 ; Platinga and Scholtens). Given that climate change mitigation actions often require radical changes and adjustments by the public and private sector and households, a large range of assets are at risk of becoming stranded. This is especially prevalent for fossil-fuel related sectors and assets, which as a result of a revaluation, can in turn lead to higher credit exposure for banking and non-banking financial institutions. Additionally, liability risks can be another primary financial risk factor. Liability risks can arise if parties suffering losses from the damages of climate change seek compensation from those they hold accountable (Heede 2014 ; Carney 2015 ). Liability risks can be more relevant to the insurance sector rather than banking sector due their nature and compensation mechanism. The three types of financial risk factors constitute a major threat to the stability of the financial system (Carney 2015 ; Arezki et al. 2016 ; Christophers 2017 ).

Those risks can come in parallel as they are interdependent. For example, an agriculture-dominated economy can suffer in many ways. Drought or flood, which is a physical risk, can lead to direct losses in agriculture and other agriculture- and food-related value-added sectors. Such a damage in turn can trigger liability risks if their properties were insured. Extreme weather events will not only reduce incomes generated by those sectors but also hamper economic growth by lowering the gross domestic product (GDP) and affecting the job market and thus threaten macroeconomic stability. As a result, affected corporates and individuals may not be able to repay their loans. Once loan default rates increase, banks with heavy agriculture portfolios will suffer. Ultimately, the stability of the whole financial system can be threatened. Additionally, changes in agricultural input can affect food security and food prices which in turn can influence the inflation rate and threaten price stability (Heinen et al. 2016 ). Figure  2 shows an example of climate change affecting in an agriculture-dominant economy.

Climate change effects in an agriculture-dominant economy

For banking and non-banking financial institutions, the transition risks of policy changes can cause more immediate and serious consequences compared to the other two types of financial risks, especially from a credit risk perspective. For example, valuation of collaterals such as land and properties may have to be downgraded if the governments decide to give up on coastal lands and properties vulnerable to sea-level rise for economic reasons or introduce more stringent building energy efficiency standards. Additionally, more extreme hot weather can decrease agricultural productivity leading to lower valuations. Borrowers in the tourism sector relying on coral ecosystems are likely to suffer from a significant decline of coral reefs of 70–90% under a 1.5 °C global warming scenario. Those banks that hold such collaterals and assets would be expected to reserve more capital against them or require more collaterals to offset the shortfall and manage the probability of default and loss-given-default which will become a financial burden by borrowers. Many banks have high exposure to carbon-intensive industries whose business models may not fit into the transition to a low-carbon economy. As a result, the borrowers in the carbon-intensive sector may face challenges in repaying loans due to a decrease in their earnings and asset value. As a result, more banks can be under pressure to shift their investment and lending patterns by divesting from fossil-fuels and investing more in low carbon and energy efficient technologies.

Additionally, the climate risk factors may increase market and operational risks for banks. Market risks can arise from significant fluctuations in energy and commodity prices due to the transition on carbon-intensive industries. Coupled with weakened macroeconomic conditions such as inflation and economic growth, these market risks can increase transaction costs for banks. Banks may also have to bear higher insurance risk premiums on their own assets vulnerable to climate change. Operational risks associated with business continuity can also increase due to climate change and frequency and depth of extreme weather events. For example, banks may have to relocate their headquarters and data centers. Reputational risks by banks could also arise from investing in carbon-intensive assets and borrowers as some might view such activities as breach of fiduciary duty for failing to consider long-term investment value drivers (Table 1 ).

Banks have increasingly started assessing the risks associated with exposure to their loans by adopting risk management frameworks such as the Equator Principles, which are essentially a credit risk management tool that can be used to identify, evaluate and manage environmental and social risks in project finance transactions. However, many frameworks like the Equator Principles are voluntary, legally non-binding industry benchmark and demonstrated inherent limitations including limited scope, a lack of transparency and publicly disclosed information, inadequate monitoring and a lack of accountability, liability, implementation and enforcement (Wörsdörfer 2016 ).

Arguably, the most effective means to address those issues would be to make such tools more enforceable within the boundary of the regulatory and prudential frameworks, assuming that most banks would not voluntarily undertake such measures. However, with exceptions of a few countries such as Bangladesh, China and Indonesia, most countries have just started exploring this possibility. In the case of China, the People’s Bank of China and the China Banking Regulatory Commission developed Green Credit Guidelines based on their Banking Industry Regulation and Administration Law and Commercial Banking Law. China’s Green Credit Guidelines require that banks establish a monitoring and evaluating system for green credit. The effectiveness of such policies is not easy to measure, and they are mostly still in mixed form between voluntary guidelines and enforceable regulations. Nonetheless, even voluntary guidelines can provide a very strong signal to banks if they come from central banks and supervisors, or organically from banks themselves, and are expected to encourage banks to assess and manage credit risks which may transit from climate risks.

Some argue that green loans possess better credit quality than non-green loans, particularly in terms of a lower non-performing loan (NPL) ratio (Weber et al. 2010 , 2015 ; Cui et al. 2018 ). On the other hand, NGFS conducted a preliminary stock-taking of research on credit risk differentials in terms of default rates and NPL ratio between green and non-green assets and concluded that there were no potential risk differentials (NGFS 2019 ). Existing data gaps is one of the factors that make a conclusion difficult to be drawn. Simply put, there isn’t much data available in this field given this is still a very new area and it’s been only a few years since countries and banks have started analyzing the potential risk exposure. Consistent and reliable data covering the credit exposure to climate risks and risk-return profiles of green and non-green assets over a sufficient period of time is needed (NGFS 2019 ).

The role of central banks and financial regulators in responding to climate change challenges

Debates on the role of the central banks and financial regulators.

As the financial risks from climate change are becoming more apparent and relevant to the banking sector, a growing number of central banks and financial regulators are taking them more seriously (Monnin 2018 ). NGFS members also acknowledge that climate-related risks are becoming financial risks and therefore taking care of climate risks is within the mandates of central banks and supervisors (NGFS 2018 ). Prior to the launch of the NGFS, the Task Force on Climate-related Financial Disclosure (TCFD) and the G20 Sustainable Finance Study Group, which was formerly known as G20 Green Finance Study Group, were established to serve similar objectives. The TCFD was established by the Financial Stability Board, which is an international body that monitors and makes recommendations about the global financial system, with an aim to develop voluntary, consistent climate-related financial risk disclosures that would be helpful to investors, lenders, insurance companies and asset managers in identifying and managing financial risks (TCFD 2017 ). Similarly, the G20 Sustainable Finance Study Group was created to identify barriers to green finance and improve the financial system to mobilize private capital for green and sustainable investment (G20 Green Finance Study Group 2017 ). While these kinds of frameworks and industry-led initiatives are major drivers of innovation and risk management, the public sector, namely central banks and financial regulators, also must play a supporting role in mainstreaming green finance and making sure climate-related risks are properly measured, verified and reported. However, many central banks are still reluctant to ease capital requirements for green lending without clear evidence that green finance indeed carries lower risks. Many debates are now arising regarding the climate change and environmental mandate of central banks and financial regulators (Volz 2017 ).

According to the statutes of the Bank for International Settlements (BIS), a central bank is defined as the bank that has been entrusted the duty of regulating the volume of currency and credit in the country. Central banks have historically had three main functional roles, which are to maintain price stability and financial stability, to support a country’s financing needs at times of crisis and to constrain misuse of its financial powers in normal times (Goodhart 2010 ). Additionally, central banks are often required to contribute to stabilizing exchange rate, creating jobs and fueling economic growth (Barkawi and Monnin 2015 ). Central banks often act as financial regulators that define the rules for banking and non-banking financial institutions such as the minimum capital requirement and specific restrictions on certain types of lending. However, there are other cases where an independent supervisory authority is established with the power of financial regulations and supervision while a central bank solely focuses on the monetary policy. The recent financial crisis between 2007 and 2008 indeed accelerated and expanded the role of central banks as the guardian of the financial system and as a lender of last resort. In this respect, the main job of a central bank is to control inflation and macroeconomic and financial stability. Thus, in a narrow sense evaluating climate-related risks and adjusting its monetary and macroprudential policies accordingly can be seen as overstepping its mandate. Volz ( 2017 ) also described potential conflicts with core objectives and mandates of central banks, overstretching their powers and resistance within the central banking community by incorporating the green objective in the mandate of central banks. Additionally, there is a question on the legal mandate of central banks. Some central banks in developing countries such as the Bangladesh Bank, the Banco Central do Brasil and the People’s Bank of China are active in pursuing green central banking policies and explicitly included sustainability in their mandate (Dikau and Ryan-Collins 2017 ). Also, the Financial Services Authority (OJK), the financial market regulator in Indonesia, has safeguarding financial system stability as a foundation of sustainable development in their corporate objectives and subsequently launched a roadmap for sustainable finance in 2014 and regulation on sustainable finance in 2017 (OJK 2014 ; OJK 2017 ). However, such an environmental sustainability mandate is relatively ambiguous for those in developed countries. For example, Article 127 (1) of the Treaty on the Functioning of the European Union defines price stability as the main objective of the European System of Central Banks (ESCB). Although some rely on Article 3 (3) of the Treaty on European Union, which states that the European Central Bank (ECB) shall support the general economic policies in the Union including a high level of protection and improvement of the quality of the environment, to argue that the ECB already integrated the environmental sustainability in its mandate; however, it is still considered as a secondary objective of the ECB and thus there is room for different interpretations. One study found that 54 out of 133 central banks have a mandate to spearhead sustainable economic growth or support sustainability goals set by the government but their mandates are not explicitly linked to climate change (Dikau and Volz 2019 ). To sum up, most central banks have focused on its interventionist role in the world’s economies since the financial crisis and they have not made significant adjustment of their policies to support a low-carbon transition (NEF 2017 ).

An increasing number of central banks and financial regulators, however, started analyzing the negative climate change effects on their banking and non-banking financial sector, and recent research supports the argument that climate change challenges can damage the financial stability (PRA 2015 ; Batten et al. 2016 ; Dietz et al. 2016 ; Volz 2017 ; Campiglio et al. 2018 ). The negative impact of climate change on the banking sector has already been analyzed from the transition, physical and liability perspectives. As shown in Fig. 2 , climate change challenges can pose potential threats to the stability of the financial markets, price and macroeconomics, all of which are within the key mandate of central banks and financial regulators. Moreover, fluctuations in energy prices while transitioning to a low-carbon economy can directly influence price stability and inflation and can hamper economic growth in all sectors, including the financial sector (DNB 2016 ). Stranded assets caused by transition risks can lead to a climate “Minsky” moment whereby a sudden, major collapse of asset values is expected to threaten the financial stability and trigger cascade effects throughout the interconnected financial system (Minsky 1982 ; Minsky 1992 ; Carney 2015 ; ESRB 2016b ; Battiston et al., 2017 ). The latest IPCC special report also mentioned that central banks or financial regulators could be a facilitator of last resort for climate financing instruments which can help lower the systemic risk of stranded assets (Safarzyńska and van den Bergh 2017 ). Other arguments supporting the expanded role of central banks and financial regulators include their responsibility for wider public goals such as the mitigation of market failure and their role in developing long-term national strategies (NEF 2017 ; Volz 2017 ). Given that climate change is becoming a major threat to the global economy, central banks and regulators are increasingly being asked to analyze climate change effects and intervene when necessary to exercise their duty as public institu7pt?>tions. Also, as putting specific restrictions on certain types of lending is one of their responsibilities, central banks and regulators should restrict financial flows and bank lending to carbon-intensive and environmentally-harmful borrowers to mitigate a credit market failure. Central banks and regulators are required to develop and implement a forward-looking monetary policy strategy (Montes 2010 ) because monetary policies usually affect the economy with a lag. The same principle should apply when dealing with climate change challenges. Central banks and regulators should develop a long-term climate change strategy and provide a long-term market signal to investors who need to deliver a vast amount of investment needed for a low-carbon transition. More central banks and regulators tend to accept their evolving roles. The NGFS declared that climate-related risks fell squarely within their mandate. A member of the Executive Board of the ECB also argued that the ECB can and should support the transition to a low-carbon economy acting within its mandate while acknowledging different views and opinions around this topic (Cœuré 2018 ).

Different approach in developing countries vs. developed countries

It is widely acknowledged that countries that established clear guidelines and mandatory regulations to direct public and private financing towards green products, offer an enabling environment for domestic finance institutions to scale up their green investments (GIZ 2019 ). However, approaches toward green banking policy interventions tend to be different between developing and developed countries, although actions taken by prudential authorities in developed countries vary. For example, rule-based authorities such as those within France tend to act more proactively and introduce policies that aim to measure climate risks, while principle-based authorities such as those within Switzerland and Japan tend to take more market-driven approaches (Spiegel et al. 2019 ). As summarized in Table  2 , many of the developing countries have introduced mandatory regulations which require their banks to formalize and implement an environmental and social safeguards policy and report relevant activities to central banks and regulators. In some cases, central banks in developing countries such as Bangladesh and India set specific lending quotas for climate-sensitive sectors. Many developing countries have received support from multilateral development agencies such as IFC in developing their green banking policy framework. According to IFC, developing countries are at different stages of sustainable finance development and Bangladesh, Brazil, China, Colombia, Indonesia, Mongolia, Nigeria and Vietnam are most advanced as they have started reporting on results of their implementation actions (IFC 2018a , 2018b ). On the other hand, most the developed countries have taken an industry-driven, voluntary approach, focusing mainly on the disclosure of climate-related financial risks as part of supporting the TCFD. As of 2018, governments in Belgium, France, Sweden, and the United Kingdom (U.K.) and financial regulators from Australia, Belgium, France, Japan, the Netherlands, Sweden and the U.K. have expressed support for the TCFD, which fully remains a voluntary initiative (TCFD 2018 ). Furthermore, France made the disclosure of climate-related financial information by listed firms, banks and credit providers as well as investors mandatory under its Energy Transition Law for Green Growth. Japan is another case of a developed country, as the Bank of Japan provides concessional loans to banks that lend to environment and energy businesses. However, even those mandatory schemes under implementation often lack details of the enforcement and thus create some ambiguity as to the extent to which authority within the government will take the responsibility of compliance-check and monitoring.

Green banking policy instruments

Green banking policy instruments can be grouped into four different policy areas which include macro-prudential policy, micro-prudential policy, market-making policy and credit allocation policy according to Dikau and Volz ( 2018 ), as summarized in Table  3 .

Green macro-prudential policy aims to define the rules for financial institutions and mitigate the systemic financial risks to the macro-economy caused by climate change. Green macro-prudential tools can include a climate stress-testing of the banking system, differentiated capital requirements depending on the proportion of green portfolio of the bank and restrictions on credit exposure and financial ratios. Such tools can help central banks and regulators influence the lending activity of banks by encouraging them to make more green investments. Arguably, the most powerful macro-prudential tool would be the Basel accord. The current capital and liquidity requirements under the Basel III accord do not necessarily require banks to evaluate the impacts of climate risks on their balance-sheet (BCBS 2016 ; ESRB 2016a ). Given that the Basel III standards have been adopted and are being implemented by all 27 Basel committee member jurisdictions (BCBS 2018 ), they are the most widely accepted standards in the banking industry across developing and developed countries. Therefore, consideration of climate and environmental risks by the Basel committee in assessing their impacts on the stability of the banking sector will give a very strong market signal and further encourage central banks and regulators to adopt robust environmental and social risk management frameworks.

Green micro-prudential policy seeks to encourage individual financial institutions to incorporate environmental and social safeguards into their policies and operations. Green micro-prudential instruments can include information disclosure of climate-related financial risks by banks, adoption and implementation of environmental and social risks management and differentiated reserve requirements. For example, Banque du Liban, the central bank of Lebanon, introduced a climate finance loan scheme whereby commercial banks are exempted from part of the required reserve when they lend to energy-related projects under the National Energy Efficiency and Renewable Energy Action (NEEREA) (CCCU 2014 ).

Central banks and regulators can play a market-making role to promote green investments and operations. For example, they can develop and provide sustainable finance guidelines for banks that can create an enabling environment in the banking sector. This is the core initiative of IFC’s Sustainable Banking Network. Another example is to develop green bond guidelines to encourage the issuance of green bonds by banks because proceeds of green bonds can be exclusively used to finance green projects. Most green bonds issued in the past followed standards set by the International Capital Market Association (ICMA) and Climate Bonds Initiative. However, some countries and regions such as China and ASEAN (Association of Southeast Asian Nations) recently developed their own standards to propel their green bond market.

Finally, green credit allocation policy seeks to promote lending and investment toward climate-sensitive sectors such as agriculture, energy and water. Some central banks have been implementing such a policy by setting a minimum proportion of bank lending to climate and environment-related sectors, creating concessional green refinancing windows and extending concessional loans to banks that lend to climate-sensitive sectors.

Additionally, the NGFS made six recommendations that can help central banks, supervisors, policy makers and financial institutions manage climate risks and ultimately make the financial system green and climate-resilient (NGFS 2019 ). The six recommendations include integrating climate risks into financial stability monitoring and prudential supervision, incorporating environmental, social and governance (ESG) factors into portfolio management, sharing and disclosing climate risk data, capacity building and awareness raising, supporting the work of the TCFD and development of a green and climate taxonomy. Developing a robust green and climate taxonomy can be a key instrument to mitigate the possibility of a green bubble and green washing.

Measuring the effectiveness of green banking policies

Measuring the effectiveness of green banking-related policies at both a sectoral and institutional level can be premature mainly due to the current lack of data and measurement methodologies, let alone comparing the performance and effectiveness between developing and developed countries and among different instruments. Many scholars have been very active in their endeavors to analyze the performance of China’s Green Credit Policy; however, their findings showed mixed results on whether implementing the policy has been effective in serving its goals (Scholtens et al. 2008 ; Aizawa and Yang 2010 ; Zhang. et al., 2011 ; Jin and Mengqi 2011 ; Stephens and Skinner 2013 ; Gong and Gao 2015 ; Lian 2015 ; Liu et al. 2015 ; Ge et al. 2016 ; Yu and Ren 2016 ). Another study analyzed the relationship between corporate environmental information disclosure, as required under the Green Credit Policy in China, and corporate green financing. It concluded that the environmental information disclosure requirement did not become a risk management tool for banks to make their financing decisions (Wang et al. 2019 ).

Also, China has officially started measuring and reporting the effectiveness of its Green Credit Policy based on the NPL ratio. The China Banking and Insurance Regulatory Commission (CBIRC, formerly the China Banking Regulatory Commission) reported that the NPL ratio of green loans provided by the 21 domestic major banks was 0.41%, which is 1.35% lower than the NPL ratio of all loans, in September 2016. In June 2017, CBIRC subsequently released the same data showing that the NPL ratio of green loans decreased to 0.37%, which is 1.32% lower than the that of all loans (Cui et al. 2018 ; NGFS 2019 ).

Despite early attempts, mostly led by China, to measure the effectiveness of green banking policies and green loans, there is still a significant lack of data availability and inconsistency to draw a clear conclusion.

The role of banks in responding to climate change challenges

Financial institutions, especially banks, have a unique market position as they have deep market knowledge and experience across all economic sectors. They arguably have one of the widest networks, outreaches and client bases and can shift consumer behavior by scaling up and redirecting financing flow towards low-carbon and climate-resilient investments.

Many international and local banks have undertaken various green banking initiatives to seize business opportunities, manage risks, comply with national and regional regulations and guidelines, enable countries to deliver their climate ambitions and encourage corporate social responsibility (CSR). According to IFC, there is USD 23 trillion worth of climate-smart investment opportunities in developing countries between 2016 and 2030 (IFC 2018a , 2018b ). Such investment opportunities will be more enormous if those in developed countries are added. Therefore, it is a natural move by commercial banks to enter into a lucrative market. According to a survey of 90% of the UK banking sector, 70% of banks in the country view climate change as a threat to the financial system, although the same survey found that only 10% are building a strategy on climate-related financial risk management (PRA 2018 ). As the banking sector is a heavily regulated market, eventually all the green banking policy efforts by central banks and regulators will seek to change the behavior of commercial banks and lead them to gradually shift their focus toward more climate- and environment-friendly ways of doing business which can help themselves manage their risk exposure and also countries meet their climate goals. Finally, some banks view green banking as a CSR-related activity as they see growing demands for banks to be greener and more sustainable by their clients and foresee potential reputational risks. CSR as a governance tool can be useful for monitoring the behavior of management in financial institutions, especially for those identified as “too big to fail” because they are critical to the economy (Barclift 2011 ). In this section, actions being taken by commercial banks, both collectively and individually, and their performance will be presented and analyzed, and gaps and areas for improvement will be identified and suggested.

Collective actions and their performance

A growing number of financial institutions around the world have voluntarily either created their own networks or initiatives or joined platforms established by international development agencies such as IFC and United Nations Environment Programme (UNEP). Some of the well-known ones are outlined in Table  4 . The common objectives of these frameworks and initiatives include development and adoption of standards, principles and risk management frameworks and sharing knowledge and best practices such as the Equator Principles. The Sustainable Banking Network (SBN), established by IFC, is a network of central banks, regulators and banking associations in developing countries that facilitates the collective learning of members and supports them in policy development (IFC 2016a ). Several developing countries such as Mongolia have received support from IFC SBN when they developed and launched their sustainable finance principles. The Banking Programme, established by the UNEP-Finance Initiative (FI), aims to help banks understand environmental, social and governance challenges for their operations and is probably the largest green banking initiative with over 130 member banks across the world. The UNEP FI also supported some of their members to create the Principles for Responsible Banking which aimed to define the banking industry’s role and responsibilities in shaping a sustainable future and align banks’ business with the objectives of the Sustainable Development Goals (SDGs) and the Paris Climate Agreement (UNEP FI 2018 ).

Performance of some green banking frameworks and initiatives has been analyzed by researchers and the result so far is mixed. For example, Weber and Acheta ( 2016 ) analyzed reports issued by Equator Principles signatories and concluded that the Equator Principles did not make significant contributions to both sustainability of projects and the financial system because they were primarily adopted as a means to enhance reputation and risk management of the signatories. Earlier research also stated that adoption of the Equator Principles was mainly used to signal responsible conduct and did not find significantly improved aspect of financial performance between adopters and non-adopters apart from the size factor (Scholtens and Dam 2007 ). On the contrary, a research by the GABV compared the financial performance of their member banks and that of the global systemically important banks (GSIB), namely the largest banks in the world, and found that their member banks achieved higher return-on-assets and return-on-equity than GSIBs with lower volatility between 2007 and 2016 (GABV 2018 ). Moreover, some studies have found that green tagging, which refers to identifying green attributes of a bank’s loan and asset portfolio, may lead to lower probability of default of borrowers (Principal 2017 ; Sahadi et al. 2013 ). According to a survey conducted by IFC, 62% of a sample of 42 banks from developing countries responded that the non-performing loan ratio of their green portfolios is lower compared to that of other non-green portfolios (IFC 2018a , 2018b ).

Individual actions and instruments

A bank is a complex institution with financial products and numerous services that they offer to their clients. As more green- and climate-related themes have increasingly become mainstreamed in the banking sector and demands by their clients grow, banks started launching dedicated green financial products and services, mostly using and customizing their existing offerings. Table  5 is not an exhaustive list of those products and services but presents the most-widely used instruments by banks. Arguably, the main function of a bank is to lend money. There are different types of borrowers, but the majority of a bank’s lending goes to companies, individuals and projects. As there have been emerging green investment opportunities and ways to lower the costs by reducing energy bills for example, more borrowers rely on bank lending to develop renewable energy projects,climate-resilient infrastructure projects and install more energy-efficient and climate-smart equipment, appliances, houses and vehicles. Small-holder farmers also borrow from a bank or a micro-finance institution to purchase climate-resilient seeds and climate-smart agriculture equipment. Some banks offer an insurance product, often by using their insurance subsidiary. A green auto insurance product can be offered to financially incentivize users by lowering insurance premium when they use electric or hybrid vehicles which emit less greenhouse gases and other pollutants. Banks can also help finance green projects and refinance existing green assets through securitization using bond issuance and warehousing. Securitization can also help free up capital by selling securities to third-party investors to support further lending to low-carbon and climate-resilient assets. Some banks perform principal investing, using their own balance-sheet, to hold a direct equity stake on start-ups and venture firms that develop green and climate-smart technologies. An alternative way is to invest in a private equity fund as an intermediary who will invest into green projects on behalf of its investors. Many banks offer brokerage and market-making services for trading of green bonds and carbon credits to help facilitate green investments. Finally, some banks provide advisory services to their clients usually for financial structuring of a project. Quite a few borrowers consider a green project complicated in terms of structuring the transaction from a financial point of view and a bank can help them using their expertise and experience. A few banks sometimes try to stimulate demands by offering capacity building support to their borrowers or project developers. For example, a bank can help a borrower perform an energy audit of its firm, factory or house by dispatching the bank’s own resources.

According to IFC (IFC 2018a , 2018b ), the proportion of banks from developing countries that provide climate lending increased from 61% in 2016 to 72% in 2017 among 135 sample banks and they have been most active in the renewable energy and energy efficiency sector. Additionally, 49% of the banks offered dedicated green financial products. Green credit was the most widely used financial product, followed by green insurance and advisory services and green investment funds. Finally, although 55% of the banks currently do not provide green financial products, 88% of them expressed their interest in offering such instruments in the future if additional support is provided. A good example for green financial products can be an auto-loan that can be used to purchase electric or hybrid vehicles which emit zero or significantly less greenhouse gases compared to vehicles with a combustion engine. Some countries provide a subsidy to promote the purchase of electric or hybrid vehicles because they usually cost more. However, not many countries can afford it due to budget constraints. Banks can bridge the gap if they can launch affordable eco-car loans which provide financial incentives to their clients to switch their choice of vehicles in addition to fuel cost savings they can benefit from.

Theory of change in green banking

Application of theory of change

The theory of change framework is generally regarded as an assessment of inputs, activities, outputs, outcomes and impacts, articulating how certain types of interventions are expected to lead to changes and achievements (Rauscher et al. 2012 ; Stein and Valters 2012 ). The theory of change framework provides the logical underpinning of changes and goals and highlights the relation between activities and expected outputs, outcomes and impacts from the carrying out of the activities. According to Stein and Valters ( 2012 ), the theory of change framework serves to map the change process and its expected results and facilitates implementation of projects (strategic planning); to articulate anticipated processes and results that can be monitored and evaluated (monitoring and evaluation); to communicate change processes to internal and external stakeholders (description); and to help organizations clarify and improve the theory behind them or their programmes (learning).

The theory of change can be a useful strategic framework and tool to assess status of green banking, conduct a gap analysis, identify activities needed to be performed to mitigate gaps and barriers and describe expected results and impacts that can be created. Given that there is a lack of data availability in this field of research, a theory of change can also be helpful for identifying the data that should be collected and how they can be analyzed in the future (Rogers 2014 ). In linking the theory of change model to green banking, barriers and gaps will be used instead of inputs as a means to identify and narrow the gap between change objectives and actual potential in green banking. Additionally, outputs and outcomes will be merged into results. The data on barriers and activities were collected and developed based on literature review and market observations. Results and impacts are desired outcomes of green banking activities which aim to contribute to reducing greenhouse gas emissions and enhancing climate-resilient sustainable development.

Three types of theory of change framework – sectoral, institutional and integrated - will be presented as different interventions are required to transform an institution versus the whole banking sector. An integrated theory of change framework aims to capture both aspects.

Theory of change at the sectoral level

The theory of change in green banking at the sectoral level is related to making systemic changes and transformation within the entire banking sector which can drive both supply and demand for green banking products and services. Therefore, it is more inclusive than the theory of change at the institutional level as engaging with other stakeholders such as project developers, beneficiaries and government agencies is critical.

There are sectoral barriers that can influence activities of individual banks and can create institutional barriers as shown in Fig.  3 . Lack of regulatory framework and enabling environment often leads to disincentivizing banks to undertake green banking activities as the banking sector is highly regulated. For example, the banking sector can set criteria for the businesses they finance, especially carbon-intensive industries, thereby mitigating the risks related to an energy transition and ultimately making the economy more sustainable (DNB 2016 ). Other sectoral barriers include insufficient financial incentives for both banks and project developers and limited access to affordable finance.

Theory of change in green banking at sectoral level

While some countries may prefer market-led approaches compared to regulations or rules to encourage green banking activities, development and implementation of green banking policy guidelines or regulatory frameworks is expected to accelerate necessary actions by financial institutions. Such policy-level interventions should also include supports for capacity building, knowledge sharing and awareness raising to maximize their impact and to reach desired results and outputs.

Theory of change at the institutional level

The theory of change in green banking at the institutional level, as shown in Fig.  4 , assumes that most financial institutions are not active in terms of providing green banking products and services because they often do not recognize the climate and green sector as commercially viable. This is mainly due to the perception of risks associated with climate change projects and their existing capacity or willingness to develop and grow financial supply in the sector is insufficient. Most financial institutions from developing countries have short-term and high cost funding which prevent them from providing more affordable financing to their borrowers which is critical to stimulate market demands for climate projects. Additionally, other types of barriers include low awareness of business opportunities and best-available climate technologies and absence of overall climate change strategies and environment and social safeguards that are needed to properly finance climate change projects. Establishing green financial products and services is often constrained by such barriers as knowledge gaps to design and operationalize the products and services and high upfront costs necessary to assess and verify technology performance.

Theory of change in green banking at institutional level

To mitigate those barriers, activities such as capacity building and access to long-term and concessional financing are needed. Additionally, financial institutions need to put more efforts into identifying and developing climate change projects and raising internal awareness. All of these activities will lead to an increased supply of financing to climate change projects. Also, developing a climate strategy and environmental and social safeguards including gender policy will help in obtaining buy-in from internal stakeholders and properly managing the projects.

Integrated theory of change framework

Mainstreaming green banking into the core banking policies and practices remains a challenge at both institutional and sectoral level because there are still many barriers and gaps to overcome and activities to be undertaken to achieve desired results and impacts.

As shown in Fig.  5 , barriers or gaps refer to impediments to promotion of green banking and they exist at both the institutional and sectoral level and are often intertwined with each other. For example, the sectoral barriers are likely to naturally become institutional barriers unless financial institutions either individually or collectively take their own action on a voluntary basis. The costs of the transition to green banking by reducing the barriers and undertaking desired activities can be evenly shared among the public sector, private sector and financial institutions, although the financial institutions are expected to be more responsible to cover many of their own activities. The public sector can be divided into domestic and international, depending on the source of financing. The domestic public sector can support the transition through various policy measures such as policy lending, subsidies and tax benefits. On the other hand, the international public sector, such as climate funds and multilateral development banks, can provide grants for technical assistance and capacity building and long-term concessional loans. The private sector can contribute by developing bankable climate projects and technologies. Expected results are also likely to happen at both the sectoral and institutional level.

The application of the theory of change indicates that if the establishment of a green financing programme with more affordable terms for climate purposes is achieved and the capacity of banks is built up, then demand for such a lending product is expected to be stimulated within the country, driving the spread of green banking activities. It is expected that expanding lending for the purpose of investing in greenhouse gas mitigation and climate resilience projects is likely to lead to the achievement of climate change mitigation and resilience impacts throughout the economies of the countries where such green banking activities are being established.

Conclusions and implications for further studies, policy makers and practitioners

The concept of green banking still has a long way to go until it gets fully mainstreamed in the banking sector. However, simultaneous activation of both top-down and bottom-up engagement in raising the awareness of green banking has taken off. Policy makers and regulators have been increasingly realizing the importance of adopting green banking policy interventions as a means to transform the financial sector which can immensely contribute towards helping countries meet their climate targets and goals. Especially, the role of central banks and financial regulators is key as they have the power to change and control dynamics and landscape of the financial sector. Considering that most developed countries rely on a voluntary code of conduct by their banks and focus on the information disclosure while developing countries tend to use more regulatory approaches to promote green banking activities, future research could examine the performance and effectiveness of each green banking policy instrument and identify which approach is proven to be more effective or has the better prospect. However, it is expected to take considerable time before any researcher can undertake such analysis because of a lack of data availability as this is very new research area. It would be equally challenging to design and develop the criteria against which performance and effectiveness of the policy instrument will be measured.

Simultaneously, more banks are willing to become greener either individually or collectively and started launching green financial products, mainly in order to increase their economic value, but also to be good corporate citizens. Green financial products serve banks to fulfill several important objectives: banks can comply with government’s regulations or guidance, enhance firm reputation, and seize emerging business opportunities. The size of the green market has been steadily growing and expected to grow further. Banks that can establish themselves as early-movers and market leaders are more likely to enhance their reputation which can in turn help attract new clients. Further, from strategic perspective, change of consumer buying behavior by encouraging them to maximize the use of green financial products is most desirable. Thus, banks will have to develop and implement robust environmental and social safeguard standards to be able to manage their green financial products and comply with the regulations or guidelines.

While there is a limited number of studies that found a positive relationship between green and social banking activities and financial and operational performance of banks, it is too early to draw such a conclusion. To do so, more data are needed and various studies should be conducted both theoretically and empirically. For example, a formal survey targeting financial institutions on current barriers and desired activities can be a useful tool for collecting the data and making the theory of change more robust. With such data in place, a structure for a more systematic and empirical analysis of root causes of market barriers and activities to address them can be developed. Also, it could be interesting future research to identify if reputation plays a mediating role between green banking activity and financial as well as operational performance of banks. Other future research topics in this area can include investigating whether green banks outperform non-green banks in terms of climate as well as operational and financial performance, and comparing the effectiveness of green banking policy measures. However, parameters and standards need to be developed to measure the green and climate performance of banks and such a task is expected to be a major challenge.

Availability of data and materials

Not applicable.

Abbreviations

Association of Southeast Asian Nations

Bank for International Settlements

Corporate Social Responsibility

European Central Bank

European System of Central Banks

Environmental, Social and Governance

Global Alliance for Banking on Value

Gross Domestic Product

International Capital Market Association

International Finance Corporation

Intergovernmental Panel on Climate Change

National Energy Efficiency and Renewable Energy Action

Network for Greening the Financial System

Non-Performing Loans

Financial Services Authority

Sustainable Banking Network

Sustainable Development Goal

Task Force on Climate-related Financial Disclosures

United Nations Environment Programme Finance Initiative

United Nations Framework Convention on Climate Change

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Hyoungkun Park

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Park, H., Kim, J.D. Transition towards green banking: role of financial regulators and financial institutions. AJSSR 5 , 5 (2020). https://doi.org/10.1186/s41180-020-00034-3

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• Green banking
• Sustainable banking
• Climate change
• Financial institutions
• Central bank
• Financial sector
• Theory of change
• Climate risk

Green Initiatives by Banking Sector in India

Eurasian Journal of Management & Social Sciences, Volume 1 Issue 4 , 2021

10 Pages Posted: 23 Sep 2021

Krishnendu Ghosh

Bennett University

Date Written: August 20, 2021

‘Go Green’ has become the new mantra across the globe. To implement the mantra successfully a huge amount of funding as well as awareness is very important. Financial industry can play a pivotal role. Green Finance has evolved as an emerging field of study in the 21st century. Green Banking has become one of the main elements of Green Finance. Green initiatives by banking sector have emerged as a paradigm shift in the traditional banking worldwide towards sustainable development. The purpose of this paper is to highlight the Green Banking practices adopted in India and their significance towards environmental protection and sustainable ecological balance. The methodology used for the article is mainly the theoretical framework build based on the various secondary sources like published articles, websites, government reports, etc. This study could benefit policymakers and researchers in understanding the various green initiatives taken by the banking sector in India as well as the challenges and way forward.

Keywords: Green finance; Green banking; Green initiatives; sustainable development; environmental protection; sustainable ecological balance

JEL Classification: O19, Q01, Q5, Q56

Suggested Citation: Suggested Citation

Krishnendu Ghosh (Contact Author)

Bennett university ( email ).

Plot Nos 8-11, TechZone 2, Greater Noida, India Uttar Pradesh 201310 Greater Noida, UT 201310 India 201310 (Fax)

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• MANTHAN: Journal of Commerce and Management
• Vol 10 , Issue 1 , January - June 2023
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Green Banking in India: A Sustainability Perspective

Vol 10 , Issue 1 , January - June 2023 | Pages: 141-161 | Perspective  

Published Online: June 05, 2023

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In view of the depletion of greenery, it is imperative that businesses, including banks, take action to promote sustainability. Green banking involves the implementation of environmentally friendly policies and practices within the banking industry, that promote sustainable development. Banks in India are promoting energy-efficient buildings and providing loans for their construction. Green Banking is also about the promotion of electronic banking. Despite the progress made, banks in India still face challenges in implementing green banking practices. This article explores the concept and extent of green banking and examines recent sustainable development initiatives undertaken by banks in India and the challenges related to implemention. The basis of the research is the analysis of secondary data. The findings suggest a pressing need for increased awareness and adoption of green banking practices in current scenario, which is characterized by innovative technologies, in order to enhance sustainability and create a more environmentally-friendly future.

Green finance; Green banking; Sustainable development; Green loans

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GREEN INITIATIVES IN PRIVATE SECTOR BANKS IN INDIA Research paper

2017, MET's Institute of Management

Abstract Today due to technological advancement the global economy is threatened from three major challenges: namely climatic changes, energy crisis and financial constraints. As a result of human pressure on Earth’s resources, natural capital has declined. Increase in environmental Pollution, natural resource depletion and effects from global environmental issues compel large economic stresses and costs. In order to meet these challenges, new ecologically sustainable development strategies, that lead to economic growth and increased social equity while preserving the environment and responding to the rapidly increasing problems related to climate change, must be adopted. Hence, There is great need to support such Green Growth strategies that induce the required revolution process towards low-carbon and resource-efficient economies. A green financial system is the remedy for achieving harmony between the economy and the environment. One such sector is Green Banking. Green Banking means adopting environment friendly practices in banking sector and thereby reducing internal and external carbon footprints. It promotes green investments in renewable energy development projects which help in achieving sustainable economic growth for the nations. The present study primarily aims at exploring existing literature on the Green banking initiatives taken by the top leading private sector banks in India. Secondly, to know about the different green processes available in the Indian financial markets, and thirdly the future scope of green finance in India.

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Home > Blog > Product > Digital Banking Revolution in India | Paperless Solutions

Ditch the Paper Chase: NiyoX Takes the Sting Out of Banking

Tired of being overwhelmed, by stacks of bank statements ending. The endless paperwork that comes with traditional banking ? It’s time to say goodbye to all that hassle and embrace a way of managing your finances. Enter NiyoX, a game changing banking platform that is revolutionizing the industry by eliminating paperwork and prioritizing convenience and clarity.

Niyo has built a digital banking platform with NiyoX–in partnership with Equitas Small Finance Bank and VISA–that makes managing finances simpler, safer, and smarter and has more than 10 lakh users across India. NiyoX is a 2-in1 saving and investment bundle through which users can manage their finances conveniently in one place. Here’s how it is leveraging the digital banking space to deliver a seamless banking experience .

Imagine paperless bank account opening within seconds using your phone and Aadhaar number – no more dealing with photocopies deciphering legal jargon or waiting in long queues, at the bank.

NiyoX simplifies the process making banking as easy, as ordering your pizza.

The advantages don’t end there. NiyoXs benefits of digital banking ;

• Say goodbye to clutter: No files or misplaced documents. Your financial life is neatly organized within the NiyoX app.
• Instant access to your money: Manage your finances from anywhere at any time. Transfer funds, pay bills. Track your spending with a few taps.
• Transparency and control: Gain real time insights into your finances with user friendly dashboards. No deciphering confusing bank statements!
• A friendly world: By going paperless NiyoX is playing its part in reducing waste and creating a sustainable future.
• Instant account opening: Skip the queues and paperwork. Open your NiyoX account in minutes from your phone.
• Lightning fast transactions: Receive money instantly without any delays like transfers.
• Effortless bill payments: Pay your bills with ease without having to fill out mountains of forms.
• Real time account tracking: Keep an eye on your balance and transactions, in time, 24/7.
• Budgeting tools: Take charge of your finances with personalized budgeting insights and expense tracking.

Say Goodbye to Paperwork

Gone are the days of endless queues, mountains of paperwork, and the frustration of traditional banking . NiyoX, the revolutionary digital banking platform, is changing the game by eliminating the pain of paperwork and making banking accessible, convenient, and oh-so-paperless!

NiyoX removes the need for physical documents at every stage of your banking journey, starting with open bank account online india . No more running around collecting statements, proofs of address, and endless forms. With NiyoX, all you need is your mobile number, email address, and Aadhaar number. The entire digital bank account opening process happens seamlessly online in under 100 seconds!

But how does NiyoX achieve this paperless magic? The secret lies in the power of e-KYC (electronic Know Your Customer). This innovative technology eliminates the need for physical documents for verification. Instead, you can complete your KYC process entirely online, using your Aadhaar card and a secure video call. No more printing, submitting, or waiting for days – e-KYC makes onboarding a breeze!

There are two kinds of KYC: Aadhaar-based or e-KYC and In-Person-Verification (IPV) KYC with biometrics. e-KYC eliminates physical paperwork and can be done online whereas IPV needed in case of regular KYC registration requires either visiting a KYC Registration Agency or calling them to your communication address. 

The KYC process for both is seamlessly integrated within the NiyoX app. There’s no need for additional documentation and KYC biometrics appointment can be booked right within the app. While e-KYC gives you access to limited features of the NiyoX account , a biometric KYC ensures you can enjoy all the benefits of this paperless bank account India to the fullest. 

What’s more? The 2-in-1 account has the added benefit of getting KYC done only once and it applies to both your savings as well as your investments account without any tedious paperwork!

The benefits of going paperless banking with NiyoX are numerous

1. embrace convenience.

Do you remember the time when we had to stand in queues, at bank branches sort through piles of paperwork and worry about misplacing documents? Well those days are long gone in todays era. NiyoX, the digital bank is reshaping how we handle our finances by bidding farewell to the hassle of dealing with paper.

• Instant Accessibility, No More Paperwork: Say goodbye to spending hours at banks. With NiyoX you can open a savings account online in than 100 seconds! All you need is your Aadhaar and PAN. The use of e KYC eliminates the requirement for documents while biometric KYC maximizes the capabilities of your account by integrating it into the NiyoX app. No more running around. Losing files – just immediate access to your financial resources.
• Statements at Your Fingertips: Embrace a clutter life. Embrace clear digital records. Within the NiyoX app you can easily access statements whenever and wherever you need them. Keep track of your expenses monitor your income flow and make decisions effortlessly. No more digging through files or waiting for statements in the mail – all your financial history is a tap away.
• Transactions, in an Instant: Gone are the days when basic transactions required waiting in lines.NiyoX makes managing your finances a breeze allowing you to effortlessly send and receive money pay bills and stay in control. You can instantly transfer funds, between accounts conveniently pay bills directly through the app and even recharge your phone with a few clicks. No more dealing with forms or experiencing delays – it’s all about secure transactions right at your fingertips.
• Sarah, a professional shares her perspective on NiyoX: “It has truly been a game changer for me. I used to dread handling my finances. Now its so effortless. Opening my account online was sailing. The app itself is incredibly user friendly. The ability to easily track expenses make money transfers and pay bills is truly liberating. It’s like being free from the hassle of paperwork.”

2. Security and Reliability

Fort knox for your finances.

• Bank-grade encryption: Your data is guarded by 256-bit encryption, the same standard used by leading financial institutions. Imagine your information wrapped in a digital vault, impenetrable to even the most determined hackers.
• Multi-factor authentication: Just a password isn’t enough. NiyoX adds an extra layer of protection with OTPs and biometric authentication. Think of it as a personalized secret handshake that only you and your account can share.
• Zero tolerance for unauthorized access: NiyoX employs strict access controls and monitors activity around the clock. Think of it as digital bodyguards keeping a watchful eye on your financial wellbeing.
• Partners in Trust: NiyoX knows that security isn’t a solo act. They’ve partnered with IDFC FIRST Bank, a trusted and RBI-approved financial institution. This means your transactions are processed through the bank’s robust infrastructure, ensuring every rupee you spend or save is handled with the utmost care.

In todays paced society convenience is highly valued. Digital banking offers a world where waiting in bank lines is replaced by the ease of transactions, at our fingertips. However along with convenience there are concerns about security and the privacy of our information.

But fret not my fellow digital wanderers! NiyoX understands these worries. Has prioritized cutting edge security measures and data privacy. Let me give you a glimpse into their system;

Unbreakable Protection for Your Finances

• State of the art encryption: NiyoX shields your data with 256 bit encryption the same level of security trusted by major financial institutions. Imagine your information securely enveloped within a vault making it nearly impossible for even the most tenacious hackers to breach.
• Double layered authentication: A mere password won’t cut it here. NiyoX goes the mile by adding OTPs (One Time Passwords) and biometric authentication as a safeguard. Think of it as a handshake that only you and your account can share.
• Zero tolerance for access: NiyoX maintains access controls while continuously monitoring activities around the clock. Picture diligent digital bodyguards keeping watch over your well being.
• Building Trust, through Partnerships: NiyoX recognizes that security is not an endeavor. They have collaborated with IDFC FIRST Bank, a institution approved by the RBI. This guarantees that all your transactions go through the banks infrastructure providing attention to every rupee you spend or save.

Beyond Technology, Transparency

Peace of mind, one tap away, 3. go green with niyox.

In today’s digital age, paper statements feel like relics of a bygone era. Not only are they inconvenient, cluttered, and prone to misplacement, but they also leave a heavy footprint on our planet. At NiyoX, we’re committed to changing the game, not just for your digital banking experience, but for the environment too.

Paperless banking isn’t just a trend, it’s a necessity. Consider this:

The global banking industry consumes 16 billion sheets of paper annually, equivalent to 4 million trees. That’s enough to cover the entire state of Connecticut!

Paper production is a major contributor to deforestation, water pollution, and greenhouse gas emissions. Every sheet of paper tells a story of environmental destruction.

NiyoX customers alone have saved over 20 million sheets of paper since launch, a forest’s worth of protection. That’s more than just a number; it’s a tangible impact on the planet we call home.

Going paperless banking with NiyoX isn’t just good for the environment, it’s good for you too:

• Instant access to your statements and transaction history, 24/7, from anywhere. No more waiting for snail mail or rifling through piles of paper.
• Enhanced security with multi-factor authentication and robust data encryption. Your money and information are always protected.
• Simplified bill pay and easier budgeting with intuitive online tools. Take control of your finances with ease.
• A clutter-free, organized life. Say goodbye to overflowing filing cabinets and lost statements.

At NiyoX, we believe that banking can be both convenient and sustainable. We’re constantly innovating to minimize our environmental impact and empower our customers to do the same. By choosing NiyoX, you’re not just managing your finances, you’re making a conscious choice for a greener future.

Conclusion:

Are you tired of dealing with overflowing file cabinets and endless paperwork? We’ve all experienced the frustration of being overwhelmed by piles of bank statements, receipts and forms.. What if there was a solution to break free, from this burden? What if there was a way to manage our finances smarter faster and without the need for paper?

Introducing NiyoX, a banking platform that is reshaping how we handle our matters. Say goodbye to the paper experience and welcome a world of convenience, security and efficiency.

NiyoX offers more than convenience; it provides security measures. With cutting edge encryption technology and multi factor authentication your money and personal information are always safeguarded. Moreover NiyoX is supported by the RBI (Reserve Bank of India) ensuring that you can bank with peace of mind.

Are you ready to embrace a future where paper’s no longer necessary in banking? Take control of your journey today by downloading the NiyoX app. Unlock a realm of freedom and unparalleled convenience.

Don’t hesitate any longer; make the switch, to NiyoX. Become part of the paperless revolution!

Visit our website or download the app now to experience firsthand how NiyoX sets itself apart from banking methods.

Frequently Asked Questions

Simply download the NiyoX app and register using your mobile number and email address. Complete the e-KYC process with your Aadhaar number and PAN, and you’ll have your account activated within 100 seconds!

No, both e-KYC and biometric KYC are available online within the NiyoX app. You can choose e-KYC for limited features or biometric KYC for full account access.

For e-KYC, you only need your Aadhaar number and PAN. For biometric KYC, you’ll need to provide your Aadhaar and PAN along with a video call for identity verification.

NiyoX takes security seriously, using advanced encryption technology and multi-factor authentication to protect your data. Additionally, e-KYC is a government-approved method for identity verification, ensuring its reliability.

Yes, NiyoX is a registered member of FINNOVATE, a RBI-approved entity, and operates under SBM Bank’s banking license. This ensures its regulatory compliance and financial stability.

NiyoX offers different account plans with varying fee structures. You can check the app for specific details and choose the plan that best suits your needs.

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What if Banking was Green? An Essay to Quantify the Effect of Fintech on Financial Inclusion and Environmental Sustainability

• Conference paper
• First Online: 18 July 2024
• Cite this conference paper

• Hadjer Boulila 4 ,
• Widad Metadjer 5 &
• Seyf Eddine Benbekhti 4  

Part of the book series: Springer Proceedings in Business and Economics ((SPBE))

Included in the following conference series:

• Excellence in Services International Conference

This paper aims to quantify the relationship between fintech, financial inclusion, and environmental sustainability using a Bayesian VAR approach and Granger Causality test using annual data, covering the period from 1998 to 2022. The study examines the effects of fintech adoption, represented by ATM and mobile banking, on the financial inclusion index and environmental sustainability indicators, including CO2 emissions and bioenergy production. The results revealed that financial technology contributes to expanding financial inclusion within the United Kingdom especially when using mobile banking apps and online payment platforms, where it helps to incur lower transaction costs, overcome barriers, offer diverse services, and expand access to financial services. Further, our findings show that via leveraging technology and promoting financial inclusion, the UK can advance both financial access and environmental sustainability, fostering an inclusive-green economy.

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Department of Economics, Abou Baker Belkaid University, Tlemcen, Algeria

Hadjer Boulila & Seyf Eddine Benbekhti

Al-Maktoum College of Higher Education, Dundee, UK

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Boulila, H., Metadjer, W., Benbekhti, S.E. (2024). What if Banking was Green? An Essay to Quantify the Effect of Fintech on Financial Inclusion and Environmental Sustainability. In: Ciasullo, M.V., Martin, J., Brunetti, F. (eds) Embracing Sustainability Management Through Excellence in Services. EISIC 2023. Springer Proceedings in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-031-65115-1_6

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