Challenges in Green Banking

Green banking is a concept adopted by banks to promote banking strategies to help fight against climate change and ensure a sustainable environment. The rising environmental disasters and the increasing demand from stakeholders for sustainable growth and development, it’s high time for financial institutions to help maneuver toward a greener economy. Additionally, the commitments of the world's leaders in 2015 to attain sustainable development (SDC) goals by 2030 and their target to achieve net-zero emission by 2050 will not be possible without the successful implementation of green banking. Banks can implement green banking principles by reducing the inhouse carbon footprint and being a catalyst for lowering external carbon emissions. They can do it by conserving energy, reducing dependency on paper, increasing online banking, and using technology to minimize resources. Likewise, banks can help to reduce external carbon emissions by developing socially and environmentally friendly products and services. They can include various loans, investments, and debt mechanisms to encourage their investment in green projects. To do so, the banks can do an environmental risk rating before granting loans to borrowers and restricting loans on those projects, which leads to a significant increase in environmental pollution (CO2 emission). This chapter provides a brief overview of green banking, its current green moment status and highlights the banks’ challenges in implementing the green moment. It uses the broader perspective to better understand the challenges in both developing and developed countries. Furthermore, it also briefly discusses new opportunities green banking provides to its stakeholders.