Green Banking

Green banking entails encouraging eco-friendly behaviors and lowering the carbon footprint of banking operations. It is also known as sustainable banking or ethical banking.

Green Banking is a method used by banks to reduce their impact on the environment and Earth is safe and hospitable for all creatures. A Green Bank takes into account all the social environmental and ecological aspects in its regular banking operations with a secondary goal of taking care of the environment, habitats, and resources on Earth. Green Banking adheres to the principles of energy efficiency, conservation, ethical investing, and sustainability are ways to protect the environment's organic resources (Park & Kim, 2020).

One of the main sources of funding for industries that produce the most carbon emissions, such as steel, paper, cement, chemicals, fertilizers, power, textiles, etc., is the banking industry. As a result, the banking industry can act as a bridge between economic growth and environmental conservation, encouraging ecologically friendly and socially conscious investment. "Green banking" is the practice of conducting banking operations in places and ways that contribute to a general decrease in both internal and external carbon emissions (Park & Kim, 2020)

Green banking products

• Green loans
• Green mortgages
• Green credit cards
• Green savings accounts
• Mobile banking and online banking

Green loans

means providing loans to an enterprise or project deemed to be environmentally sustainable.

Green Mortgages

refers to the type of mortgage that provides you a money-saving discount or a bigger loan than normally permitted as a reward for making energy-efficient improvements or for buying a home that meets Particular energy efficiency standards.

Green Credit Cards.

Be It in form of environmentally friendly rewards or using biodegradable credit card materials or promoting paperless 'banking, credit cards are going green. 

Green Saving Accounts:

In case of Green Saving Accounts, banks make donations on the basis of savings done by customers The more they save, the more the environment benefits in form of contributions or donations done by banks.

Mobile banking and online banking,

 These new age banking forms include less paperwork, less mail, and less travel to branch offices by bank customers, all of which have a positive impact on the environment 

Advantages

• In order to obtain green credit cards and green mortgages, ethical banking essentially eliminates as much paperwork as possible and focuses on online and electronic transactions for processing. Less paperwork equals less tree chopping.
• educating business people about environmental issues and social responsibility will help them implement environmentally friendly company practices.
• Time is saved by using online banking instead of branch banking.

Disadvantages

Difficult to operate: It can be challenging at first to use banking websites. It could take some time to read the lessons on the banking sites software in order to feel at ease in your virtual lobby.

Customer care: The only way to communicate with any of the personnel is over the phone; there is no human interaction with any of them. You can be sure that you are speaking with the most qualified individual.

Security concern: Despite the fact that online banking services are highly protected, it is difficult to completely rule out hackers who might gain access to your bank accounts given the state of technology.

Technical breakdowns: Like other technology, online banking websites occasionally experience outages. When you closed your local bank or credit card accounts if this occurred. You will undoubtedly get bankrupt.

Green Banking Experience in Sri Lanka

The ‘Green Banking’ focus so far has been on ‘mitigation’ efforts ‐ In essence, funding Non-Conventional Renewable Energy (NCRE) projects in the private sector

Off‐grid Solar Homes Systems and community village hydro systems

Grid Tied Solar – Domestic and Commercial Roof Top Solar installations

Consumer financing of Hybrid/Electric vehicles; Financing of Green Buildings

(Karunathilake, 2017)

Green banking Challenges in Sri Lanka

Awareness 

• Knowledge of climate hazards and the need for action immediately at all levels
• Characteristics and dangers of different technologies
• The ability to create and market to clients Green Banking products

Domestic long-term debt financing from the capital market is expensive

• The demand for long-term funding is significant, yet there aren't many long-term investors in Sri Lanka (just a few pension funds and insurance firms).
• Risks are significant due to past inflation and interest rate volatility
• Hedging strategies are uncommon.

High Cost of Investment

• Higher nominal costs for the government, household and industrial users, and utilities

Insurance for floods/landslides/changed weather patterns

External Sources of Climate Finance

• Unacceptably high foreign exchange risk means that only businesses with foreign exchange revenues can borrow money.

References

Karunathilake, N. (2017). Experience and Challenges for  Green Banking in Sri Lanka. [Online] Available at-https://www.unescap.org/sites/default/files/Experience%20&%20Challenges%20for%20Green%20Banking%20in%20SL%20%20-%20NK%20DFCC%20Bank%208Nov17.pdf [Accessed on: 15/07/2022]

Park, H. & Kim, J. D. (2020). Transition towards green banking: role of financial regulators and financial institutions. AJSSR 5(5). [Online] Available at: https://doi.org/10.1186/s41180-020-00034-3 [Accessed on: 15/07/2022]