Green Banking Practice, Status and Prospectus of Bangladesh: A Review and Summary

of Green Banking Practice in Bangladesh

Md. Jisan Ahmed
Master’s Degree Student of Urban and Regional Planning, Department of Urban and
Regional Planning, Bangladesh University of Engineering and Technology
Email: jisanurp11@gmail.com
Abstract
Bangladesh is going through vulnerable stage and endangered in terms of climate change and disaster
risk management. The financial banking sector of Bangladesh can play vital and effective role through
green banking to protect the environmental debasement and disaster risk reduction. Green banking is
familiar as sustainable banking and the system of banking practices considering all social,
environmental and ecological factors (Faruque, Biplob, Al-Amin, & Patwary, 2016). Green Banking
aims to protect the environment as well as preserve natural invaluable resources. In addition, sustainable
green banking can optimizes the project costs, reduces the disaster and hazard risk, enhances the green
building concept and protects the commonweal interest of environmental resources (Dipika, 2015).
Therefore, green banking is serving the both economic target of the financial bank as well as it is also
playing its social responsibilities. Green Banking could also be a great opportunity to make an impactful
positive endowment to environmental and social issues in Bangladesh. This banking system also
ensures that the development growth will not degrade the environment or will not be harmful to the
society (Julia & Kassim, 2020). This review study has investigated the trends of green banking practice
in Bangladesh. It portrays the green bank activities and green baking practices over the years in
Bangladesh. This study has been mainly developed based on literature review of previous similar
studies on green banking. This study has found that Bangladesh like the other countries has also given
continuous efforts to mitigate the climate and disaster risk by various effective activities like green
banking, green financing and climate financing. Most of the bank including Bangladesh Bank has
provision of green climate financing (Morris, 2022). To develop and practice green banking system in
Bangladesh, all the financial banks must follow the policy guideline prepared and recommended by the
Bangladesh Bank (The Central Bank of Bangladesh). This study has also found that there need more
interventions to generate more green climate finance and fund to go with Paris agreement as well as to
mitigate climate change.
Key Words
Green Bank, Green Banking, Green Financing, Sustainable Economic Development, Climate
Financing.
Introduction
The green banking approach was evolved in western countries and now are practicing in worldwide.
Eventually, it is endorsing environment-friendly practices and sustainable development as well as
reducing carbon footprint. It is a sustainable approach to keep the world environment friendly and
liveable without any significant change in climate and our built environment. One of the main purpose
of green banking system is to make sure the proper and effective use of organizational and regulatory
resources in favour of the built environment as well as the society. It is a driven and context based way
of thinking with a target for future environment friendly sustainable development.

Issues as the result of environmental degradation and climate change like flood, deforestation,
dissertation, soil erosion, river bank erosion, increased evaporation, CO2 emission, rising seal-level,
cyclones, displacement, salinity problem in agricultural sector etc. are the burning question in
Bangladesh as well as in the present world. In addition, Bangladesh is now struggling with the lowest
adaption capacity to assume the future negative impacts of climate change like high risk of drought,

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flooding, high reliance on agriculture, and alarming poverty rate of 31.5% (UK Aid, 2017). These issues
emerged green banking practices in Bangladesh.

The rapid changes in climate in Bangladesh will have negative impacts in different types of eco-systems
to suitably adjust. These changes definitely have negative impact on built environment, biodiversity,
forestry, dry land, water resources, agriculture as well as human health issues. In addition, Bangladesh
is recognised as climate change endangered countries. The unusual changes in weather pattern, unusual
changes in seasons, alarming rising of greenhouse gas, rapidly declining air quality etc. are frequently
seen in recent few years. In response to the above changes in environment, urgent effective and
proactive measures are needed by the decision and policy makers and others authorities. The
government and private banks of Bangladesh can play a unique role in economic system that can affect
the financing and economic activities through their financing regulation in favour of green banking.

In Bangladesh, the green banking practices are now at an early stage. With upgrading least developed
country, development speed will go fast and Bangladesh needs a change in banking strategy to cope up
with the global green banking strategy. With this aim, the central bank of Bangladesh introduced a
guideline of green banking in 2011. Bangladesh Bank stated that all the financing banks in Bangladesh
have enthusiastically come forward to Bangladesh Bank's guidelines/polices towards green banking
(Bangladesh Bank, 2018). In the other hand, BRAC Bank Ltd of Bangladesh has become the regional
winner for Asian Emerging Markets Sustainable Bank of the Year. It represents the popularity of green
banking practices in Bangladesh (Chowdhury & Day, 2016).
Green Banking
Green Banking comes up to promote sustainable environment friendly development practices and
declining the excessive carbon emission through green banking activities. In addition, it deals with two
approaches. Firstly, it focuses on the green conversion of internal activities of all financing banks, which
means all the financing banks will adopt proper and effective steps of ensuring renewable energy, and
other measures to decline the excessive carbon emission from banking financing operations. Secondly,
all financing banks will follow environment friendly responsible financing system through decreasing
the environmental risks of project before finalising financing operations. In addition green banking
includes: Sustainable effective green banking financing, ethical environment friendly banking
financing, green loans for sustainable development project, green mortgages to ensure green banking,
green credit cards to foster green development, green savings accounts to encourage green banking,
green checking accounts for effective green banking, green money market accounts, mobile green
banking, online green banking, remote deposit for green banking, promoting modern and environment
friendly waste management, and promoting roof gardening (Shakil, Azam, Tasnia, & Munim, 2014).
Green banking practice is highly inevitable in Bangladesh as a country of environmentally vulnerable
as well as for sustainable development.
Reasons of Practicing of Green Banking in Bangladesh
The main objectives of the green banking practice in Bangladesh are giving priority to environmental
issues and social responsibilities. Bangladesh is now recognised as an environmentally vulnerable
country and the rapid changes in climate are happening continuously. Focusing on environment friendly
initiatives by ensuring innovative financial financing, significant amount of incentive and sustainable
development to make the country liveable for a long period of time. To minimize the negative impact
of climate changes and to mitigated the adverse impacts of climate changes are another challenge of
green banking system in Bangladesh.

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Significance of the Study
Bangladesh has already written its name in the list of most climate vulnerable countries where it is
planning to go up to middle income status by the coming years. This review studies mainly assesses the
past and current context of green financing practice in Bangladesh. It also highlights the insights on
green banking guideline of Bangladesh Bank. It also provides a brief summary of the financing sources
of green funds and the current green financing policies and programmes in our national financing
system. This study also gives overview to the challenges that are required to be resolved to ensure
innovative and effective green finance in Bangladesh. There are also some recommendations based on
findings and analysis in this review study which help Bangladesh Bank as well as our government to
bring green banking into practice.
Objectives of this Review Study

This review study aims to analyse the green banking practices and trends in Bangladesh with reviewing
the status and prospects of green banking practices in Bangladesh. This study also aims to provide some
suggestions and recommendation in this regards.
Literature Review
Bangladesh Bank has now adopted by government and non-government financial institutions,
especially in banking sector for determining, assessing and managing environmental and social risk in
projects. World Bank also has the publications on Environmental & Social (E&S) norms for financial
institutions including commercial banks, investment funds and leasing companies, to define their role
on the negative environmental impact. These norms provide an overview about environmental and
social risks or opportunities for financial institutions. Those also gave an Environmental and Social
Management System (ESMS) for the institution to outline the way to protect environment. The
principles are including:
 Environmental & Social Policy and Objective;
 Transaction Screening and Risk Categorization;
 Environmental & Social Due Diligence and Corrective Action Plans;
 Environmental & Social Covenants;
 Monitoring Environmental & Social Performance;
 Supporting Tool, Systems and Organizations;
 Roles, Responsibilities and Capacity Building (Alam, Julker, Rashedul, & Khadiza, 2017).
Ullah, M. M. (2010) stated that green banking as a component of global steps to save the built
environment and sensitive climate. This study stated that government bank, commercial banks and
social development banks are not much concerned about green financing ( Ullah, 2010). Khan, M.T .A.
(2012) stated that green financing is an moral and ethical responsibility to save the world people. This
study also comments that lenders and borrowers need to consider 'Go green' and 'Think green' themes (
Khan, 2012). Millat, K. M. et. al; (2012) stated that the Banks in Bangladesh have enthusiastically come
forward to Bangladesh Bank's green banking guidance with steps in environment friendly green
financing ( Millat, Chowdhury, & Singha, 2012). Hossan, F. et. al; (2012) stated that green banking
system could minimise the environmental degradation by green banking practice. All the financial
banks can play vital and effective role in green development through "Green Banking" practice as well
as incorporate the social factors with environmental and climate issues (Hossan, 2012).
Methodology of the Study
This review study is mainly conducted with lots of reviews of literatures of previous studies and
researches on green banking system in Bangladesh as well as others countries. Different studies of

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developing and developed countries are also reviewed to withdraw the best practices in green banking
system and approach. Green banking policy of Bangladesh mainly reviewed to obtain the ideas and
country’s perspectives on difficulties and opportunities for developing green banking practices. All the
secondary data and information have been collected from various journals and articles, electronic
sources, repots, websites, Bangladesh Bank’s reports, various newspaper etc.
Findings from the Review Study
This review study has found that the concept of green banking was formally initiated in some countries
in 2003 with the vision to protect and preserve the environment. Green or sustainable bank is the new
form of banking toward to protect and preserve the environmental activities and sustainable
development. The Bangladesh Government and all banking sectors can play an intermediary part in
between economic development and environment protection through practicing green banking (Alam,
Julker, Rashedul, & Khadiza, 2017). In the other hand, Green Banking creates a new chapter for banking
sector of Bangladesh. By complying a comprehensive green banking policy, and considering green
strategies during loan disbursement, we can easily establish green banking prat in any countries (Rocky,
2017).
This study has also found that practicing green banking can be resulted as the following benefits for the
financial banks:
 It can develop bank image by ensuring their commitment for the sake of environment friendly
development;
 Add limitation on giving loans to non-environment friendly activities;
 Important environmental and climate factors can be checked before financing;
 Efficient and effective utilization of resources can be ensured by green financing in a
sustainable manner;
 It will help to reduce excessive carbon emission; and
 It will also help to build up public and institutional consciousness among all level of
stakeholders about environmental and social duties ensuring adaptation of environmental
friendly development practices (Bangladesh Bank Green bank policy guideline, 2011).
Tools of Green Banking

Green banking brings a paradigm shift within banking system. As all the green banking activities are
interlinked with each activities where the categorization in green banking activities is not very
insightful. However, for broader perspective, green banking activities can be grouped under four
categories.
i. Greening of banking operations & infrastructure
ii. Conforming/ Complying regulatory and society expectations
iii. Proactive green banking initiatives
iv. Awareness and training of Stakeholders
Importance of Green Banking

According to Bangladesh Bank, adopting and practicing green banking policies/strategies will generate
the following benefits to the commercial banks as well as decision makers: (1) increase goodwill or
improve brand image by showing their commitment to preserve and protect the environment; (2) less
loan/investment approvals to the environmentally harmful projects; (3) check the necessary important
environmental issues before approving the loan/investment; (4) ensure well planned and effective use
of all kinds of resources and well organised financing in environment friendly way; (5) modern
technology in financial operations which is not only benefit the customers but also increase the

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productivity of the employees; (6) reduce carbon foot print in all funded/invested projects; and (7) build
up public and organizational awareness amongst the stakeholders about environmental and social duties
enabling them to adopt environmental friendly financing practices (Bangladesh Bank, Green Bank
Policy Guideline).
Tracking Green Finance in the Government Sectors

According to Financing Green Growth in Bangladesh: Challenges & Opportunities, UK Aid, 2017,
following activities are found under green financing/Green Banking in Bangladesh.
Bangladesh Climate Change Trust Fund (BCCTF) under the Ministry of Environment and Forests
(MoEF) to finance adaptation projects from its own resources between 2009-10 and in the 2016-17
fiscal year, a total of BDT 3,100 crore taka (US$400 million approximately) has been allocated to
BCCTF.
Bangladesh Climate Change Resilience Fund (BCCRF) was created in 2010. This was further
consolidated when Bangladesh was awarded US$110 million in grant and highly concessional loans
through the Pilot Programme on Climate Change (PPCR), funded by the Climate Investment Fund
(CIF), the proceeds of which are currently used under various green projects. As per the guidelines, 10
percent of the total funds were being routed through the Palli Karma Shohayak Foundation (PKSF) to
NGOs. The BCCRF was set to end in June 2017, with unmet objectives as originally schemed.
However, the BCCRF Secretariat could still act as a window for accessing international climate finance.
Forest Investment Programme (FIP): To prepare bankable projects in near future, Bangladesh will
get access to US$250,000 for technical assistance programme. Further, a US$75 million loan-grant mix
financing has recently been signed, which will be used mainly for research in ramping up efficiency in
solar irrigation pumps through promoting innovative practices.
Global Environment Facility (GEF): The fund focuses on the prevention of carbon loss from forests,
soil erosion and salinization; recovery of marginal lands; and the introduction of climate risk insurance
through adaptation strategies to encourage sustainable land and water management. Since 1991,
Bangladesh has received total grants worth US$143.59 million from GEF to implement 41 projects.

Climate Investment Funds: The US$8.3 billion CIF were set up by the World Bank in 2008.
Bangladesh accesses the fund through three of these: Pilot Programme for Climate Resilience (PPCR),
Scaling up Renewable Energy in Low Income Countries Programme, and the Forest Investment
Programme.
Pilot Programme for Climate Resilience (PPCR): The PPCR is a major provider of grant support to
climate vulnerable countries. Bangladesh first accessed the fund in 2010 and received US$110 million,
of which 45 percent was provided as a grant (US$50 million) and 55 percent was provided as highly
concessional loan support (US$60 million) for projects.
Green Climate Fund (GCF): The Government of Bangladesh has designated the Economic Relations
Division (ERD), of the Finance Ministry as the Designated National Authority for direct access to the
GCF while four institutions have been identified as National Implementing Entities (NIE). IDCOL,
Palli Karma-Sahayak Foundation (PKSF) and the Department of Environment have lodged
accreditation applications.
Clean Development Mechanism (CDM): Emissions reduction projects, which generate Certified
Emission Reduction units, may be traded in emissions trading schemes. Bangladesh has succeeded very
little in accruing CDM benefits. It lacked robust institutional mechanisms to submit emissions reduction

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projects to the UNFCCC in generating CER. Due to the volatility in price linked with the recent global
economic recession, the carbon market is yet to reap the benefit of CDM projects.
Seventh Five-Year Plan (2015–2020) and the Perspective Plan Bangladesh (2010–2021): The
Seventh Five Year Plan (2015–2020) and the Perspective Plan Bangladesh (2010–2021) recognise the
importance of strategic approaches to reduce the adverse impacts of industrialisation and the negative
impacts of climate change through stimulating the sustainable development.
Bangladesh Bank Activities on Green Banking

Bangladesh Bank (BB) as the central bank of Bank of Bangladesh has already taken steps to stimulate
green banking practice in Bangladesh. BB has already nominated ten banks based on CAMEL rating
and Risk Based Capital Adequacy (RBCA) measurement that are executing green banking practices.
However, BB has disclosed the green Banking report for the first time. In the other hand, BB had given
importance and foreground on the environmental compliance for starting new approaches through
nominating the banks such as Eastern Bank ltd (EBL), Shahjalal Islami bank ltd, Bank Bangladesh ltd,
Bank Asia ltd, Dutch Bangla Bank limited (DBBL), Mutual trust bank ltd, Prime bank ltd, Pubali bank
ltd, Standard Chartered bank, and Trust bank ltd taking into consideration the green banking data till
first quarter of 2012. BB had examined some major initiative and activities under the green banking for
getting the whole scenario of the green banking policy, allotment of fund in green banking, green
banking budget, green banking unit, environmental risk rating, Effluent Treatment Plant (ETP) and ETP
related project. The selected ten banks allotted Tk. 525 crore for green banking and Tk. 505 crore was
sanctioned for green banking/financing among that fund. Forty out of forty seven nationalized and non-
nationalized commercial banks was established green banking unit in their banking/financing system.
Total 41 commercial banks were prepared green banking policies in their banking system (Islam & Das,
2013).
On the other hand, BB had tried to provide long term financing support for private sector firms who
follow green banking policies. Environmental and Social Management Framework (ESMF) had been
formed to confirm the sustainability of financing of this facility (FE Circular No. 18/2015). One of the
mentionable initiatives of Bangladesh Bank was to form the Green Transformation Fund. In February
2016, BB declared its purposes to form a new longer-term refinancing system (GTF of 200 million
USD). The fund was utilized to ensure environment friendly growth in export oriented textile and
leather sectors (FE Circular No. 02/2016). Until June 2016, Bangladesh Bank had disbursed total USD
16.21 million (BDT 125.95 crore) to five PFIs against their financing for eight sub projects. The green
banking activities of Banks and FIs in the quarter ended on June 30, 2017 proves increment in total
green finance for both Banks and FIs comparing the previous quarter. The increment had been
stimulated by indirect Green Finance increment from Tk. 119.21 billion to Tk. 134.52 billion. On the
other hand, Indirect Green Finance, and Direct Green Finance had also increment from Tk. 7.23 billion
to Tk. 8.69 billion (Islam & Das, 2013). It is also assumed that total amount of investment and
expenditure in direct green finance of banks and FIs possibly be increased in the coming years.
However, Bangladesh Bank has recommended the more precise and effective policies to the all banks
and FIs in mainstreaming green banking/financing especially in direct green finance (Adeleke & Naim,
2017).
Allocation and Utilization of Fund of Bangladesh Bank as Green Banking Practice

A brief of financial approval, sanction and disbursement of total finance along with green finance by
the all banks and FIs during April-June, 2018 quarter is shown in the following Table. The quarterly

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shift from March 2018 to June 2018 proves increment in Green Finance is shown in the following Table-
1 & 2.
Table 1: Sanction & Disbursement of Funded Loan

Source: Green Refinance Activities of Bangladesh Bank, April-June, 2018. *** State-Owned Commercial Banks (SCBs),
State-Owned Specialized Development Banks (SDBs), Public Commercial Banks (PCBs), and Foreign Commercial Banks
(FCBs)
Table 2: Major Green Banking Activities at a Glance in April-June, 2018

Source: Green Refinance Activities of Bangladesh Bank, April-June, 2018

In between FY 2009-10 and FY 2016-17, a total of BDT 3,100 crore taka (US$400 million
approximately) had been allocated to Bangladesh Climate Change Trust Fund (BCCTF). The addition
to the fund had been decreased in recent times because of misdirected allocation of resources for non-
adaptation purposes. Though the project activities of the fund are going on, the speed of climate finance
as green banking to indigenous adaptation projects has drastically slowed down from 2009 to 2017.

Figure 1: Amount allocated by GoB to BCCTF

Source: UKaid, EDGG
(http://www.greengrowthknowledge.org/sites/default/files/downloads/resource/Financing%20Green%20Growth%20in%20
Bangladesh%20Challenges%20and%20Opportunities.pdf).

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Total amount of loans disbursed in different green finance categories in FY-2020, data shows both
deviation and increment in each sectors like Renewable Energy, Energy Efficiency, Alternative Energy
Waste Management, Recycling and Recyclable Product, Green Brick Manufacturing, Green
Establishment and Miscellaneous. All the private commercial banks had the maximum contribution
in financing most of the sectors like ETP, energy efficiency, waste management, fire burnt brick,
recycling and recyclable products, setting up green industries and factory safety. It is evident that NBFIs
disbursed major portion of financing in renewable energy. All of the sectors are included in various
refinancing schemes of BB through which all private commercial banks have incentivised to stimulate
direct green finance. Data shows that in FY 2016-20, for most of the sectors there have been increase
in disbursements except renewable energy and waste management. Following table and figures show
the details of Disbursement trend of Bangladesh Bank (BB)’s refinance scheme for green
product/initiatives in million BDT.

The following section renders the green banking trends of Bangladesh of the last few years and shows
the green banking activities of all banks and NBFIs assembled from the annual reports of 2016 to 2020.
The below table-3 shows the categorical direct green finance in 2020, where table-4 exhibits the
disbursement of green finance of the last five years. On the other hand, below table-5 exhibits the brief
summary of quarterly sanction and disbursement of total finance as well as green finance in 2020.
Figure-2 states the share of categorical green finance in FY20 where figure-3 shows the percentage of
green finance of total funded loans disbursed by all banks and NBFIs in the last five years.

Table 3: Green finance in FY20 by banks and non-bank financial institutions (NBFIs) in million
BDT
Types of Renewa Energy Alterna Waste Recycling Green Green Miscel Total
Banks/FIs ble Efficie tive Manage and Brick Establis laneo
Energy ncy Energy ment Recyclable Manufa hment us
Product cturing
SOCBs 7.48 0 0 660.05 290.85 363.25 579.85 7.43 1908.91
(06)
PCBs (40) 1979.41 6398.37 10.08 8878.87 8298.55 8402.90 32,737.93 2962.65 69,668.75
FCBs (09) 608.60 327.70 0 283.80 4.60 0 33,072.40 35.59 34,332.69
Bank’s 2595.49 6726.07 10.08 9822.72 8594.00 8766.15 66,390.18 3005.67 105,910.35
Total
FIs (33) 942.36 2819.03 6.00 240.00 272.69 432.13 350.00 233.00 5295.20
Grand 3537.85 9545.10 16.08 10,062.72 8866.69 9198.28 66,740.18 3238.67 111,205.55
Total
Source: Sustainable Finance Department, Bangladesh Bank (2020).

Table 4. Green finance by banks and NBFIs from 2016 to 2020 in million BDT
Green Finance by Banks 2016 2017 2018 2019 2020 Total
SOCBs (06) 2013.7 2884.4 1815.2 1219.44 1908.91 9841.65
PCBs (40) 24,597.40 30,578.50 65,904.30 78,316.90 69,668.75 269,065.85
FCBs (09) 768.8 551.3 192.6 19,213.20 34,332.69 55,058.59
Total Green Finance by Banks 27,379.90 34,014.20 67,912.10 98,749.54 105,910.35 333,966.09
% of relative changes by banks (Year 3.60% 24.20% 99.70% 45.40% 7.25% -
on year)
Green Finance by NBFIs 5948.00 4632.00 3389.60 6499.87 5295.20 -
% of relative changes by NBFIs (Year −28.50% −22.10% −26.80% 91.80% −18.50% -
on year)
Total Green Finance by Banks and 33,327.90 38,646.20 71,301.70 105,249.40 111,205.55 -
NBFIs
Source: Sustainable Finance Department, Bangladesh Bank (2020). * SOCB—State-owned commercial banks, *PCB—private
commercial banks, *FCB—foreign commercial banks. Note: 1 BDT equivalent to USD 0.012 as at 20 January 2021.

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Table 5: Disbursement trend of Bangladesh Bank (BB)’s refinance scheme for green
product/initiatives in million BDT

Items FY16 FY17 FY18 FY19 FY20

Biogas 84.8 46.6 10.5 4.6 1.24
Solar home system (SHS) 114.7 35.3 0 0.2 0.45
Solar irrigation pump 0.6 0 0 0 0
Solar assembly plant 16.3 0 0 0 0
Solar mini—grid 10 0 0 0 0
Effluent treatment plant 58 179.6 60 108.4 132.5
Hybrid Hoffman Kiln technology in brick 177.8 10 0 5 100
kiln
Vermicomposting 1.6 1.3 0 0.8 1.26
Green industry 400 0 500 152.3 198.7
Safe working environment 35.7 55.3 82 40 88.1
Organic manure from slurry 0.2 0.1 0 0 0
Paper waste recycling 20 20 0 0 0
Energy efficient tech 0 0.6 13 10 46.29
Total 393.5 919.7 348.8 321.3 568.54
Relative changes in % 3.15% 133.72% −62.07% −7.88% 76.95%
Source: Sustainable Finance Department, Bangladesh Bank (2020)

Figure 2: Green finance trend from 2016 to 2020

Figure 3: Trend in share of green finance in total funded loans disbursed 2016 to 2020 (Khairunnessa, Vazquez-Brust,
& Yakovleva , 2021).

Specific findings from the review study

 Till 2020, more than fifty banks had formulated policy regulation for green banking.
 Till 2020, more than fifty commercial banks had formulated a green banking unit in their banks.
 Till 2020, more than forty one commercial banks had come forward to introduce green office
guide.
 Assessment of environmental risk had been done for more than 20000 projects to till 2020.
 Till date for more than 15000 risk rated projects had been financed by different commercial banks.

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  About BDT 2145.35 million was allocated in 2012 as climate risk fund in Bangladesh.
 Out of allocated BDT 2145.35 million, 84.86% (BDT 219.70 million) had been used by Private
Commercial Banks whereas only 9.5% is used by State Owned Commercial Banks.
 In green marketing, training and development 90.42 million taka had been utilized (Shakil, Azam,
Tasnia, & Munim, 2014).
Green Banking Policy Initiatives in Bangladesh
Bangladesh has reacted as one of the premature forward movers in composing green policy strategies
to employ green and sustainable as well as environment friendly financial operation. BB was the pioneer
among the other government authorities in stimulating the green banking or green financing. Green
banking or financing was promoted by taking several steps like policy initiatives or on-lending options
and refinancing strategies considering green banking or financing policy formulation, credit quotas for
green financial institutions, concessional refinancing initiatives, and donor supported sensitive projects.
However, BB had first prepared the Green Banking Policy Guidelines in 2011 through directing all the
commercial banks to follow and adopt an effective and extensive green banking or financing policy. In
the other hand, several policy guidelines were issued up to 2020. Following table-6 shows us the details
of issued policy guidelines until 2020.
Table 6: Policy initiatives by Bangladesh Bank.
Year Policy Initiative Reference
2011  BB had issued Environmental Risk Management (ERM) Guidelines BRPD Circular
for Banks and Financial Institutions (FIs) in 2011 No.01/2011 & 02/2011
 BB had issued Green Banking Policy Guidelines for banks in 2011
2012  Banks and FIs were recommended to set up Solid Waste Management BRPD Circular Letter
System, Rainwater Harvesting, and Solar Power Panel in their newly No. 07/2012
constructed or arranged building infrastructure.
 All the banks and FIs must ensure the establishment and activeness of
Effluent Treatment Plant (ETP) during financing to all possible
clients.
2013  BB had also issued policy guidelines for green banking for the GBCSRD Circular No.
Financial Institutions and for the banks scheduled in 2013. 04/2013 & Letter No.
05/2013
2014  From January 2016 to till now, the minimum target of direct green GBCSRD Circular No.
banking/finance was set at 5% of the total funded loan 04/2014
disbursement/investment for all banks and FIs.
2015  BB had instructed the Banks and FIs to form a “Climate Risk Fund”, GBCSRD Circular No.
allocating at least 10% of their Corporate Social Responsibility 04/2015
budget.
2016  BB had instructed the Banks and FIs to set up Solid Waste SFD Circular No.
Management System, Rainwater Harvesting, and Solar Power Panel 01/2016,
in their newly constructed or arranged building infrastructure. SFD Circular No.
 BB had also instructed all the banks and FIs to ensure the 03/2016,
establishment and activeness of Effluent Treatment Plant (ETP) SFD Circular No.
during financing to all possible clients. 02/2016
 All banks and FIs to establish Sustainable Finance Unit and
Sustainable Finance Committee by abolishing both green banking and
Corporate Social Responsibility units.
2017  BB had issued the guidelines on Environmental and Social Risk SFD Circular No.
Management (ESRM) for Banks and Financial Institutions along with 02/2017
an Excel-based Risk Rating Model.
 BB had circulated a comprehensive list of product/initiatives of Green
Finance for banks and FIs.
2018  BB had circulated a new uniform reporting format of Quarterly SFD Circular No.
Review Report on green banking activities for banks and FIs to 01/2018
monitor green banking policy and other regulations and to ensure the
quality and uniformity of data provided by banks and FIs.

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 2019  Investment by scheduled banks and FIs in any impact fund, which is SFD Circular No.
registered under BSEC (Alternative Investment) Rules, 2015 and 01/2019
formed for environment friendly sectors/purposes (resource and
energy efficiency, renewable energy, waste management and
treatment, women and child right protection etc.) will be considered
as green finance.
2020  From September 2020, onwards minimum target of green finance was SFD Circular Letter No.
set at 5% of the total funded term loan disbursement/investment for 05/2020
all banks and FIs.
Source: Sustainable Finance Department, Bangladesh Bank (2020).

Adopting Green Banking Policy in Bangladesh

With a view to guiding green banking exercise in Bangladesh, an effective and extensive Green Banking
Policy and Strategy Framework has been prepared for the government and all private banks in the
following methods:
 Green Banking Policy Guidelines needs to be activated through periodical time frame which is
divided into 3 different phases.
 In 1st phase, all the banks need to activate an environment policy guideline evaluating the issues
of internal and external operational services and strategical guideline for loan facilities along
with the conceptualization of individual green banking unit.
 In 2nd phase, all the banks were recommended to prepare sector specific green financing
guidelines for the sensitive sectors (environmentally and socially ) with setting up green
banking windows and forming an effective environmental risk management instruction for
evaluating, and monitoring of the projects and public awareness building for green banking or
financing operations.
 In 3rd phase, all the banks were suggested to take necessary steps for developing new innovative
environment friendly services/products and publishing reports on green banking operations in
standardised formats. Since 2011, Bangladesh Bank has given circulars in different times to
enlarge it further.
The major important features of Bangladesh Bank’s Green Banking Policy Guidelines include:
Uniform Reporting: In 2012, the Bangladesh Bank had started a uniform reporting manual to report
green banking activities. In 2013, an updated policy guideline for green banking were prepared for
financial institutions and banks under a revised circular where the detailed manual was shared for
reporting relevant green banking activities. This updated manual stated that all banks and financial
institutions need to submit information on green finance, green marketing, training and capacity
development, utilisation of climate risk fund, strategic plans and steps for green banking, sector specific
green finance policies etc. on a quarterly basis.
Mandatory Credit Quota for Green Banking: A minimum target of direct green finance had been
fixed at 5% of the total loan disbursement from January 2016 to till now for all banks and financial
institutions to stimulate the direct green financing by Bangladesh Bank. The green banking policy
guidelines also guided the banks and financial institutions to form a Climate Risk Fund and allocate at
least 10% of their Corporate Social Responsibility budget to this fund.
Greening the Banking Infrastructure: Another circular had issued by Bangladesh Bank in May 2016
to all banks and FIs to take initiative for solid waste management systems, rainwater harvesting and
solar power panels within their buildings by December 31, 2018 (December 31, 2020 for state owned
banks). This circular also recommends all banks and financial institutions should promote their clients

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to set up environmentally friendly facilities in newly built infrastructure under financed projects (UK
Aid, 2017).
The Challenges in Executing Green Banking Policies and Regulations in Bangladesh
As Green banking is a new premature issue in Bangladesh’s financial sector, it has faced lack of capacity
to materialise the policies and programmes especially in the private sector was expected. However, the
green banking policy guideline has promoted capacity building for all banks and financial institutions
where the progress was limited because of the slow growth of green finance activities. On the other
hand, the growth of green finance requires capacity development across sector stakeholders, including:
capital market stakeholders, industry stakeholders, and regulatory agencies. Till date, an active and
extensive capacity development strategy is not in place which includes all the relevant stakeholders
(UK Aid, 2017).
Risks and Barriers for Green Financing in Bangladesh
Policy and Regulatory Risks: It is found that policy and structural limitations affect the feasibility and
economic attractiveness of low carbon options. The threat of policy and regulatory changes are the
fundamental risk that can discourage investors. On the other hand, fossil fuel subsidies till now going
on in many countries that would incentivize green financing.
Technology Risks: The green technologies sometimes have comparatively higher capital expenses,
which can discourage the investors. Particularly in the developing and least develop countries, these
may also add operational or performance related risks.
Market Risks: Green investments can create additional risks to the immaturity of the market such as
country or currency risk. These may add high first-mover expenses and risks related to unproven
commercial application of a new technology.
Scale of Investment Barriers: It is project specific bindings particularly for investment in green
infrastructure during delivering the required scale of investment that may be required to meet green
policy targets and objectives.
Transformation Cost of ’RED’ CATEGORY (Polluted Industry) Industry to Green Category:
Green industries have low carbon emission, higher production, and save more gas, electricity and water
compared to other industries. Bangladesh has a total of about 32 green factories. More than 100 green
factories are under construction in Bangladesh.
Recommendation for Green Financing
The University Grants Commission of Bangladesh need to take steps to add some courses on green
banking/financing in the environmental economics, environmental science, development economics,
BBA and MBA, climate and disaster management to ensure an efficient and effective contribution in
supply of capacity and resources to exercise green banking or financing in Bangladesh. On the other
hand, regulatory authorities may issue more policies and interventions to ensure green financing
exercise for reshaping the private sectors. The participatory market mapping for green financing could
be another way. The extensive and perspective advocacy for the government of Bangladesh could be
following:
 All the Banks of Bangladesh should exercise green financing in projects those are environment
friendly. Bank Investment need to increase for projects such as waste management, installing
solar energy plant, bio-gas, bio-fertilizer plants, Effluent Treatment Plant (ETP), Hybrid
Hoffman Kiln projects (Shakil, Azam, Tasnia, & Munim, 2014).
 All the Banks of Bangladesh should finance after assessing its negative environmental impact,
climate risk and disaster risk. Any kind of financial investment should be given after assessing
the environmental risks of particular project. Banks can introduce and promote some new

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 environment friendly services/products such as Green Home Loan, Green Car Loan and others
in this regard.
 All the government and private financial banks need to take initiatives to train up their
professionals regarding green financing, environmental impacts and social welfare.
 All the government and private banks may arrange periodical training workshops, seminars and
symposiums to make the stakeholders aware about green banking as well as to introduce their
Green Products and services therein. This can eventually make the stakeholders adapted to the
Green Banking activities.
 Finally, all the commercial banks should take the responsibility if their financial investment
occurs any environmental pollution and social imbalance in future. All the banks should think
twice or more before giving loan/investment in any environmentally harmful projects (Ahmad,
Zayed, & Harun, 2013; Ahmad, Zayed, & Harun, 2013).
Conclusion
Bangladesh is listed in the most vulnerable countries respect to climate change around the world. From
the review studies, it is found that green banking or green financing practices in Bangladesh are not at
up to the expected level. Every government and private financing bank should take immediate initiatives
to practice and promote green banking and green financing for better environment and society. Banks
can do much more to help the existing environment by promoting green banking. Green
banking/financing can truly reduce the carbon emission activities by developing more efficient and
active green banking branches, imposing renewable or energy-efficient production procedures,
supporting green transportation facilities, enforcing sustainable green banking and increasing green loan
in environment-sensitive activities. Banks can also support eco-friendly groups and raise money for
local environmental initiatives. Bangladesh bank should emphasize more on green banking
activities/practices during giving permission for opening new bank or new branches or disbursement of
loan/investment as well as approval of loan/investment. Bangladesh Government should also promote
and encourage the green banking/financing practices in the national development activities. The central
bank of Bangladesh also needs to monitor or supervise all the government and private commercial banks
whether they are practicing green banking/financing or not. As Bangladesh has started its green
banking/financing journey lately, a cooperative effort needs to come up from the all level of banks and
stakeholders to cope up with alarming climate changes in coming years.

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