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Green Banking Report | 1
GREEN
Socially
Responsible
Banking
Sustainable
Banking
THINK
2013
GREEN BANKING
Green Banking Report | 2
INTERNSHIP REPORT
ON
COMPARATIVE ANALYSIS OF
GREEN BANKING INITIATIVES
OF
PRIME BANK LIMITED
Green Banking Report | 3
August 20, 2013 Suborna Barua Lecturer Department of International Business University of Dhaka Subject: Submission of the Internship Report. Honorable Sir,
It is my pleasure to submit my internship report on Green Banking Practices of Prime
Bank Limited. This report is a result of the Internship Program that I have accomplished for
a specified 15 days in the Green Banking Unit at the Head Office of Prime Bank Limited.
I have tried my level best to make this report comprehensive and informative as possible
within the time allowed. I hope this report will meet the standards of your judgment. Sincerely Yours, Asif Al Nahian Kazi Asif Al Nahian ID: 02-200935
BBA 15th
Batch Department of International Business University of Dhaka
LETTER OF TRANSMITTAL
Green Banking Report | 4
This is to certify that the internship report on Green Banking Practices of Prime Bank
Limited as a part to fulfill the requirement of Bachelor of Business Administration, (B.B.A)
degree from the Department of International Business, University of Dhaka has been carried
out by Kazi Asif Al Nahian, student ID-35, a student of BBA 15th
Batch under my
supervision. No part of the internship report has been submitted for any degree diploma, title,
or recognition before. Date: Suborna Barua Lecturer Department of International Business University of Dhaka
LETTER OF AUTHORIZATION
Green Banking Report | 5
First of all I would like to express my deepest gratitude to the almighty for giving me the composure to finish this work.
Internship program provides an opportunity to experience the real world scenario and helps
to develop own judgments. And doing my internship on the Green Banking Practices of
Prime Bank Limited was a great experience for me.
Here I would like to express my heartiest gratitude to my Intern Supervisor Mr. Subarna Barua for his sincere cooperation and suggestions to complete my job.
I would like to express my gratitude to the Head of Green Banking Cell of Prime Bank Limited for giving me a chance to work as an intern in his department.
Finally I am really grateful to my teachers and to the officials of Bangladesh Bank for giving me such an opportunity to work in this project.
Kazi Asif Al Nahian ID: 02-200935
BBA 15th
Batch Department of International Business University of Dhaka
ACKNOWLEDGEMENTS
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The concept Green Banking evolved in western countries and now is practiced in most of
the countries in the world. It indicates endorsing environment-friendly practices and reducing
carbon footprint from banking activities. Green banking is not just another corporate social
responsibility activity; it is all about going beyond to keep the world livable without any
significant damage. Green banking that considers all the social and environmental factors is
also called ethical banking. The main objective of green Banking is to ensure the use of
organizational resources in favor of the environment and society. Green banking as a concept
is proactive and smart way of thinking with a vision for future sustainability of our only
Spaceship earth. Bangladesh Bank is the first central bank in the world that has taken real initiatives to
facilitate the way of Green Banking practice. With some specific guidelines and legal
frameworks the central bank of Bangladesh has been urging all the commercial banks in
Bangladesh to develop their own Green Banking Policies.
This paper is an attempt to analyze the Green Banking Practices of a renowned private
commercial bank in Bangladesh, the Prime Bank Limited and identifying the efficiency or
inefficiency of the initiatives taken by the bank regarding Green Banking.
ACKNOWLEDGEMENTS
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TABLE OF CONTENT Topics Page
1. Chapter-One
1.1 Introduction 9
1.2 Origin of the Study 10
1.3 Objective of the Study 10
1.4 Methodology of the Study 11
1.5 Limitations of the Study 11
2. Chapter-Two
2.1 About Prime Bank
13
3. Chapter-Three
3.1 About Green Banking
15
3.2 Evaluation of the Idea of Green Banking
16-17
3.3 Components of Green Banking
17
3.4 Challenges towards Green Banking
18
3.5 International Initiatives of Green Banking
19-20
3.6 Green Banking Products & Services in the World
21-27
3.7 Green Banking Practices in Bangladesh
28-32
4. Chapter-Four
4.1 Green Banking in Prime Bank Limited 34
4.2 Concept of Management About Green Banking 35
4.3 Formal Document of Green Banking 36
4.4 Reasons for Introducing Green Banking 37
4.5 Green Banking Components of Prime Bank Limited 38-40
4.6 Management Framework of Green Banking in Prime Bank 41-42
4.7 Institutional Arrangement for Green Banking 43-47
4.8 Dimensions & Coverage of Green Banking Activities 48
4.9 Green Banking Best Practices 49-50
4.10 Policy Framework of Green Banking Activities 51-52
5. Recommendations 53
6. Conclusions 54
7. References 55
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CHAPTER ONE
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1.1 INTRODUCTION
An internship program is a very good approach to co-relate the practical work
experience with the theoretical knowledge because it provides an individual the great
opportunity to work in an organization with some specific objectives. As a result it
bears great importance in case of business graduates.
As an intern it was a great opportunity for me to work in one of the reputed private
commercial banks of Bangladesh, the Prime Bank Limited. During this period I had the
opportunity to work in the Green Banking Unit at the Head Office of Prime Bank
Limited.
Green Banking or Sustainable Banking as a concept is not very new around the world.
Global warming, unusual weather pattern, rising greenhouse gas etc. has always urged
the business world to take some responsibilities in safeguarding the planet.
Consequently environment friendly banking practices emerged in many western
countries.
However, in our country, the central bank of Bangladesh, Bangladesh Bank has taken
the real initiative to make the financial industry more environment friendly and
responsible by formulating a detail Green Banking Policy Guideline in February 27,
2011.
Now, the main objective of my internship program was to evaluate the Green Banking
practices of the Prime Bank Limited and this report is basically a result of experience in
the Green Banking Unit of the Prime Bank Limited.
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1.2 ORIGIN OF THE REPORT
As a requirement of the completion of the Bachelor of Business Administration degree
under the Faculty of Business Study at University of Dhaka, I was assigned to do my
internship at the Head Office of Prime Bank Limited for a specified period of 15 working
days from May 30 to June 19, 2013 as an intern. During this period I worked at the
Green Banking Unit under the Risk Management Division of the Head Office of Prime
Bank Limited. The objective of my internship program was to understand the different
aspects of Green Banking activities of Prime Bank Limited. This report is a formal
documentation of this internship program.
1.2 OBJECTIVE OF THE REPORT
The objective of this report can be viewed from two perspectives.
1) General Objective
2) Specific Objective
General Objective: This internship report is primarily prepared as a requirement of the
completion of Bachelor of Business Administration degree under the Faculty of Business
Studies at University of Dhaka.
Specific Objective: The specific objectives of this report are-
a) To find the historical evaluation of Green Banking at Prime Bank Limited.
b) To find the reasons for introducing Green Banking.
c) To find the concept of the institutions management about Green Banking.
d) To analyze the components of Green Banking & their effectiveness of Prime Bank
Limited.
e) And finally to identify the major areas of efficiency or inefficiency of the bank
regarding its Green Banking initiatives.
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1.3 METHODOLOGY OF THE STUDY
The objectivity of any study depends largely on how methodologically it is done. For the
purpose of this report I have used both qualitative and quantitative information to give
it a clear judgment opportunity.
All the information used in this report are from two major sources. These are:
Primary Sources:
Face-to-face interview with the concerned employees of the bank.
Conversations with my classmates.
Practical work experience in the Green Banking Unit under the Risk Management
Division of the bank.
Secondary Sources:
Quarterly Reports of Prime Bank Limited about Green Banking.
Annual Report of the Prime Bank Limited 2012.
Reports published by Bangladesh Bank.
Some national & international journals about Green Banking.
1.4 LIMITATIONS OF THE STUDY
Almost every research work has to face some limitations in its completion. Limitations
of a study are those issues that if analyzed could be more helpful for the study. This
internship report is not also out of limitations. For the purpose of acquiring data to
prepare this report I faced some constraints that are listed below:
Lack of Published Materials: No kind of published materials was provided to me
during my internship period. The division only allowed me to review their materials. As
a result this report is in lack of some specific reference papers in the appendix part.
Time Constraint: Covering the entire Green Banking performance of the bank was a
difficult task within the time allowed for the internship program.
Lack of Experience: Preparing a formal document like an internship report requires
some prior experience in this field. I have tried my level best to reduce the distortion or
biasness of information that I have used in this report.
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CHAPTER TWO
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2 ABOUT PRIME BANK LIMITED
Prime Bank is one of the reputed private commercial banks working in Bangladesh. The
bank started its journey on 17th April 1995 by a group of successful local entrepreneurs.
Within a very short span of time Prime Bank has made significant progress in the
industry and has been graded as top class bank in the internationally accepted CAMELS
rating.
At present the bank has 130 branches operating in different areas in Bangladesh. As of
annual report 2012, total paid-up capital of Prime Bank is Tk. 9,358 million.
Mission Statement
To build Prime Bank Limited into an efficient, market driven, customer focused
institution with good corporate governance structure. Continuous improvement of our
business policies, procedure and efficiency through integration of technology at all
levels.
Vision
To be the best Private Commercial Bank in Bangladesh in terms of eficiency, capital
adequacy, asset quality, sound management and profitability having strong liquidity.
Credit Rating
CRISL reaffirmed long term rating of PBL to AA+ and short term rating to ST-1 based
on financials up to December 31, 2011.
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CHAPTER THREE
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3.1 ABOUT GREEN BANKING
Global warming, which is one of the most burning & discussed issues, has the worst
impact on the climate of the planet as a whole. Due to unusual weather pattern, rising
greenhouse gas, declining air quality etc. society demands that business also take
responsibility in safeguarding the planet.
Green Banking is one of the revolutionary concepts in todays business world which
basically refers to as sustainable banking, socially responsible banking or ethical
banking that endorse environment-friendly practices and reducing carbon footprint
from banking activities.
The main objective of Green Banking is to ensure the use of organizational resources in
favor of the environment and society. Green banking as a concept is proactive and smart
way of thinking with a vision for future sustainability of our only Spaceship earth. So in
a very specific way- Green Banking means banking practices that foster
environmentally responsible financing practices as well as using environmentally
sustainable internal processes.
Morshed, Rubayat and Singha (n.d., p. 11) explained that Green Banking can be viewed
from two different approaches as follows:
Transformation of Internal Operation:
Firstly, banks can adopt appropriate ways
to utilize renewable energy sources,
automation and other measures to
minimize carbon usage in banking
activities.
Environmentally Responsible
Financing Policy: Secondly, banks should
consider environmental issues with utmost
importance while financing or investing in
project.
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3.2 EVALUATION OF THE IDEA OF GREEN BANKING
Although the theoretical idea of Green Banking is not very old; some practices can be
traced from the ancient banking & financial practices. During the 16th century religious
ethics, the environment and local community provided the main framework for both life
and economy and therefore influence businesses and the financial sector as well.
Besides, during the 19th century credit unions and financial cooperatives worked on the
criteria that were used as sustainability criteria later. (Weber n.d., p. 2)
These banks used some of the principles of the credit unions and co-operatives but
added an ethical perspective to their business. Because of higher energy and waste
management prices it was worthwhile for a service sector as well to be eco-efficient in
order to reduce costs. At about the same time new environmental regulations
influenced the responsibility of business for its environmental impact. After mainly
managing costs and risks connected with environmental issues the financial sector
began to explore business opportunities connected with sustainable development as
well. Weber (n.d., p. 3) also stated that in the beginning of the 1990 the first
sustainability mutual funds, indices and other financial products and services were
Following the political disturbance in
the 1960s and first discussion about
environmental and social
responsibilities of business, the first
ethical banks were founded in the
1970s. They wanted to re-integrate
ethics into the financial business.
(Weber n.d. p. 2)
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launched. Since then their market share is increasing. They changed the landscape of
financial products and services as they re-integrated non-financial issues like the
environment or sustainability into financial decision making processes and product
development.
Weber (n.d., p. 3) again explained that another event that influenced the financial sector
to consider environmental responsibility was the launch of the Kyoto Protocol on
climate change mitigation. Because financial instruments were needed to reduce carbon
emissions, the financial sector engaged in creating products and services around carbon
reduction, carbon offsets and financing projects under the Kyoto Protocol mechanism.
However, today the view about social or environmental responsibility in changing from
managing environmental risks into creating positive impacts on sustainable
development by using different financial products and services. This new view is
reflected in the Global Impact Investment Network (GIIN) and in the Global Alliance for
Banking on Values (GABV) both of which emphasizes the positive role that the financial
industry can play in fostering sustainable development.
3.3 COMPONENTS OF GREEN BANKING
The scope of Green Banking is huge- leading to the way of Green Economy in a broad
sense. So determining all the components of Green Banking is a difficult task. However,
the following can be a short checklist of the components of Green Banking.
Online banking Green Accounts (ATM Service)
a) Paying bills online, Green Financing
b) Remote deposit/ bKash Power Savings Equipments
c) Online fund transfers Green Debit Cards/ Credit d) E statements Cards
e) Automated clearing Save Paper
house
Mobile Banking
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3.4 CHALLENGES TOWARDS GREEN BANKING
Although the concept of Green Bank is considered as a sustainability issue but it is true
that achieving the actual response of Green Banking initiatives is associated with some
major challenges like:
DIVERSIFICATION MATTERS
Green banks will be screening their customers and naturally, theyll be limiting and
restricting their business to those entities that qualify. With a smaller pool of customers,
theyll automatically have a smaller profit base to support them. If they focus their loans
on certain industries, they open themselves up to being much more vulnerable to
economic shifts.
THESE BANKS ARE STILL STARTUPS
Apparently, it takes 3 to 4 years for a typical bank to start making money. Many green
banks in business today are very new and are still in startup mode. It doesnt help that
these banks are trying to get their footing during a recession.
BANKS ARE SPECIALIZED
Again, while the main goal of a green bank is to do good by supporting those who are
taking care of the environment, the question here is just how much money is there in
these businesses and in the eco-friendly industry? Saving the environment does not
necessarily equate to making a profit. Hopefully though, this premise is proven wrong
in this case and that green banks prove that they can survive, even as they face
restrictive requirements for doing business.
OPERATING EXPENSES AND COSTS ARE HIGHER
Green banks require specialized talent, skills and expertise as well, due to the kind of
customers they are servicing. Employees, such as loan officers, need to have additional
background and experience in dealing with green businesses and consumers. Plus,
giving breaks to such clients via discounted loan rates can eat at their profit margins.
REPUTATION RISK
In all likelihood, due to growing awareness about environment safety, banking
institutions are more prone to lose their reputations if they are involved in big projects,
which are viewed as socially and environmentally damaging.
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3.5 INTERNATIONAL INITIATIVES OF GREEN BANKING
Environmental responsibility has always achieved importance from the international
community. During early 1990s there had been a growing concern about the
environmental management system because of increasing energy prices and new
environmental regulations. However, from that time financial institutions have been
trying to mitigate social and environmental risk issues by introducing different
environmental friendly policies & operations. Today the financial sector has begun to
explore business opportunities connected with sustainable development one of the
result of which is the concept of Green Banking. According to Pravankar (2008, p. 8)-in
the beginning of the 1990 the first sustainability mutual funds, indices and other
financial products and services were launched.
DEVELOPMENT OF UNEP
During the early 1990s the United Nations Development Programme (UNEP) was
launched which is now known as UNEP Finance Initiatives. The objective of this
initiative was to integrate environmental considerations into the regular business
operations, asset management, and other business decisions of the banks. (Pravankar
2008, p. 8)
INITIATIVES TAKEN BY RENOWNED INTERNATIONAL ORGANIZATIONS
Pravankar (2008, p. 9) also mentioned that during the year 1991 to 2002 some
renowned international organizations had taken different initiatives regarding
environment friendly business practices like:
Green Banking Report | 20
DEVELOPMENT OF EQUATOR PRINCIPLES
All these concerns for sustainable finance or green finance have compelled the banking
institutions to devise a common and coherent set of environmental and social policies
and guidelines that can be used to evaluate the projects. Then a small group of banks
along with IFC came together to initiate the process of designing the common guidelines
in October 2002 and came up with a guidelines in June 2003 that is known as Equator
Principles with 10 leading commercial banks adopting these voluntary set of
principles.
ABOUT THE EQUATOR PRINCIPLES
The Equator Principles (EPs) is a credit risk management framework for determining,
assessing and managing environmental and social risk in Project Finance transactions.
It is based on the International Finance Corporation Performance Standards on social
and environmental sustainability and on the World Bank Group Environmental, Health,
and Safety Guidelines. (The Equator Principles 2006, p. 1)
There are 10 broad principles under the EP framework. Eventually these principles
have become the industry standard for environmental and social risk management and
financial institutions, clients/project sponsors, other financial institutions, and even
some industry bodies refer to the EPs as good practice.
Currently 79 adopting financial institutions (77 EPFIs and 2 Associates) in 32 countries
have officially adopted the EPs, covering over 70 percent of international Project
Finance debt in emerging markets.
Green Banking Report | 21
3.6 GREEN BANKING PRODUCTS & SERVICES AROUND THE WORLD
Today there are a number of banks and other financial institutions around the world
who are offering their customers different products and services that are
environmentally sustainable. Some of these products are really innovative and some are
traditional with some benchmarking environmental features.
However, according the report of IFC Consulting Canada Inc. 2007, Green Banking
products and services around the world can be seen from two broad perspectives- 1)
Products and services related to Retail Banking and 2) Products and services related to
Corporate & Investment Banking.
RETAIL BANKING
Products Product Features Banks Regions
Home Mortgage Government led green
mortgage initiative.
1% reduction on interest for Dutch Bank Europe
loans that meet environmental
criteria.
Offers free home energy rating Europe
and offsets carbon emissions for
CFS
(UK)
every year of loan.
Generation Green Home Loan
Offered to both new and old
homes, so those with existing Bendigo
mortgages can take advantage of
Australia
Bank
discounted rates.
All projects must exceed state
requirements.
Green Power Oriented Mortgage
Provides an incentive for
homeowners to use renewable
power. N/A
N/A
Design focuses on sustainable
behavior or customer, rather than
on physical infrastructure of
their residence.
MyCommunityMortgage and
Smart Commute Initiative Fannie Mae
Mortgage
US
(Citigroup) Available to help borrowers buy
energy efficient homes and use
Green Banking Report | 22
public transportation.
Products feature a variety of
options and flexible terms.
CMHC offers a 10% premium
refund on its mortgage loan
insurance premiums and
extended amortization to a CMHC
maximum of 35 years (subject to (CIBC, Canada
lender availability) to purchase BMO)
energy efficient homes or make
energy efficient renovations.
Refund is a one-time payment.
Commercial Green Loans for new condos
Building Loans Developer repays loan with
funds that would otherwise be
spent on operating costs using
conventional equipment and TAF/Tridel Canada
material.
Buildings must demonstrate
25%+ energy savings over
conventional designs.
Provides first mortgage loans for
building and refinancing LEED-
certified commercial buildings.
Developers do not have to pay Wells Fargo US an initial premium for green
commercial buildings, due to
features such as: lower operating
costs and higher performance.
Provides 1/8 of 1% discount on
loans to green leadership NRB US
projects in the commercial or
multi-unit residential sectors.
Home Equity One-Step Solar Financing
Loan Takes place over a 25-year term, NRB US equal to the same period of time
as the solar panel warranty.
Environmental Home Equity
Program Bank of
For customers using line of Visa US America
Access Credit, bank will donate
to an environmental NGO.
Bank signed a joint marketing
agreement with Sharp
Electronics Corporation to offer
customers easily accessible and Citigroup US
convenient financing options to
Green Banking Report | 23
purchase and install residential
solar technologies.
Enables users to take out a home
equity loan or line of credit
rather than access savings or take
out a general loan.
Auto Loan Clean Air Auto Loan with
preferential rates for hybrids
Product recently redesigned to VanCity Canada
cover all low-emitting vehicle
types.
GoGreen Auto Loan
Product has achieved worldwide
recognition as a successful
green product. Mecu Australia
Since launch, the banks number
of car loans has increased by
45%.
Fleet Loan Small Business Administration
Express loans, with rapid
approval process, no collateral
and flexible terms, are offered to Bank of
truck companies to finance fuel US
America efficient technologies.
Helps to purchase SmartWay
Upgrade kits that can improve
fuel efficiency by up to 15%.
Credit Card Affinity Cards
Bank partners with ENGO,
which accepts future royalties in Various Various
exchange for the use of its name
and logo. APR 15-22%, many
with annual fees.
Climate Credit Card
Bank will donate to WWF.
Sum of donation depends on the Rabobank Europe
energy-intensity of the product
or service purchased with the
card.
GreenCard Visa Tendris
The worlds first credit card to Europe Holding
offer
an emissions offset (NL) B.V.
program.
BarclayBreathe Card
Include discounts and low
borrowing rates to users when
buying green products and Barclays UK services.
Green Banking Report | 24
50% of card profits will go to
fund emissions reduction
projects, worldwide.
Existing cardholders can donate Bank of US
Visa WorldPoints rewards to America
organizations that invest in GHG
reductions or redeem them for
green merchandise.
Bank donates 1.25 per 100
spent by personal (Co-op debit
and credit cards) and business CFS UK customers (Co-op Business Visa)
to the banks Customers Who
Care Campaigns.
Deposit Landcare Term Deposit
Australias first environmental
deposit product. Westpac Australia
For every dollar spent, bank
lends equivalent to support
sustainable agriculture practices.
EcoDeposits
Fully-insured deposits
earmarked for lending to local
energy efficient companies
aiming to reduce
waste/pollution, or conserve Shorebank
natural resources.
US Pacifc
EcoCash
Checking Account allows for 5
free paper checks a month, with
US$3 per check fee applied. A
portion of this fee goes to The
Climate Trust.
Sales Consumers can offset CO2
emissions associated with air
travel, with no funds being Barclays,
channeled to the bank. Europe HSBC This new initiative is in
partnership with the offsetting
organization Climate Care.
Green Banking Report | 25
CORPORATE & INVESTMENT BANKING
Products Product Features Banks/ FI Regions
Project Finance Specialized service divisions BNP Paribas
are dedicated to long-term (Wind),
financing of clean energy Rabobank,
projects. Barclays, Global
Some banks also specialize in
Fortis,
one (or several) renewable Standard
technology type and/or place a Chartered
premium on working with Bank,
states where regulatory WestLB
framework and government (Biofuels
policy encourages the early and Wind)
adoption of clean technologies.
Led the effort to raise $1.5
billion of equity for the wind
power market in 2006, with
approximately $650 million
allocated to its own portfolio.
The farms renewable energy
portfolio now comprises
approximately $1 billion of JPMorgan US
equity investments in 26 wind
farms since its inception in
2003.
The farm is also actively
pursuing investments in
biomass, geothermal, and solar
power.
Portfolio financing technique
Combines the financing of a
portfolio of renewable energy Dexia US
projects to the construction (Wind)
risks associated with project
development.
Lead arranger on energy-from-
waste project financing that
includes a 25-year loan Bank of
supported by waste contracts Europe Ireland with local authorities and
corporate backing on non-
contracted waste.
Partial Credit Financial institution provides a
Guarantee bond issued by a municipality IFC Global to finance environmental
projects.
Securitization A risk sharing arrangement for
environmental projects.
Green Banking Report | 26
Financial institution represents
a guarantor (or structuring IFC Global
investor) at the mezzanine
level of risk, allowing client to
transfer risk to bank.
Eco-Securitization scheme will
test the feasibility of financing
natural infrastructure by IFC and
linking
sustainable Global
DFID management of resources with
the funding capacity and
requirements of asset-backed
securitization.
Green Mortgage-Backed
Securities (Proposed).
Designed to package
mortgages on buildings that
meet specific energy-use and Not yet
environmental benchmarks. US implemented Products would be rated higher
and worth more as a result of
the operational benefits
associated with green
buildings.
Bonds Forest Bond designed to fund
large-scale reforestation in
Panama. Latin Reinsurers underwrite a 25-yr Various
America bond, while
investors and
frequent users of Panama
Canal will purchase the bond.
Cat Bonds provide ancillary
capital for risks from natural BNP Paribas,
catastrophes. Goldman
Can pay higher than average Sachs, Global
yield, while diversifying Lehman
investors portfolios and Brothers
improving industry reserves.
Technology Provides environmentally-friendly Deutsche
Leasing technologies at preferential rates. Bank,
ABN Europe
AMRO, and
ING Group
Private Equity Private equity investments in
wind, solar and bio-fuels through
Alternative Investments Citigroup US
Sustainable Development
Investment Program.
Private equity focused on
forest conservation and
Green Banking Report | 27
preserving biodiversity.
Provides 100% financing, with
a discounted rate on the loan, Bank of US to a non-profit organization to America
acquire biologically sensitive
land and implement
sustainable forestry practices
and management.
Indices Series of environmental ABN
private investor eco-market US/ AMRO, products includes a bio-fuels Europe
JPMorgan commodity
basket, total
returns solar energy index,
clean renewable energy index
and total returns water index
(e.g., enables interested
parties to invest in water as a
commodity).
Carbon Finance Banks provide equity, loans
& Emissions and/or upfront or upon Barclays
Trading delivery payments to acquire Capital,
carbon credits from CDM and HSBC,
JI projects. Fortis, ABN
Most acquire carbon credits AMRO, Global
in order to
serve their BNP Paribas, (Mainly corporate clients compliance JPMorgan, Europe)
needs, supply a tradable Goldman
product to the banks trading Sachs,
desks, or develop lending Citigroup,
products backed by emission among
allowances and carbon others
credits.
Allowance trading products
can include, but are not limited
to: discreet placement of
physical orders;fixed-or-
floating swaps and indexed
sales or purchases; options; Various Europe
allowances repurchase
structures; market-making for
spot and forward trades; and
price hedging based on cross-
commodities.
Green Banking Report | 28
3.6 GREEN BANKING PRACTICES IN BANGLADESH
The economic development of any country is inextricably linked with environmental
issues because activities of financial institutions may boost wealth creation as well as
environmental degradation. Bangladesh is identified by climate change experts as being
among the countries more severely challenged by climate change threat with
correspondingly high urgency of preparedness with mitigative and adoptive responses.
The government and the central bank of Bangladesh is fully conscious about this issue
and have played a proactive role in this regard.
As being realized that bank as a responsible financial institution has a significant role to
play in these game changing developments, Bangladesh Bank, the central bank of
Bangladesh has taken the first initiative to make activities of the financial institutions of
Bangladesh more environmentally responsible at the beginning of the year 2011.
Green Banking as a concept of sustainable banking practices was formally introduced in
Bangladesh on February 2011 with the development of an indicative Green Banking
Guideline for Banks and Financial Institutions by Bangladesh Bank. The main
objective of this guideline is to give a detail and indicative advice to all the commercial
banks of Bangladesh to adopt environment friendly financing policies as well as to take
appropriate initiatives to make internal operations more energy efficient and
environment conscious.
RULES & REGULATIONS GOVERNING GREEN BANKING IN BANGLADESH
With a view to encouraging sustainable development in Bangladesh, the government of
Bangladesh has formulated two important documents namely the Environmental
Conservation Act 1995 and the Environmental Conservation Rules 1997. These two
documents basically make the ground rules for Green Banking in Bangladesh.
In January year 2011, Bangladesh Bank as a regulatory body in the financial sector of
Bangladesh had formulated the Environmental Risk Management Guidelines for
Banks and Financial Institutions. The ERM guideline basically represents structured
formats of addressing environmental risks in project financing and also provides
standards in this regard.
Besides, in February 27, 2011 Bangladesh Bank formulated the Green Banking Policy
Guidelines that provides a standard format for the commercial banks in Bangladesh to
develop their own Green Banking Policy.
The Green Banking practices in Bangladesh can be viewed from three perspectives: 1)
Initiatives taken by Bangladesh Bank, 2) Initiatives taken by Government & 3) Initiatives
taken by other commercial banks.
Green Banking Report | 29
INITIATIVES TAKEN BY BANGLADESH BANK Bangladesh Bank is the first central bank in the world which has taken real initiatives
according to a definite agenda in its vision and mission to play a specific role in Green
Banking. With the different initiatives of in-house green activities, the authority has
developed an indicative Green Banking Policy on February 27, 2011 which aims to provide
a detail guideline to all the commercial banks to adopt Green Banking policy. (Morshed et al.
2012, p. 5) The policy is to be rolled out in the following three phases:
Green Banking Report | 30
Besides developing a formal guideline regarding Green Banking practices, Bangladesh
Bank has also launched a refinance program of Taka 2 billion for different types of
Green financing like Solar Irrigation Pump Station, Solar Home System, Bio Gas Plant,
ETP, HHK and Solar PV module assembling plant.
INITIATIVES TAKEN BY GOVERNMENT
The government of Bangladesh has already invested USD 10 billion over the last three
decades to make the the country climate resilent and less vulnerable to disester.
According to Morshed, Rubayat & Singha (n.d., p. 4) over the past three fiscal years
(FY2009-10 to FY 2011-12) the government has allocated USD 300 million under the
following two specialized funds regarding sustainable development:
INITIATIVES TAKEN BY COMMERCIAL BANKS
According to Morshed et al. (2012, p. 5) With some formal guidelines of Bangladesh
Bank as well as government, the commercial banks of Bangladesh have also come up
with some remarkable initiatives regarding green banking like:
Policy Formulation and Governance Climate Risk Fund
Budget Allocation Green Marketing
Green Banking Unit/Cell/Desk Green Banking
Incorporation of Environmental Risk in Core Branches powered by Solar Energy
Risk Management (CRM)
Banks In-house Green Activities Improved In-House Environment Management
Green Finance Employee Training, Consumer Awareness and
Green Event
Green Banking Report | 31
TOP 10 BANKS PRACTICING GREEN BAKING DURING 2012
According to the report of Bangladesh Bank the top 10 banks in Green Banking activities
by the end of the year 2012 are:
1. AB Bank Limited
2. Bank Asia Limited
3. Eastern Bank Limited
4. EXIM Bank Limited
5. IFIC Bank Limited
6. Islami Bank Bangladesh Limited
7. Prime Bank Limited
8. Rupali Bank Limited
9. Social Islami Bank Limited
10. Standard Chartered Bank Limited
Green Banking Report | 32
AN
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S
Green Banking Report | 33
CHAPTER FOUR
Green Banking Report | 34
4.1 GREEN BANKING IN PRIME BANK LIMITED
The Prime Bank Limited started its journey in 1995 and within a very short period of
time the bank achieved a very good reputation in the industry. From the inception
sustainable development and reputation building was the focus of all banking activities
of the bank. As a result the bank has been graded as top class bank by the
internationally excepted CAMELS rating.
Md. Shirajul Islam, the Ex Chairman of the Prime Bank Limited was the pioneer of the
Green Banking Initiatives in the organization. Under his direction the Prime Bank
Limited started its online banking service from 2010.
At the beginning of the year 2011 when Bangladesh Bank formulated the Policy
Guidelines for Green Banking and urged all the commercial banks to introduce the
Green Banking concept, the Prime Bank as a responsible corporate citizen formulated a
Green Banking Committee and a Green Banking Cell under the Risk Management
Division and on December 27, 2011 the GBC developed the Green Banking Policy of
Prime Bank Limited.
During the year 2012, the Prime Bank Limited has made BDT. 3589.37 million Green
Finance for installation of ETP and projects having ETP. Besides, 12 branches and 5
SME/ ATMs have been powered by solar energy. The GBC of the bank has developed a
Green Office Guide and two Sector Specific Policies by this time of the current year.
Green Banking Report | 35
4.2 CONCEPT OF MANAGEMENT ABOUT GREEN BANKING
As a responsible corporate citizen the Prime Bank Limited has come up with real
initiatives to introduce Green Banking in the organization. By this time the bank has
formulated a Green Banking Cell under the RMD, incorporated the Environmental Risk
Management Guidelines into the Core Risk Management Guidelines and prepared an
indicative Green Banking Policy and instructed employees accordingly.
However, although the management committee of the Prime Bank Limited is conscious
about the environmental responsibilities of a financial institution but it thinks that
taking all the initiatives as instructed by Bangladesh Bank is not possible. For example:
there is a lack of real initiatives of the bank in developing Green Products like Green
Credit Cards or Green Deposit Accounts both of which associates some environmental
features. The management thinks that providing such products will initially increase the
charges from customers and there is also a lack of willingness and awareness of clients
about environmental responsibilities.
Another important issue is that, virtualization of all the banking products like different
kinds of memos, forms, documents, bills etc. and banking services like online facilities
for running different kinds of accounts is very difficult. The reason is that most of the
clients dont have access to internet for running virtual accounts. Besides, clients
demand printed documents as evidence of their banking activities.
Besides, the management of Prime Bank thinks that guidelines of in-house environment
management should be adopted in all branches. But the MANCOM also thinks that it will
take time. Location creates a big problem in transforming existing materials into more
energy efficient one.
Green Banking Report | 36
4.3 FORMAL DOCUMENTS OF GREEN BANKING
Green Banking Policy Guideline: As per BRPD Circular No. 2 of Bangladesh Bank, the
Prime Bank Limited has formulated its own Green Banking Policy at December 27, 2011
which is called PBLs Environmental Blueprint.
Green Office Guide: The Green Banking Cell as per instructions from the management
committee has formulated an instructive Green Office Guide which is yet to be approved
by the MANCOM.
Sector Specific Policy: The GBC of the Prime Bank Limited has also formulated two
sector specific policies recently which are also yet to be approved by the MANCOM.
These are:
1. Sector specific policy for RMG & Textile Industry
2. Sector specific policy for Ship Breaking Industry
Quarterly Report to BB: The bank has also developed a standard reporting format
with the instruction of Bangladesh Bank to report to the BB on a quarterly basis about
the Green Banking activities of the bank.
Sustainability Report: Disclosure of the Green Banking initiatives or sustainability
report is a requirement under phase two of the Green Banking Policy of Bangladesh.
Prime Bank Limited has published two reports about Sustainability & Green Banking
Initiatives of the bank in the annual report of 2012.
Green Banking Report | 37
4.4 REASONS TO INTRODUCE GREEN BANKING
Prime Bank Limited is one of the reputed private commercial banks in Bangladesh. The
management committee is very conscious about the goodwill of the bank and as a result
there have been some initiatives like assessing the financing process carefully,
providing internet banking facility to the clients etc. taken by the bank before the formal
instruction of Bangladesh Bank regarding Green Banking. So from the viewpoint of GBC
of Prime Bank Limited there are three core reasons side by side of BB instructions to
introduce Green Banking in the organization. These are:
Credit Risk: Unusual weather pattern and global worming can cause financial
institutions to suffer from credit risk. For example, adverse climate change may severely
hamper a project financed by the bank and thus lead to a credit default. Realizing this
issue Prime Bank Limited has rearranged its risk management policy by incorporating
the Environmental Risk Management in its Core Risk Management Policy.
Legal Risk: Legal risk arises when financial institution finance to a project that is
environmentally harmful. In that case the financing institution will be liable by the
environmental acts. So this is another important reason to introduce more environment
friendly financing policies.
Reputational Risk: In recent times bank are facing extreme reputational risk arising
from some recent big loan scandals. Besides, the environmental awareness is also
increasing day by day.
These issues together drive the Board of Directors of Prime Bank Limited to introduce a
Green Banking Policy which is called PBLs Environmental Blueprint by the end of the
year 2011.
Green Banking Report | 38
4.5 CONCEPT OF GREEN BANKING IN PRIME BANK
Components of Green Banking include the factors that affect the Green Banking
activities of the bank. The following are the major components of Green Banking in
Prime Bank Limited.
GREEN BANKING POLICY
As per the instruction of Bangladesh Bank, Prime Bank Limited formulated its Green
Banking Policy which is called PBLs Environmental Blueprint. According to Green
Banking Policy of Prime Bank Limited, the policy shows PBLs view on environmental
issues and describes the Bank's environmental risk management procedures and
practices.
However, from my observation I have found that the policy is created highlighting the
issues that should be done with reference Bangladesh Bank guidelines and instructions.
Some specific issues of the policy represent unorganized information.
Besides, the effectiveness of policy also depends on the sound understanding of the
policy. However, during my internship program at the organization I found that only
one employee under the risk management division of the bank is overseeing all the
Green Banking activities. The Green Banking Policy is not disclosed to all the concerned
departments.
CLIMATE RISK FUND
Climate Risk Fund is one of the major components of Green Banking. It is required as a
precautionary measure for possible safeguards and mitigating hazards due to climate
change. A Climate Risk Fund is also required for the banks as part of their CSR activities
that relate to climate change conditions.
In 2012, Prime Bank Limited has created a Climate Risk Fund and up to the year 2012 it
has allocated Tk. 60 million for this fund. However, by the end of the year 2012 the bank
made no utilization of this fund.
IN-HOUSE ENVIRONMENT MANAGEMENT
Strategy of reuse, recycling of materials and equipments, and source reduction and
waste minimization strategy is a part of in-house environmental management. The
Green Banking Cell of Prime Bank Limited has developed a Green Office Guide to
reduce water, paper and electricity consumption which is yet to be approved by the
MANCOM. Without this there is no special initiatives taken in the bank to actually
reduce the use of electricity, paper, water etc.
Green Banking Report | 39
GREEN FINANCE
Green finance as a part of green banking makes great contribution to the transition to
resource efficient and low carbon industries i.e., green industry and green economy.
Prime Bank financed various projects which are environment friendly. The projects
which contribute to degradation or deterioration of the environmental issues are
usually avoided. The bank financed Effluent Treatment Plants (ETP) of RMG and textile
sectors and projects having ETP. In 2012, the bank extended finance of Tk. 94.42 million
for installation of ETP and Tk. 346.28 million for financing projects having ETP.
However, in case of Green Finance, Prime Bank has exposure in only two sectors-
Installation of ETP & Projects having ETP. The bank has no investment in solar plant
project, bio-gas plant project, bio-fertilizer plant project up to year 2012.
GREEN PRODUCTS
Prime Bank has introduced various services which are reducing paper use, fuel
consumption etc. Internet Banking, Online Banking, SMS Banking and Phone Banking
are such services which are gaining popularity day by day. Besides, the bank has already
introduced two specific brands under the Green Banking Products category namely-
ALTITUDE and PRIME CASH.
ALTITUDE: This is basically an internet banking facility that provides opportunity-
PRIME CASH: It is a Biometric Smart Card where the thumb impression of a client will
work as an authentication code. This smart card is very simple because there is no use
of SMS, PIN number or mobile phone. Rather, only the smart card and the clients thumb
impression is required. Besides, the smart card is also secured because it is required the
thumb impression to authenticate a transaction.
GREEN MARKETING
Prime Bank allocated Tk. 15 million per quarter for green marketing, training and
capacity building. After introduction of SMS banking, green marketing is gaining
momentum. Through push and pull system, the customers are becoming aware of
banks new products and initiatives. Employment notices are given on website and
Green Banking Report | 40
online applications are invited now. Kiosk machines installed at different places for the
awareness to the customers of the banks product instead of sending paper ads and
door to door mail delivery. In addition, CSR activities had contributed to the field of
health and green finance as well.
However, during 2012 the bank has allocated a total of Tk. 60 million for Green
Marketing but utilized only Tk. 0.03 million up to 2012.
EMPLOYEE TRAINING
Actually there has been no formal training program conducted by the Prime Bank
Limited for giving instructions to the employees regarding Green Banking Policy of the
bank. However, the bank has arranged some workshops on Green Banking where only
the top executives of the bank from different branches participated.
Green Banking Report | 41
4.6 MANAGEMENT FRAMEWORK OF GREEN BANKING
The Green Banking Cell of the Prime Bank Limited is working under the Risk
Management Division. The RMD consists of 6 members which are also the member of
the Green Banking Cell. All the works of the Green Banking Cell are supervised by a
Management Committee regarding Green Banking and the decisions of any Green
Banking initiatives are taken by the Borad of Directors.
Overall Responsibility
The Management Committee responsible for ensuring the integration of Environmental
Risk Management into Credit Risk Management. The operational responsibility is
carried out by the Head of Risk Management Unit/Head of Green Banking Cell Mr.
Debashis Chakraborti. The Board of Directors allocate and approve a considerable
amount of fund in its annual budget for Green Banking.
Internal Reporting
Green Banking Cell (GBC) actively and continuously works with Business Team, HRD,
LSSD, CAD, CRM & RMU to improve its environmental management system and
environmental qualities of the projects which it finances. It reports to the
Management Committee (MANCOM) on Environmental Issues periodically and takes the
initiative to comply with the reporting directions provided by Bangladesh Bank.
External Reporting
Green Banking Practices: GBC reports on the initiatives/activities under the said
program to the Department of Off-site Supervision of Bangladesh Bank on quarterly
basis. Similarly it submits reports on the subsequent quarters within the next 15 days of
Green Banking Report | 42
the respective quarter end. The GBC also keeps their annual report and websites
updated with the disclosures on green banking initiatives/activities.
Environmental Risk Management: GBC has already developed a reporting system
with the assistance of Bangladesh Bank, with a view to intimating management,
shareholders, and other stakeholders on the use of these Guidelines. This reporting is
done on an annual basis in the Annual Report as the Sustainability Report & Green
Banking. These are enclosed under the ANEX part of this report.
Besides, there are two specific functions which are also considered under the
management framework of Green Banking. These are:
Credit monitoring function
This function is to ensure that environmental risk monitoring shall also be undertaken
as a part of monitoring credit risks. Prime Bank Limited has no separate Credit
Monitoring Unit and thus CAD/CRM performs the credit monitoring functions and
provides the necessary information to the GBC.
Database on Non-Performing Loans (NPLs) due to Environmental Risks
GBC has already established a database of NPLs that are due to environmental reasons.
If the borrower has indicated environmental factors as one of the reasons for delays in
making repayments, then this is noted in the database. The purpose of this database is
to ensure that the Prime Bank Limited streamlines its own institutional knowledge for
better decision-making in its future financing.
Green Banking Report | 43
4.7 INSTITUTIONAL ARRANGEMENTS FOR GREEN BANKING
The institutional arrangements of the Prime Bank Limited for Green Banking can be
viewed from two perspectives.
1) Arrangements for Environmentally Responsible Internal Operations
2) Arrangements for Environmentally Responsible Financing Policies
ARRANGEMENTS FOR ENVIRONMENTALLY RESPONSIBLE INTERNAL OPERATIONS
To foster a more energy or resource efficient internal operations, the GBC of the Prime
Bank Limited has completed the formulation of an indicative Green Office Guide which
is yet to be approved by the Management Committee.
The principles of the Green Office Guide are formulated in a way so that it will inspire all
the employees of the bank to follow those principles. The purpose of the Green Office
Guide is to inspire and aware the employees of the bank about how they can maximize
their effort to minimize the wastage of resources.
The main Slogan of the Green Office Guide is REDUCE, REUSE & RECYCLE. According
to the Green Office Guide all the employees of the Prime Bank Limited are instructed on
the following issues:
Computers, Printers, Photocopiers
Switching off all the equipments while not in use
Program equipments to Hibernate in office times
All the office equipments must be shut down after office hours
Making sure that all the employees know how to use the equipments as for not to
waste resources in unlearned hands
A LCD or Desktop Monitor use energy as of energy needed for printing 800 Laser
prints if it is left open for 8 hours without use. So it is very important to shut
down all the equipments
Personal computers must be shut down while not using it
Laptops should run in battery saving mode. The charger should not be plugged in
while running on battery.
Photocopiers and Printers have high electricity consumption and these
equipments are mostly turned on idle. All the employees must know how to use
them efficiently and must make sure to turn them off after use.
Air Conditioning
Use of Fans and natural ventilation when possible
Use Energy efficient, Eco-friendly Air Conditioners
Buy Programmed AC which has motion detection on, allowing them to maintain
proper room temperature
Green Banking Report | 44
Use Central AC system rather than Split or Box AC as the use of resources will be
less.
Close all windows, doors to maximize the cooling while AC is turned on
Set Air Conditioning at a Minimum of 24C which will keep proper balance of Air
All the AC will be turned off after 7pm ( End Of Office Hours)
Switch off all the AC while leaving the room
Lights
Use of natural lights whenever possible. This will save a significant amount of
energy and associated greenhouse gas emissions
Replacing bulbs with energy efficient bulbs. This will not just only reduce costs
but also energy consumption.
Replacing Spotlights with same effect but with more energy saving. Like using
20W halogen light instead of 50W will reduce 60% of energy but serve with
same lighting
Cleaning and maintaining lamps and bulbs will create light efficiency.
Everyone must know Last man to leave the room , turns off the switch rule not
in just lights but in all equipments
All the lights except very important security lights will be turned off after Office
Hours
The Cleaning stuff must be trained to turn off all the lights and equipments while
not necessary
Conservation of Water
Must conserve Water as the best possible way
Use of water bottles which can be reusable
Cleaning Staff must commit to reduce water usage in cleaning procedures.
Install low-flush toilets and water saving faucets in the restrooms.
Purchase of Stationeries
Office Stationeries should be bought which are needed
Seek & Inspect for Energy Saving, Environment Sustainable or Eco-friendly
products for purchase before buying
Seeking for longevity, reusability, refill-ability and recyclability of Products like
Printers, Scanners and Photocopiers before Purchase
Seek products made out of or has elements of Recycled Products
All office elements should be eligible for recycling at the end of its life
Office shall buy Recycled papers for their use.
Green Banking Report | 45
Reuse of Stationeries
Reuse of Single Sided Paper as notepads or draft copies usable within office
Reusing Clip-files, Covers , Folders
Use of Reusable Cups, Crockery & Cutlery within Office
Encourage the use of Reusable Bottles instead of Single use water Bottles
Making the Office Journals, Journal Subscription common for all Employees
Selling used papers to the firms who are recycling the papers
Use of Email instead of paper works with clients who understand internet
business.
Use telemarketing and email marketing
Reduce the use of Paper to the best possible way
Single Transportation on the Same Rote
Transportation is another important issue when we thinking about energy or resource
consumption. There are a number of employees of every organization who uses the
same rote everyday for reaching to the workplace. To reduce the consumption of diesel
as well as to reduce the emission of CO2 PBL has encouraged its employees to use a
single vehicle for the transportation purpose on a same rote. Besides, all the vehicles
used for banking purposes use CNG which also contributing to the reduction of CO2
emission.
ARRANGEMENTS FOR ENVIRONMENTALLY RESPONSIBLE FINANCING POLICIES
Prime Bank Limited has already incorporated the Environmental Risk Management
Guidelines of Bangladesh Bank into its Core Risk Management Policy. So when the bank
considers any business project for financing purpose the Green Banking Cell under the
Risk Management Division performs a detail Environmental Due Diligence analysis with
the regular Financial or Legal Risk assessment.
However, Environmental Risk Rating assessment is applicable for the following cases
for both new and
Greenfield projects as well as those pertaining to the existing ones:
Green Banking Report | 46
Credit Processing and Approval Process
For a project that is considering to finance and is applicable to the Environmental Risk
Assessment, a detailed Environmental Due-Diligence is assessed using the General EDD
and the Sector Specific EDD checklist of the Environmental Risk Management Guideline
of Bangladesh Bank.
The General EDD: This checklist is provided under the Technical ANNEX Part of the
Environmental Risk Management Policy of BB based on which the Prime Bank initially
determine the general environmental risk of the project.
Green Banking Report | 47
The Sector Specific EDD: The Technical ANNEX Part of the Environmental Risk
Management Policy of BB also represents sector specific due diligence checklist for 10
specific sectors. These are:
1. Agri-business 6. Pulp & Paper
2. Cement 7. Sugar & Distilleries
3. Chemicals (Fertilizers, Pesticides 8. Tannery
and Pharmaceuticals) 9. Textile and Apparel
4. Engineering and Basic Metal 10. Ship Breaking
5. Housing
After completing the Sector Specific EDD the following Matrix is used to give the project
a total Environmental Risk Rating (EnvRR).
Now at present the GBC of the Prime Bank Limited has formulated two sector specific
policies. One is for the RMG & Textile Industry and Ship Breaking Industry. The reason
is that the bank has much exposure in these two sectors. But the bank is considering the
other sectors for new financing projects.
However, in general the Prime Bank limited takes a financing decision for those projects
having the low or moderate EnvRR. And in case of High EnvRR projects the bank gives
importance on personal relation with the borrowers and also gives high importance on
the additional documentations in the Environmental Risk Management Policy of BB.
Green Banking Report | 48
4.8 DIMENSIONS OR COVERAGE OF GREEN BANKING
Green Banking basically considers all the activities and relevant policies of a bank that
have a direct or indirect impact on the environment. As a result, identification of the
areas that are related or associated with the coverage of Green Banking is a difficult
task.
However, in Prime Bank Limited the Green Banking Cell (GBC) is working under the
Risk Management Division (RMD). This is logical because the Risk Management Division
is responsible for assessing the feasibility as well as fitness of a project.
Here the Green Banking Cell uses the policies related to the Green Banking activities
which provide a detail assessment of the projects regarding viability as well as
environmental sustainability.
Besides policy formulation, the GBC also provides necessary dictation regarding Green
Banking Policy to the Retail Department to consider these issues when making any
decision regarding procurement.
The Sales and Marketing Division of PBL is also concerned about the development of
Green Banking Products. PBL has been allocating Tk. 15 million per quarter for green
marketing, training and capacity building. By this time PBL has introduced various
products which are reducing paper use, fuel consumption etc. ALTITUDE (Internet
Banking), Online Banking, SMS Banking, Utility Bill Pay service, EasyCash (Mobile
banking), Phone Banking and Prime Cash (A Biometric Smart Card) are such products
which are gaining popularity day by day.
Besides, the Human Resource Department (HRD) of the Prime Bank Limited is
concerned about the initiative of Green Banking. As part of formal initiatives the HR
division invites ideas from employees for Go Green program at PBL. These ideas are
generally evaluated and selected for implementation from MANCOM.
Green Banking Report | 49
4.9 GREEN BANKING BEST PRACTICES
Prime Bank Limited has made some mentionable progress with regards to Green
Banking initiatives by the end of the year 2012. The bank has formulated an indicative
Green Banking Policy (as per BB BRPD Circular No. 2), allocated budgets for Green
Finance & Climate Risk Fund, introduced some innovative products like ALTITUDE,
Prime Cash etc to facilitated online banking, prepared two sector specific policies for
RMG & Textile Industry and Ship Breaking Industry etc.
But however, in my view the Green Banking initiatives of Prime Bank Limited has not
reached its expected level up to December 31, 2012. The reasons are:
Budget Allocation: Up to December 31, 2012 Prime Bank has allocated a total of BDT.
500 million (BDT. 380 million for Green Finance and BDT. 60 million for both Climate
Risk Fund & Marketing activities). But during 2012 the industry highest allocation for
Green Banking Activities was BDT. 41700.57 million made by Standard Chartered Bank.
Budget Utilization: Prime Bank has utilized a very small portion of the allocated
budget for Climate Risk Fund and Marketing & Capacity Building activities.
Allocation (In Utilization (In millions)
millions)
Climate Risk Fund 60.00 0.00
Marketing & Capacity 60.00 0.03
Building
In-House Green Activities: The in-house initiatives of Prime Bank Limited regarding
Green Banking are not good. Up to 2012-
Total number of branches of Prime Bank 130
Number of branches powered by solar energy 12
Number of ATMs & SMEs powered by solar energy 5
Besides, there have been no mentionable initiatives taken by the bank to reduce the
internal electricity consumption in the Head Office at Motijhil.
Green Finance: Prime Bank Limited has exposure in only two kinds of projects with
regards to Green Finance. These are ETP and Projects having ETP. During 2012
Prime Bank has financed a total of BDT. 440.70 million in these two kinds of projects
where-
ETP 94.42 million
Projects having ETP 346.28 million
Green Banking Report | 50
However, the bank is considering some new projects like Bio-Gas Plant, Renewable
Energy Plant etc. to finance in 2013.
Online Banking: Online banking or paperless banking is one of the basic features of the
Green Banking Initiative. Prime Bank Limited is lagging behind in this sector too. Up to
2012 Prime Bank has-
Total number of accounts 663619 100%
Accounts facilitated with internet banking 14959 2.25%
Accounts facilitated with SMS banking 7697 1.16%
Green Banking Report | 51
4.10 POLICY FRAMEWORK OF GREEN BANKING
PBLs Environmental Blueprint is prepared and structured according to the policy
guideline of Bangladesh Bank. From the 2011 to the year 2013, the bank has been able
to take necessary steps to complete the objective of phase one.
1.1 Policy formation And Governance
As per the BRPD Circular No. 2, the Prime Bank Limited has formulated its Green
Banking Policy at 27 December, 2011. The policy basically contains a framework of
Green Banking of the bank. The effectiveness of the policy largely depends on the
awareness of the employees regarding the policy. However, in my view there is a lack of
awareness about the green banking policy among the employees of the bank. Besides,
the policy is prepared reviewing only the published material of Bangladesh Bank. As a
result it is lack of company specific factors and international standards.
1.2 Incorporation of Environmental Risk In Core Risk Management
Prime bank has reviewed its Core Risk Management Guidelines considering the
Environmental Risk Management Guidelines of Bangladesh Bank. I think for
incorporating the Environmental Risk Management Guidelines in the Core Risk
Management, the banks risk management policy has been strengthened.
1.3 Initiating in-House Environment management
The Green Banking Unit has formed a Green Banking Office Guide. This guide
implicates all the necessary means to ensure Energy efficiency, Paperless
communication, equipment purchase, recycling of office equipment. This proves a
complete Guideline for the employees and management to comply to reduce carbon
omission and provide Eco-friendly banking.
However, although the GBC has prepared a Green Office Guide but I think there is a lack
of interest of employees to know about it and there is also a lack of publicity of this
guide.
1.4 Introducing To Green Finance
Although the bank has made Green Finance against its allocated budget during the year
2012 (Allocation BDT. 380 million & Utilization BDT. 3589 million) but it was lower
compared to other banks in the industry. Besides, Prime Bank has exposure in only to
types of projects- ETP and projects having ETP. So I think Prime Bank may consider
other green projects like Solar Plant, Bio-Gas Plant etc.
Green Banking Report | 52
1.5 Creation of Climate Risk Fund
As a requirement of the Green Banking Initiative of Bangladesh Bank, the Prime Bank
Limited allocated BDT. 60 million during the year 2012 for the creation of a climate risk
fund. But the bank did not utilize any portion of the money during the said period.
1.6 Introduction of Green marketing
To communicate with the customers, potential clients the Prime Bank Limited has
implemented ATM screenshots, Email messages, SMS, and other electronic medias to
reduce previous paper based communications. But I think the bank should focus more
on developing products or services that is associated with some environmental features
and which will give the bank a unique identity.
1.7 Online Banking
The Prime Bank Limited started its online banking services by the end of the year 2008.
But still only 2.25% of its total account is facilitated with internet banking.
1.8 Supporting Employee Training, Consumer Awareness and Green Event
From the formulation of the Green Banking Policy by the end of the year 2011 Prime
Bank Limited conducted around 6 workshops mostly held in Dhaka and covered only
the company executives. There is also a lack of proactiveness of the bank to encourage
its clients to invest in more environment friendly projects.
1.9 Disclosure and Reporting of Green banking Activities
Prime Bank disclosed its first Sustainability Report in the Annual Report 2012. The bank
also discloses green banking initiatives time to time in newspapers. However, there is a
little disclosed materials in the website of the bank regarding Green Banking. But I think
the website is a very good source of making publicity about any new initiatives.
Green Banking Report | 53
RECOMMENDATIONS
As a renowned private commercial bank in Bangladesh, the Prime Bank Limited has
already given much importance in balancing non-financial issues such as environmental
and social issues with financial priorities to demonstrate the characteristics of good
corporate governance throughout the bank. Up to the year 2012 the bank has made
complementary progress and has taken some real initiatives regarding Green Banking
like: formulation of an active and responsive Green Banking Cell (GBC), financing ETP
projects, formulation of Green Office Guide for in-house environment management,
formulation of two Sector Specific Policies, investment for installation of Solar Plant etc.
However, since the idea of Green Banking is getting new dimensions day by day and
there is a good opportunity of the banks to link their goodwill and image with there
initiatives of Green Banking, I think PBL still has a long way to go I also think that the
Prime Bank Limited should focus on the following issues more in the upcoming years to
make a good position in this regard:
Make regular adjustments and updates of the Green Banking Policies.
Increase the exposure of Green Finance to new projects.
The Management Committee should take necessary steps to circulate the
principles of the Green Office Guide to all the branches of the Prime Bank
Limited.
The Management committee should take necessary steps to develop new
products or services with environmental features.
And finally the bank should arrange more training and workshop programs to
encourage the employees to follow and foster the Green Banking Concept in their
day to day banking affairs.
Green Banking Report | 54
CONCLUSIONS
Green banking is no longer a new concept. The term has become popular among the
conscientious people in the backdrop of climate change. Human activities have caused
serious damage to the environment. All have the responsibility to save the ecology by
prudent activities. The professional segment of the population of every country has a
greater role to play than the common man to check environmental degradation. Bankers
are an important professional group which has interaction with all strata of people in
the society. By adopting various green initiatives within their in-house environment and
also initiating prevention of air and water pollution through their clients, bankers can
contribute in a big way to this noble cause. In a rapidly changing market economy
where globalization of markets has intensified the competition, the industries and firms
are vulnerable to stringent public policies, severe law suits or consumer boycotts. This
would affect the banks and financial institutions to recover their return from
investment. Thus, the banks should play a pro-active role to take environmental and
ecological aspects as part of their lending principle which would force industries to go
for mandated investment for environmental management, use of appropriate
technologies and management systems.
Green Banking if implemented sincerely will act as an effective ex ante deterrent for the
polluting industries that give a pass by to the other institutional regulatory mechanisms.
There has not been much initiative in this regard by the banks and other financial
institutions in Bangladesh though they play an active role in its emerging economy. The
banking and financial sector should be made to work for sustainable development. As
far as green banking in concerned, Bangladeshs banks and financial institutions are
running behind time. None of them are signatory to the UNEP Financial Initiative
statement. It is time now that Bangladesh takes some major steps to gradually adhere to
the equator principles-guidelines that use environment-sensitive parameters, apart
from financial, to fund projects.
Green Banking Report | 55
REFERENCES
1. Khondokar Morshed Millat, Rubayat Chowdhury, Edward Apurba Singha, n.d., About
Green Banking, Green Banking in Bangladesh- Fostering Environmentally Sustainable
Inclusive Growth Process, pp. 11. 2. Olaf Weber, n.d., Introduction, Sustainable Banking- History and Current
Developments, pp. 2-4. 3. Md. Maruf Ullah, n.d., Steps in Green Banking, Green Banking in
Bangladesh-A Comparative Analysis, pp. 7.
4. Pravankar Sahoo, Bibhu Prasad Nayak, 2008, Green Banking: International Initiatives,
Green Banking in India, Ser. No. 125/2008, pp. 8-10. 5. The Equator Principles 2006, Statement of Principles, pp. 2-6. 6. Khondokar Morshed Millat, Rafeza Akhter Kanta, Md. Mahfuzur Rahman
Khan et al. 2012, Bangladesh Bank Green Banking Activities Other than In-House,
Green Banking Report: March 2012, pp. 5. 7. IFC Consulting Canada Inc. 2007, Green Financial Products & Services-CuCrrent
Trends and Future Opportunities in North America, pp. 15-38.