Local and foreign banks have spontaneously responded to the central bank’s efforts to make the country’s banking practices environment-friendly, a new report found.
Banks disbursed Tk 27,092 crore as green finance in 2012, said the central bank annual report on green banking practices in the country.
This is the first annual report on green banking prepared by the green banking and CSR department of Bangladesh Bank.
Khondkar Morshed Millat, deputy general manager of BB, and Md Zainul Abedin and Shamima Akhter, assistant directors, authored the report.
The authors said BB is the first central bank in the world to have a clear vision on promoting green banking and safeguarding the environment from unusual weather patterns, rising greenhouse gases, and declining air quality.
The central bank has proactively come forward to put in place a fund of Tk 200 crore to refinance lending for renewable energy generation and other environmentally beneficial projects such as effluent treatment plants and energy efficient kilns for brickfields.
As of December 2012, Tk 85 crore out the revolving fund has been allocated for different green projects in the areas of solar irrigation pumps, solar home systems, biogas plants, effluent treatment plants, brick kilns and solar photovoltaic module assembling plants.
It was only Tk 25 crore in 2011, said the report.
Banks are already required to report on their green banking activities on a quarterly basis. All scheduled banks have formulated their own green banking policy and formed green banking unit.
The report said the central bank has formulated Environmental Risk Management guidelines. The guidelines are for assessing environmental risks and do not intend to squeeze investment but ensure sustainable finance, according to the authors.
According to the report, BB Governor Atiur Rahman said green banking is not only limited to building awareness but also in practice and banks are responding spontaneously.
“I am convinced that with the level of enthusiastic commitment and engagement demonstrated by our financial sector, green banking initiatives in Bangladesh will keep attracting yet wider recognition and attention from outside our borders,” he said.Deputy Governor SK Sur Chowdhury said Bangladesh is one of the most climate change vulnerable countries. As a result, the country does not have any other option but to adapt to a system that would play an important role in coping with the varying environmental scenario, he added.
“In this scenario, banks are required to protect their financing from the risks of a deteriorating environment and ensure sustainable banking practices,” he said. The report said banks started Environmental Risk Rating in July 2011. They conducted the risk rating in 12,088 projects in 2012 — three times from 2011 when 4,394 projects were rated.
The central bank also published the first-ever ranking of banks proactively lending to green projects.
The central bank also rated top ten banks on the basis of the environmental risk rating.
AB Bank topped the rating last year, followed by IFIC, Standard Chartered, Bank Asia, SIBL, BRAC, BASIC, Shahjalal, Exim, Jamuna, One and Dhaka Bank.
Private commercial banks accounted for 66 percent of all direct and indirect green financing in 2012, lending Tk 17,881 crore. State-run commercial banks and specialised banks however fared poorly, accounting for a meagre 2 percent and 3 percent.
In the ranking of green financing, EXIM Bank grabbed the pole position. Standard Chartered came second, followed by Rupali, BASIC, Islami, Citi NA, Bank Asia, Social Islami, City and Eastern Bank.
Banks allocated Tk 214 crore in 2012 as climate risk fund, which covers their part of corporate social responsibility activities.
Banks, the report said, however have not responded well in utilising the fund, as they have spent only 12 percent of the total allocation.
IBBL, EXIM and HSBC are the top three banks that have together utilised 51 percent of the total climate risk fund.