Industrialisation and globalisation have contributed to comfort and luxury in human existence, but have also led to catastrophic environmental damage. Today, the whole global economy must cope with environmental concerns and their consequences on day-to-day operations. Consumers and the general public, as well as businesses, are aware of the significance of the environment. Financial institutions, notably banks, can promote environmental sustainability.
Though we have only just grasped the need for sustainable and equitable development, the fact that all sectors of the economy, including the financial industry, are increasingly concerned about it is a positive sign. Banks and other financial institutions are among the companies that have implemented greener practices. So how can you engage your employees in sustainability practices such as green banking?
Green Banks: what are they?
Green banking practices encourage clients to lower their carbon footprint through their financial activity. A Green Bank acts as a conventional bank while also considering environmental management for the conservation of natural resources. Green banking aims to make internal bank procedures and information technology more environmentally friendly by lowering their negative impact. It achieves this by analysing the implications of operations.
Green Banks that are created as institutions have a greater chance of lasting and are better equipped to cultivate an environmentally conscious organisational culture and level of expertise. In contrast to programmes, institutions have the freedom to experiment, make mistakes, and then move on to other ideas. There are three main components to sustainability: environment, economy, and society. Let’s delve deeper.
Environmental management
Environmentally friendly Green Banks can play a critical role in the economic and long-term growth of a nation. As the largest financier, banks indirectly contribute to environmental deterioration by financing projects and enterprises whose operations have a detrimental influence on the environment. A Green Bank’s participation in the lending industry could make a big difference by encouraging projects with better environmental management.
Banks are increasingly utilising a variety of ways to examine projects using a set of instruments that take environmental factors into account. They are also encouraging projects that demonstrate environmental concerns such as sustainable development, the use of renewable natural resources, waste minimization, pollution prevention, occupational health and safety, energy efficiency, health care, and many other attributes that aim to improve society.
Internal environmental impacts of banks
People think of the banking industry as a clean industry that is strong in technology and has a small negative impact on the environment and society. Banks’ direct effects have to do with how they run on the inside, which can lead to more greenhouse gas emissions. For example, lights, computers, ATMs, water, waste disposal, business travel, etc., all use energy.
When compared to many other types of businesses, the amount of energy, rubbish and paper that banks consume has a far less direct impact on the surrounding environment. Nevertheless, one cannot disregard the overall impact that the banking industry has on the natural world as a whole. This is due to the sector’s immense size. Now let’s check out sustainability impacts.
Impacts of banks on sustainability
This has to do with how the products that banks and their clients sell affect the environment. But the situation is very different from that of other parts of the economy. The products that banks sell are not bad for the environment, but the people who use those products are. It is hard to calculate the damage that banking activities cause.
The dangers facing financial institutions
Banks are vulnerable to a wide variety of dangers, any one of which might result in a loss of earnings or reputation for the institution. An example is the possibility of not receiving the money that they have loaned to their customers. So, financial institutions risk losing both credit and their good name, which can hurt them for a long time.
UNEP – green financing
Green finance aims to improve the number of financial flows (from banking, microcredit, insurance, and investment) from the public, private, and non-profit sectors to objectives for sustainable development. A critical component of this is to manage environmental and social risks better and to pursue opportunities that provide both a reasonable rate of return and great environmental benefit, as well as greater responsibility.
The United Nations Environment Programme (UNEP) collaborates with nations and the financial industry to align financial systems with the 2030 Sustainable Development Agenda. Financial flows are steered to support the achievement of Sustainable Development Goals. Financial markets, through which banks transfer cash to various industries, are at the heart of today’s worldwide economy. Capital allocated now will affect ecosystems and future production.
Green banking and sustainability — conclusion
Green banking is when banks support eco-friendly investing. Green banking is a proactive approach to future sustainability. In developing countries, banks must be proactive in order to boost economic development. As the environment changes and banks face tough competition around the world, they must follow strict public rules and avoid lawsuits. Banks must apply sustainability to their business model and grow stronger.
