The Effect of Green Banking Practices on Banks’ Environmental Performance and Green Financing: An Empirical Study

Abstract

Every sector of the global economy is faced with environmental problems and their resulting consequences to their day-to-day operations. Due to the rising threat of global climate change, the green banking (GB) concept has been given significant attention in recent green finance literature. Therefore, the main purpose of this study was to identify the impact of GB practices on banks’ environmental performance and sources of green financing of private commercial banks (PCBs) in Bangladesh. Using a survey method, the primary data were obtained from a cross-sectional sample of 322 banking employees of PCBs in Bangladesh. In order to identify the key relationships existing between the study variables, structural equation modelling (SEM) approach was employed. The empirical findings indicated that banks’ employees, daily-operations, and policy-related GB practices have significant positive effects on green financing, contrary to banks’ customer-related GB practice, which was not statistically significant. Additionally, banks’ green project financing exhibited a strong and positive influence on banks’ environmental performance. Moreover, banks’ daily operation and policy-related practices of GB were observed to have significant impacts on banks’ environmental performances, in contrast to banks’ employee and customer-related GB practices. Therefore, major policy implications and directions for future research in the concerned area are discussed.

A Two-Staged SEM-Artificial Neural Network Approach to Analyze the Impact of FinTech Adoption on the Sustainability Performance of Banking Firms: The Mediating Effect of Green Finance and Innovation

“…In other words, the greener a company's finance, the greater its environmental sustainability. As a result, in accordance with Zhang et al [5], GF in this study has been defined as the financing of various ecofriendly projects such as renewable energy, clean technology, green industrial growth, and waste management in order to increase banks' SP. According to the literature, GF and its dimensions have a favorable influence on the SP of banking institutions [1].…”

“…Banking institutions in Bangladesh have been specially selected for this study due to their significant contribution to FA, particularly mobile banking, which is why the country's high mobile banking adoption rate during the past few years is beneficial to our research [18,30] and green financing [4,11]. Moreover, existing literature has demonstrated that banking firms play a significant role in the long-term economic growth of a country like Bangladesh by funding a wide range of environmentally responsible projects, including green sources, clean energy, and green industrial growth [1,5].…”

“…Despite various studies showing that GF and GI have a positive influence on a firm's environmental and sustainability performance, little attention has been given to the relationship between FA, GF, GI, and SP in the context of banking institutions of an emerging economy like Bangladesh. Nevertheless, scholars continue to focus on this link because of mixed findings reported in past studies [5]. Therefore, the current study established a comprehensive research model to investigate the impact of FA on SP of banking institutions through the mediating effect of GF and GI.…”

“…According to Nassiry [3], FinTech and green finance are crucial to regulators, particularly in developing nations, in order to meet the Paris Agreement and the Sustainable Development Goals (SDGs). Banking institutions are playing a critical role in achieving the country's sustainable development through the adoption of innovative technologies including blockchain, green banking, and online banking [3,4], as well as the financing of various eco-friendly initiatives such as clean energy, energy efficiency, clean technology, and green industry development [1,5,6]. As a result, this study concentrates on the variables that influence the sustainability performance (SP) of banking institutions in an emerging country like Bangladesh.…”

“…To date, various studies have recently been conducted to evaluate the relationship between GF and business environmental SP [5,7,13,14]. The literature has demonstrated that GF significantly enhances corporate green performance [15], SP [1,14], and environmental performance [2,5]. Besides, Awawdeh et al [7] observed that technological innovation significantly determines the environmental performance.…”