Pandemic slows green finance initiatives

Ananta Apparel and Universal Menswear -- two concerns of Ananta Group located in the Adamjee export processing zone in Narayanganj -- built green factories around four years ago.

The factories have adopted better waste disposal methods, low-carbon emission technologies, energy efficient appliances and many other technical know-hows in order to produce goods in an environment-friendly manner.

"An additional investment of 15 to 20 per cent was needed to set up the green factories compared to the funds required to build a traditional industrial unit," said Sharif Zahir, managing director of Ananta Group.

"We already got back the extra investment as the production cost at a green factory is usually lower than that in a traditional unit," he said.

Three or four banks financed Ananta Group's project to set up the two factories, where around 10,000 workers are employed.

Alongside Ananta Group, 123 other businesses related to the garment sector have set up green factories, which have brightened the country's image before the outside world.

Following the collapse of Rana Plaza building in April 2013, international communities raised concerns over the garment sector's compliance with global standards.

As a result, local apparel producers took the extraordinary initiative to construct green factories, improve workplace safety and protect the environment from industrial pollution.

But the country's other industrial sectors are still far off from setting up such climate-friendly industrial units.

For instance, only one shipbreaking yard -- the PHP Ship Breaking and Recycling Yard -- has so far turned into a green one.

There are around 150 shipbreaking yards in the country, which is a cause for concern considering their level of pollution.

Although the central bank started a journey in 2009 to pursue banks for loan disbursement for setting up green factories, the initiative has yet to gain momentum in keeping with the size of the country's economy and the latest measures taken by the global community.

The outstanding loans under green finance stood at Tk 28,529 crore as of September this year, up 131 per cent year-on-year, central bank data showed.

But September's figure is only 2.50 per cent of the outstanding loans to the tune of Tk 11,41,086 crore in the banking sector.

"The outstanding figure has not reflected the whole image of Bangladesh Bank's efforts," Khondkar Morshed Millat, general manager of the Sustainable Finance Department of the central bank, told The Daily Star.

The figure was calculated after the deduction of the previous loans disbursed by banks and non-banking financial institutions (NBFIs), he said.

The central bank is forming a sustainable finance policy for banks and NBFIs, which would give a boost to green banking in the days to come, he said.

"This will help fight the adverse impacts of climate change," said Millat.

Green banking is a genre of banking practices which considers all social, environmental and ecological factors with an aim to protect the environment and conserve natural resources. It is also called ethical banking or sustainable banking.

The ongoing economic hardship caused by the coronavirus pandemic has also dealt a fatal blow to the green finance initiatives taken by banks.

Between July and September, banks gave out Tk 2,320 crore, down 7.27 per cent from that of three months ago and 30 per cent from the final quarter of last year.

However, loan disbursements under green finance in the third quarter of this year increased 21.46 per cent from that of a year ago, when banks gave out Tk 1,910 crore.

Atiur Rahman, a former governor of the central bank and one of the pioneers of the global green banking programme, said both local and global lenders now irrespectively try to disburse loans given the ongoing economic hardship as they were struggling to survive at any cost.

Such trends may bring immediate profit for banks and industries but the practice will dreadfully damage the environment in the long run, he said.

"The country would have gone forward a lot in promoting green banking as Bangladesh Bank had raised the issue officially for the first time in 2009 among all central banks in the globe," Rahman added.

Rahman had taken a number of measures to popularise green banking in 2009, soon after he had been appointed as the central bank governor.

The Bank of England, the central bank of the United Kingdom, the European Central Bank and many other central banks later followed in the footsteps of Bangladesh Bank's initiative, he said.

"But we are lagging far behind many countries. The high-ups of the central bank and the government should give attention to this end," Rahman said.

It is time to roll out green bond to push the climate-friendly financing such that the government or banks can manage to get funds for the implementation of green projects.

For instance, city corporations can issue such bonds in order to run their waste management system effectively by way of protecting nature from pollution.

The issuance of global green bonds reached $257.7 billion in 2019, up 51 per cent year-on-year, shows data from the Climate Bond Initiative, which is working to promote investment in projects for a rapid transition to a low carbon and climate resilient economy.

The 2019 volume is a new global record in terms of value of the green bonds.

Local banks will have to be offered tax incentives and other facilities to encourage them to purchase green securities, Rahman said.

If the central bank permits them to show the green bond as statutory liquidity ratio (SLR), they will invest in the securities beyond a doubt, he added.

Besides, many other commercial banks have focused on giving out green loans in recent times.

Deutsche Bank, one of the largest banks in the world headquartered in Frankfurt, is pledging to roughly double its green financing activities over the coming five years to total €200 billion by 2025, according to a report by the Financial Times.

Syed Mahubur Rahman, managing director of Mutual Trust Bank, said lenders should lay emphasis on the disbursement of green loans as climate change has already had an adverse impact on the country.

"But, in many cases, we are facing different problems to disburse the green loans given our limited resources," he said.

MTBL, one of the leading banks in giving out green loans, will take more initiatives in the days ahead to give a tempo in the green financing programme.

Dutch-Bangla Bank is also giving immense efforts to disburse green loans, said its managing director, Abul Kashem Md Shirin.

He said classified loans in green finance were comparatively lower than the traditional loans as owners of green factories were highly compliant when operating their businesses.

Non-performing loans in green finance stood at Tk 577 crore as of September this year, which is below one per cent of the outstanding classified loans amounting to Tk 94,449 crore in the banking sector.