Targets set for green financing | The Daily Star
12:00 AM, September 05, 2014 / LAST MODIFIED: 01:53 AM, March 08, 2015

Targets set for green financing

Targets set for green financing

Banks will have to lend at least 5 percent of their total loans a year to green projects, Bangladesh Bank said in a notice yesterday.

The amount will be 3 percent for nine new banks and 4 percent for non-bank financial institutions.

For example, if a bank lends Tk 2,000 crore a year, it has to give 5 percent of the loans or Tk 100 crore directly to green projects.

There are no such targets now and the new measures will come into effect next year.

“Eco-friendly financing is important for sustainable banking and relevant for the country vulnerable to climate change,” BB said.

Green financing will carry points while calculating a bank or non-bank's CAMELS (capital, asset, management, earning, liquidity and sensitivity) rating.

The central bank will take actions against the lenders that will fail to meet the target.

The BB first came up with the idea of green banking by issuing a policy guideline in February 2011. In 2012, banks were provided with a uniform format for reporting green banking activities in a structured manner. In 2013, policy guidelines for green banking were issued for non-banks.

The BB had also asked the banks to introduce a comprehensive green banking policy and set up a unit by December 2013 in a bid to make banking practices more responsible to social and environmental causes.

Banks and non-banks also have to inform the BB of their green financing activities on a quarterly basis.

The quarterly report for April-June 2014 released last week said all 47 banks (scheduled before 2013) have their own green banking policy guidelines approved by their boards and have green banking units. Of the nine new banks, two have formulated their own policy guidelines and two have set up green banking units till the reporting quarter.

Non-banks lag behind banks as 22 out of 31 have formulated their own green banking policy guidelines approved by their boards.

The report said 38 banks have utilised Tk 11,270 crore during April-June. Of the amount, Tk 11,257 crore was for green financing and the rest for climate risk fund and capacity building. The banks had utilised around Tk 7,500 crore during the January-March quarter. BB data shows some 9,502 projects were rated under environmental risk, of which 7,725 were financed by banks and non-banks in the reporting quarter.

Touhidul Alam Khan, deputy managing director of Modhumoti Bank, said setting the green loan target is an epoch-making step for the country.

“The notice is definitely a timely one and the BB has shown its commitment towards building a greener environment,” said Khan, also the first Certified Sustainability Reporting Specialist in Bangladesh.

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