internship report on green banking 2013 (prime bank limited)

Green Banking Report | 1

GREEN

Socially

Responsible

Banking

Sustainable

Banking

THINK

2013

GREEN BANKING


INTERNSHIP REPORT

ON

COMPARATIVE ANALYSIS OF

GREEN BANKING INITIATIVES

OF

PRIME BANK LIMITED


August 20, 2013 Suborna Barua Lecturer Department of International Business University of Dhaka Subject: Submission of the Internship Report. Honorable Sir,

It is my pleasure to submit my internship report on Green Banking Practices of Prime

Bank Limited. This report is a result of the Internship Program that I have accomplished for

a specified 15 days in the Green Banking Unit at the Head Office of Prime Bank Limited.

I have tried my level best to make this report comprehensive and informative as possible

within the time allowed. I hope this report will meet the standards of your judgment. Sincerely Yours, Asif Al Nahian Kazi Asif Al Nahian ID: 02-200935

BBA 15th

Batch Department of International Business University of Dhaka

LETTER OF TRANSMITTAL


This is to certify that the internship report on Green Banking Practices of Prime Bank

Limited as a part to fulfill the requirement of Bachelor of Business Administration, (B.B.A)

degree from the Department of International Business, University of Dhaka has been carried

out by Kazi Asif Al Nahian, student ID-35, a student of BBA 15th

Batch under my

supervision. No part of the internship report has been submitted for any degree diploma, title,

or recognition before. Date: Suborna Barua Lecturer Department of International Business University of Dhaka

LETTER OF AUTHORIZATION


First of all I would like to express my deepest gratitude to the almighty for giving me the composure to finish this work.

Internship program provides an opportunity to experience the real world scenario and helps

to develop own judgments. And doing my internship on the Green Banking Practices of

Prime Bank Limited was a great experience for me.

Here I would like to express my heartiest gratitude to my Intern Supervisor Mr. Subarna Barua for his sincere cooperation and suggestions to complete my job.

I would like to express my gratitude to the Head of Green Banking Cell of Prime Bank Limited for giving me a chance to work as an intern in his department.

Finally I am really grateful to my teachers and to the officials of Bangladesh Bank for giving me such an opportunity to work in this project.

Kazi Asif Al Nahian ID: 02-200935

BBA 15th

Batch Department of International Business University of Dhaka

ACKNOWLEDGEMENTS


The concept Green Banking evolved in western countries and now is practiced in most of

the countries in the world. It indicates endorsing environment-friendly practices and reducing

carbon footprint from banking activities. Green banking is not just another corporate social

responsibility activity; it is all about going beyond to keep the world livable without any

significant damage. Green banking that considers all the social and environmental factors is

also called ethical banking. The main objective of green Banking is to ensure the use of

organizational resources in favor of the environment and society. Green banking as a concept

is proactive and smart way of thinking with a vision for future sustainability of our only

Spaceship earth. Bangladesh Bank is the first central bank in the world that has taken real initiatives to

facilitate the way of Green Banking practice. With some specific guidelines and legal

frameworks the central bank of Bangladesh has been urging all the commercial banks in

Bangladesh to develop their own Green Banking Policies.

This paper is an attempt to analyze the Green Banking Practices of a renowned private

commercial bank in Bangladesh, the Prime Bank Limited and identifying the efficiency or

inefficiency of the initiatives taken by the bank regarding Green Banking.

ACKNOWLEDGEMENTS


TABLE OF CONTENT Topics Page

1. Chapter-One

1.1 Introduction 9

1.2 Origin of the Study 10

1.3 Objective of the Study 10

1.4 Methodology of the Study 11

1.5 Limitations of the Study 11

2. Chapter-Two

2.1 About Prime Bank

13

3. Chapter-Three

3.1 About Green Banking

15

3.2 Evaluation of the Idea of Green Banking

16-17

3.3 Components of Green Banking

17

3.4 Challenges towards Green Banking

18

3.5 International Initiatives of Green Banking

19-20

3.6 Green Banking Products & Services in the World

21-27

3.7 Green Banking Practices in Bangladesh

28-32

4. Chapter-Four

4.1 Green Banking in Prime Bank Limited 34

4.2 Concept of Management About Green Banking 35

4.3 Formal Document of Green Banking 36

4.4 Reasons for Introducing Green Banking 37

4.5 Green Banking Components of Prime Bank Limited 38-40

4.6 Management Framework of Green Banking in Prime Bank 41-42

4.7 Institutional Arrangement for Green Banking 43-47

4.8 Dimensions & Coverage of Green Banking Activities 48

4.9 Green Banking Best Practices 49-50

4.10 Policy Framework of Green Banking Activities 51-52

5. Recommendations 53

6. Conclusions 54

7. References 55


CHAPTER ONE


1.1 INTRODUCTION

An internship program is a very good approach to co-relate the practical work

experience with the theoretical knowledge because it provides an individual the great

opportunity to work in an organization with some specific objectives. As a result it

bears great importance in case of business graduates.

As an intern it was a great opportunity for me to work in one of the reputed private

commercial banks of Bangladesh, the Prime Bank Limited. During this period I had the

opportunity to work in the Green Banking Unit at the Head Office of Prime Bank

Limited.

Green Banking or Sustainable Banking as a concept is not very new around the world.

Global warming, unusual weather pattern, rising greenhouse gas etc. has always urged

the business world to take some responsibilities in safeguarding the planet.

Consequently environment friendly banking practices emerged in many western

countries.

However, in our country, the central bank of Bangladesh, Bangladesh Bank has taken

the real initiative to make the financial industry more environment friendly and

responsible by formulating a detail Green Banking Policy Guideline in February 27,

2011.

Now, the main objective of my internship program was to evaluate the Green Banking

practices of the Prime Bank Limited and this report is basically a result of experience in

the Green Banking Unit of the Prime Bank Limited.


1.2 ORIGIN OF THE REPORT

As a requirement of the completion of the Bachelor of Business Administration degree

under the Faculty of Business Study at University of Dhaka, I was assigned to do my

internship at the Head Office of Prime Bank Limited for a specified period of 15 working

days from May 30 to June 19, 2013 as an intern. During this period I worked at the

Green Banking Unit under the Risk Management Division of the Head Office of Prime

Bank Limited. The objective of my internship program was to understand the different

aspects of Green Banking activities of Prime Bank Limited. This report is a formal

documentation of this internship program.

1.2 OBJECTIVE OF THE REPORT

The objective of this report can be viewed from two perspectives.

1) General Objective

2) Specific Objective

General Objective: This internship report is primarily prepared as a requirement of the

completion of Bachelor of Business Administration degree under the Faculty of Business

Studies at University of Dhaka.

Specific Objective: The specific objectives of this report are-

a) To find the historical evaluation of Green Banking at Prime Bank Limited.

b) To find the reasons for introducing Green Banking.

c) To find the concept of the institutions management about Green Banking.

d) To analyze the components of Green Banking & their effectiveness of Prime Bank

Limited.

e) And finally to identify the major areas of efficiency or inefficiency of the bank

regarding its Green Banking initiatives.


1.3 METHODOLOGY OF THE STUDY

The objectivity of any study depends largely on how methodologically it is done. For the

purpose of this report I have used both qualitative and quantitative information to give

it a clear judgment opportunity.

All the information used in this report are from two major sources. These are:

Primary Sources:

Face-to-face interview with the concerned employees of the bank.

Conversations with my classmates.

Practical work experience in the Green Banking Unit under the Risk Management

Division of the bank.

Secondary Sources:

Quarterly Reports of Prime Bank Limited about Green Banking.

Annual Report of the Prime Bank Limited 2012.

Reports published by Bangladesh Bank.

Some national & international journals about Green Banking.

1.4 LIMITATIONS OF THE STUDY

Almost every research work has to face some limitations in its completion. Limitations

of a study are those issues that if analyzed could be more helpful for the study. This

internship report is not also out of limitations. For the purpose of acquiring data to

prepare this report I faced some constraints that are listed below:

Lack of Published Materials: No kind of published materials was provided to me

during my internship period. The division only allowed me to review their materials. As

a result this report is in lack of some specific reference papers in the appendix part.

Time Constraint: Covering the entire Green Banking performance of the bank was a

difficult task within the time allowed for the internship program.

Lack of Experience: Preparing a formal document like an internship report requires

some prior experience in this field. I have tried my level best to reduce the distortion or

biasness of information that I have used in this report.


CHAPTER TWO


2 ABOUT PRIME BANK LIMITED

Prime Bank is one of the reputed private commercial banks working in Bangladesh. The

bank started its journey on 17th April 1995 by a group of successful local entrepreneurs.

Within a very short span of time Prime Bank has made significant progress in the

industry and has been graded as top class bank in the internationally accepted CAMELS

rating.

At present the bank has 130 branches operating in different areas in Bangladesh. As of

annual report 2012, total paid-up capital of Prime Bank is Tk. 9,358 million.

Mission Statement

To build Prime Bank Limited into an efficient, market driven, customer focused

institution with good corporate governance structure. Continuous improvement of our

business policies, procedure and efficiency through integration of technology at all

levels.

Vision

To be the best Private Commercial Bank in Bangladesh in terms of eficiency, capital

adequacy, asset quality, sound management and profitability having strong liquidity.

Credit Rating

CRISL reaffirmed long term rating of PBL to AA+ and short term rating to ST-1 based

on financials up to December 31, 2011.


CHAPTER THREE


3.1 ABOUT GREEN BANKING

Global warming, which is one of the most burning & discussed issues, has the worst

impact on the climate of the planet as a whole. Due to unusual weather pattern, rising

greenhouse gas, declining air quality etc. society demands that business also take

responsibility in safeguarding the planet.

Green Banking is one of the revolutionary concepts in todays business world which

basically refers to as sustainable banking, socially responsible banking or ethical

banking that endorse environment-friendly practices and reducing carbon footprint

from banking activities.

The main objective of Green Banking is to ensure the use of organizational resources in

favor of the environment and society. Green banking as a concept is proactive and smart

way of thinking with a vision for future sustainability of our only Spaceship earth. So in

a very specific way- Green Banking means banking practices that foster

environmentally responsible financing practices as well as using environmentally

sustainable internal processes.

Morshed, Rubayat and Singha (n.d., p. 11) explained that Green Banking can be viewed

from two different approaches as follows:

Transformation of Internal Operation:

Firstly, banks can adopt appropriate ways

to utilize renewable energy sources,

automation and other measures to

minimize carbon usage in banking

activities.

Environmentally Responsible

Financing Policy: Secondly, banks should

consider environmental issues with utmost

importance while financing or investing in

project.


3.2 EVALUATION OF THE IDEA OF GREEN BANKING

Although the theoretical idea of Green Banking is not very old; some practices can be

traced from the ancient banking & financial practices. During the 16th century religious

ethics, the environment and local community provided the main framework for both life

and economy and therefore influence businesses and the financial sector as well.

Besides, during the 19th century credit unions and financial cooperatives worked on the

criteria that were used as sustainability criteria later. (Weber n.d., p. 2)

These banks used some of the principles of the credit unions and co-operatives but

added an ethical perspective to their business. Because of higher energy and waste

management prices it was worthwhile for a service sector as well to be eco-efficient in

order to reduce costs. At about the same time new environmental regulations

influenced the responsibility of business for its environmental impact. After mainly

managing costs and risks connected with environmental issues the financial sector

began to explore business opportunities connected with sustainable development as

well. Weber (n.d., p. 3) also stated that in the beginning of the 1990 the first

sustainability mutual funds, indices and other financial products and services were

Following the political disturbance in

the 1960s and first discussion about

environmental and social

responsibilities of business, the first

ethical banks were founded in the

1970s. They wanted to re-integrate

ethics into the financial business.

(Weber n.d. p. 2)


launched. Since then their market share is increasing. They changed the landscape of

financial products and services as they re-integrated non-financial issues like the

environment or sustainability into financial decision making processes and product

development.

Weber (n.d., p. 3) again explained that another event that influenced the financial sector

to consider environmental responsibility was the launch of the Kyoto Protocol on

climate change mitigation. Because financial instruments were needed to reduce carbon

emissions, the financial sector engaged in creating products and services around carbon

reduction, carbon offsets and financing projects under the Kyoto Protocol mechanism.

However, today the view about social or environmental responsibility in changing from

managing environmental risks into creating positive impacts on sustainable

development by using different financial products and services. This new view is

reflected in the Global Impact Investment Network (GIIN) and in the Global Alliance for

Banking on Values (GABV) both of which emphasizes the positive role that the financial

industry can play in fostering sustainable development.

3.3 COMPONENTS OF GREEN BANKING

The scope of Green Banking is huge- leading to the way of Green Economy in a broad

sense. So determining all the components of Green Banking is a difficult task. However,

the following can be a short checklist of the components of Green Banking.

Online banking Green Accounts (ATM Service)

a) Paying bills online, Green Financing

b) Remote deposit/ bKash Power Savings Equipments

c) Online fund transfers Green Debit Cards/ Credit d) E statements Cards

e) Automated clearing Save Paper

house

Mobile Banking


3.4 CHALLENGES TOWARDS GREEN BANKING

Although the concept of Green Bank is considered as a sustainability issue but it is true

that achieving the actual response of Green Banking initiatives is associated with some

major challenges like:

DIVERSIFICATION MATTERS

Green banks will be screening their customers and naturally, theyll be limiting and

restricting their business to those entities that qualify. With a smaller pool of customers,

theyll automatically have a smaller profit base to support them. If they focus their loans

on certain industries, they open themselves up to being much more vulnerable to

economic shifts.

THESE BANKS ARE STILL STARTUPS

Apparently, it takes 3 to 4 years for a typical bank to start making money. Many green

banks in business today are very new and are still in startup mode. It doesnt help that

these banks are trying to get their footing during a recession.

BANKS ARE SPECIALIZED

Again, while the main goal of a green bank is to do good by supporting those who are

taking care of the environment, the question here is just how much money is there in

these businesses and in the eco-friendly industry? Saving the environment does not

necessarily equate to making a profit. Hopefully though, this premise is proven wrong

in this case and that green banks prove that they can survive, even as they face

restrictive requirements for doing business.

OPERATING EXPENSES AND COSTS ARE HIGHER

Green banks require specialized talent, skills and expertise as well, due to the kind of

customers they are servicing. Employees, such as loan officers, need to have additional

background and experience in dealing with green businesses and consumers. Plus,

giving breaks to such clients via discounted loan rates can eat at their profit margins.

REPUTATION RISK

In all likelihood, due to growing awareness about environment safety, banking

institutions are more prone to lose their reputations if they are involved in big projects,

which are viewed as socially and environmentally damaging.


3.5 INTERNATIONAL INITIATIVES OF GREEN BANKING

Environmental responsibility has always achieved importance from the international

community. During early 1990s there had been a growing concern about the

environmental management system because of increasing energy prices and new

environmental regulations. However, from that time financial institutions have been

trying to mitigate social and environmental risk issues by introducing different

environmental friendly policies & operations. Today the financial sector has begun to

explore business opportunities connected with sustainable development one of the

result of which is the concept of Green Banking. According to Pravankar (2008, p. 8)-in

the beginning of the 1990 the first sustainability mutual funds, indices and other

financial products and services were launched.

DEVELOPMENT OF UNEP

During the early 1990s the United Nations Development Programme (UNEP) was

launched which is now known as UNEP Finance Initiatives. The objective of this

initiative was to integrate environmental considerations into the regular business

operations, asset management, and other business decisions of the banks. (Pravankar

2008, p. 8)

INITIATIVES TAKEN BY RENOWNED INTERNATIONAL ORGANIZATIONS

Pravankar (2008, p. 9) also mentioned that during the year 1991 to 2002 some

renowned international organizations had taken different initiatives regarding

environment friendly business practices like:


DEVELOPMENT OF EQUATOR PRINCIPLES

All these concerns for sustainable finance or green finance have compelled the banking

institutions to devise a common and coherent set of environmental and social policies

and guidelines that can be used to evaluate the projects. Then a small group of banks

along with IFC came together to initiate the process of designing the common guidelines

in October 2002 and came up with a guidelines in June 2003 that is known as Equator

Principles with 10 leading commercial banks adopting these voluntary set of

principles.

ABOUT THE EQUATOR PRINCIPLES

The Equator Principles (EPs) is a credit risk management framework for determining,

assessing and managing environmental and social risk in Project Finance transactions.

It is based on the International Finance Corporation Performance Standards on social

and environmental sustainability and on the World Bank Group Environmental, Health,

and Safety Guidelines. (The Equator Principles 2006, p. 1)

There are 10 broad principles under the EP framework. Eventually these principles

have become the industry standard for environmental and social risk management and

financial institutions, clients/project sponsors, other financial institutions, and even

some industry bodies refer to the EPs as good practice.

Currently 79 adopting financial institutions (77 EPFIs and 2 Associates) in 32 countries

have officially adopted the EPs, covering over 70 percent of international Project

Finance debt in emerging markets.


3.6 GREEN BANKING PRODUCTS & SERVICES AROUND THE WORLD

Today there are a number of banks and other financial institutions around the world

who are offering their customers different products and services that are

environmentally sustainable. Some of these products are really innovative and some are

traditional with some benchmarking environmental features.

However, according the report of IFC Consulting Canada Inc. 2007, Green Banking

products and services around the world can be seen from two broad perspectives- 1)

Products and services related to Retail Banking and 2) Products and services related to

Corporate & Investment Banking.

RETAIL BANKING

Products Product Features Banks Regions

Home Mortgage Government led green

mortgage initiative.

1% reduction on interest for Dutch Bank Europe

loans that meet environmental

criteria.

Offers free home energy rating Europe

and offsets carbon emissions for

CFS

(UK)

every year of loan.

Generation Green Home Loan

Offered to both new and old

homes, so those with existing Bendigo

mortgages can take advantage of

Australia

Bank

discounted rates.

All projects must exceed state

requirements.

Green Power Oriented Mortgage

Provides an incentive for

homeowners to use renewable

power. N/A

N/A

Design focuses on sustainable

behavior or customer, rather than

on physical infrastructure of

their residence.

MyCommunityMortgage and

Smart Commute Initiative Fannie Mae

Mortgage

US

(Citigroup) Available to help borrowers buy

energy efficient homes and use


public transportation.

Products feature a variety of

options and flexible terms.

CMHC offers a 10% premium

refund on its mortgage loan

insurance premiums and

extended amortization to a CMHC

maximum of 35 years (subject to (CIBC, Canada

lender availability) to purchase BMO)

energy efficient homes or make

energy efficient renovations.

Refund is a one-time payment.

Commercial Green Loans for new condos

Building Loans Developer repays loan with

funds that would otherwise be

spent on operating costs using

conventional equipment and TAF/Tridel Canada

material.

Buildings must demonstrate

25%+ energy savings over

conventional designs.

Provides first mortgage loans for

building and refinancing LEED-

certified commercial buildings.

Developers do not have to pay Wells Fargo US an initial premium for green

commercial buildings, due to

features such as: lower operating

costs and higher performance.

Provides 1/8 of 1% discount on

loans to green leadership NRB US

projects in the commercial or

multi-unit residential sectors.

Home Equity One-Step Solar Financing

Loan Takes place over a 25-year term, NRB US equal to the same period of time

as the solar panel warranty.

Environmental Home Equity

Program Bank of

For customers using line of Visa US America

Access Credit, bank will donate

to an environmental NGO.

Bank signed a joint marketing

agreement with Sharp

Electronics Corporation to offer

customers easily accessible and Citigroup US

convenient financing options to


purchase and install residential

solar technologies.

Enables users to take out a home

equity loan or line of credit

rather than access savings or take

out a general loan.

Auto Loan Clean Air Auto Loan with

preferential rates for hybrids

Product recently redesigned to VanCity Canada

cover all low-emitting vehicle

types.

GoGreen Auto Loan

Product has achieved worldwide

recognition as a successful

green product. Mecu Australia

Since launch, the banks number

of car loans has increased by

45%.

Fleet Loan Small Business Administration

Express loans, with rapid

approval process, no collateral

and flexible terms, are offered to Bank of

truck companies to finance fuel US

America efficient technologies.

Helps to purchase SmartWay

Upgrade kits that can improve

fuel efficiency by up to 15%.

Credit Card Affinity Cards

Bank partners with ENGO,

which accepts future royalties in Various Various

exchange for the use of its name

and logo. APR 15-22%, many

with annual fees.

Climate Credit Card

Bank will donate to WWF.

Sum of donation depends on the Rabobank Europe

energy-intensity of the product

or service purchased with the

card.

GreenCard Visa Tendris

The worlds first credit card to Europe Holding

offer

an emissions offset (NL) B.V.

program.

BarclayBreathe Card

Include discounts and low

borrowing rates to users when

buying green products and Barclays UK services.


50% of card profits will go to

fund emissions reduction

projects, worldwide.

Existing cardholders can donate Bank of US

Visa WorldPoints rewards to America

organizations that invest in GHG

reductions or redeem them for

green merchandise.

Bank donates 1.25 per 100

spent by personal (Co-op debit

and credit cards) and business CFS UK customers (Co-op Business Visa)

to the banks Customers Who

Care Campaigns.

Deposit Landcare Term Deposit

Australias first environmental

deposit product. Westpac Australia

For every dollar spent, bank

lends equivalent to support

sustainable agriculture practices.

EcoDeposits

Fully-insured deposits

earmarked for lending to local

energy efficient companies

aiming to reduce

waste/pollution, or conserve Shorebank

natural resources.

US Pacifc

EcoCash

Checking Account allows for 5

free paper checks a month, with

US$3 per check fee applied. A

portion of this fee goes to The

Climate Trust.

Sales Consumers can offset CO2

emissions associated with air

travel, with no funds being Barclays,

channeled to the bank. Europe HSBC This new initiative is in

partnership with the offsetting

organization Climate Care.


CORPORATE & INVESTMENT BANKING

Products Product Features Banks/ FI Regions

Project Finance Specialized service divisions BNP Paribas

are dedicated to long-term (Wind),

financing of clean energy Rabobank,

projects. Barclays, Global

Some banks also specialize in

Fortis,

one (or several) renewable Standard

technology type and/or place a Chartered

premium on working with Bank,

states where regulatory WestLB

framework and government (Biofuels

policy encourages the early and Wind)

adoption of clean technologies.

Led the effort to raise $1.5

billion of equity for the wind

power market in 2006, with

approximately $650 million

allocated to its own portfolio.

The farms renewable energy

portfolio now comprises

approximately $1 billion of JPMorgan US

equity investments in 26 wind

farms since its inception in

2003.

The farm is also actively

pursuing investments in

biomass, geothermal, and solar

power.

Portfolio financing technique

Combines the financing of a

portfolio of renewable energy Dexia US

projects to the construction (Wind)

risks associated with project

development.

Lead arranger on energy-from-

waste project financing that

includes a 25-year loan Bank of

supported by waste contracts Europe Ireland with local authorities and

corporate backing on non-

contracted waste.

Partial Credit Financial institution provides a

Guarantee bond issued by a municipality IFC Global to finance environmental

projects.

Securitization A risk sharing arrangement for

environmental projects.


Financial institution represents

a guarantor (or structuring IFC Global

investor) at the mezzanine

level of risk, allowing client to

transfer risk to bank.

Eco-Securitization scheme will

test the feasibility of financing

natural infrastructure by IFC and

linking

sustainable Global

DFID management of resources with

the funding capacity and

requirements of asset-backed

securitization.

Green Mortgage-Backed

Securities (Proposed).

Designed to package

mortgages on buildings that

meet specific energy-use and Not yet

environmental benchmarks. US implemented Products would be rated higher

and worth more as a result of

the operational benefits

associated with green

buildings.

Bonds Forest Bond designed to fund

large-scale reforestation in

Panama. Latin Reinsurers underwrite a 25-yr Various

America bond, while

investors and

frequent users of Panama

Canal will purchase the bond.

Cat Bonds provide ancillary

capital for risks from natural BNP Paribas,

catastrophes. Goldman

Can pay higher than average Sachs, Global

yield, while diversifying Lehman

investors portfolios and Brothers

improving industry reserves.

Technology Provides environmentally-friendly Deutsche

Leasing technologies at preferential rates. Bank,

ABN Europe

AMRO, and

ING Group

Private Equity Private equity investments in

wind, solar and bio-fuels through

Alternative Investments Citigroup US

Sustainable Development

Investment Program.

Private equity focused on

forest conservation and


preserving biodiversity.

Provides 100% financing, with

a discounted rate on the loan, Bank of US to a non-profit organization to America

acquire biologically sensitive

land and implement

sustainable forestry practices

and management.

Indices Series of environmental ABN

private investor eco-market US/ AMRO, products includes a bio-fuels Europe

JPMorgan commodity

basket, total

returns solar energy index,

clean renewable energy index

and total returns water index

(e.g., enables interested

parties to invest in water as a

commodity).

Carbon Finance Banks provide equity, loans

& Emissions and/or upfront or upon Barclays

Trading delivery payments to acquire Capital,

carbon credits from CDM and HSBC,

JI projects. Fortis, ABN

Most acquire carbon credits AMRO, Global

in order to

serve their BNP Paribas, (Mainly corporate clients compliance JPMorgan, Europe)

needs, supply a tradable Goldman

product to the banks trading Sachs,

desks, or develop lending Citigroup,

products backed by emission among

allowances and carbon others

credits.

Allowance trading products

can include, but are not limited

to: discreet placement of

physical orders;fixed-or-

floating swaps and indexed

sales or purchases; options; Various Europe

allowances repurchase

structures; market-making for

spot and forward trades; and

price hedging based on cross-

commodities.


3.6 GREEN BANKING PRACTICES IN BANGLADESH

The economic development of any country is inextricably linked with environmental

issues because activities of financial institutions may boost wealth creation as well as

environmental degradation. Bangladesh is identified by climate change experts as being

among the countries more severely challenged by climate change threat with

correspondingly high urgency of preparedness with mitigative and adoptive responses.

The government and the central bank of Bangladesh is fully conscious about this issue

and have played a proactive role in this regard.

As being realized that bank as a responsible financial institution has a significant role to

play in these game changing developments, Bangladesh Bank, the central bank of

Bangladesh has taken the first initiative to make activities of the financial institutions of

Bangladesh more environmentally responsible at the beginning of the year 2011.

Green Banking as a concept of sustainable banking practices was formally introduced in

Bangladesh on February 2011 with the development of an indicative Green Banking

Guideline for Banks and Financial Institutions by Bangladesh Bank. The main

objective of this guideline is to give a detail and indicative advice to all the commercial

banks of Bangladesh to adopt environment friendly financing policies as well as to take

appropriate initiatives to make internal operations more energy efficient and

environment conscious.

RULES & REGULATIONS GOVERNING GREEN BANKING IN BANGLADESH

With a view to encouraging sustainable development in Bangladesh, the government of

Bangladesh has formulated two important documents namely the Environmental

Conservation Act 1995 and the Environmental Conservation Rules 1997. These two

documents basically make the ground rules for Green Banking in Bangladesh.

In January year 2011, Bangladesh Bank as a regulatory body in the financial sector of

Bangladesh had formulated the Environmental Risk Management Guidelines for

Banks and Financial Institutions. The ERM guideline basically represents structured

formats of addressing environmental risks in project financing and also provides

standards in this regard.

Besides, in February 27, 2011 Bangladesh Bank formulated the Green Banking Policy

Guidelines that provides a standard format for the commercial banks in Bangladesh to

develop their own Green Banking Policy.

The Green Banking practices in Bangladesh can be viewed from three perspectives: 1)

Initiatives taken by Bangladesh Bank, 2) Initiatives taken by Government & 3) Initiatives

taken by other commercial banks.


INITIATIVES TAKEN BY BANGLADESH BANK Bangladesh Bank is the first central bank in the world which has taken real initiatives

according to a definite agenda in its vision and mission to play a specific role in Green

Banking. With the different initiatives of in-house green activities, the authority has

developed an indicative Green Banking Policy on February 27, 2011 which aims to provide

a detail guideline to all the commercial banks to adopt Green Banking policy. (Morshed et al.

2012, p. 5) The policy is to be rolled out in the following three phases:


Besides developing a formal guideline regarding Green Banking practices, Bangladesh

Bank has also launched a refinance program of Taka 2 billion for different types of

Green financing like Solar Irrigation Pump Station, Solar Home System, Bio Gas Plant,

ETP, HHK and Solar PV module assembling plant.

INITIATIVES TAKEN BY GOVERNMENT

The government of Bangladesh has already invested USD 10 billion over the last three

decades to make the the country climate resilent and less vulnerable to disester.

According to Morshed, Rubayat & Singha (n.d., p. 4) over the past three fiscal years

(FY2009-10 to FY 2011-12) the government has allocated USD 300 million under the

following two specialized funds regarding sustainable development:

INITIATIVES TAKEN BY COMMERCIAL BANKS

According to Morshed et al. (2012, p. 5) With some formal guidelines of Bangladesh

Bank as well as government, the commercial banks of Bangladesh have also come up

with some remarkable initiatives regarding green banking like:

Policy Formulation and Governance Climate Risk Fund

Budget Allocation Green Marketing

Green Banking Unit/Cell/Desk Green Banking

Incorporation of Environmental Risk in Core Branches powered by Solar Energy

Risk Management (CRM)

Banks In-house Green Activities Improved In-House Environment Management

Green Finance Employee Training, Consumer Awareness and

Green Event


TOP 10 BANKS PRACTICING GREEN BAKING DURING 2012

According to the report of Bangladesh Bank the top 10 banks in Green Banking activities

by the end of the year 2012 are:

1. AB Bank Limited

2. Bank Asia Limited

3. Eastern Bank Limited

4. EXIM Bank Limited

5. IFIC Bank Limited

6. Islami Bank Bangladesh Limited

7. Prime Bank Limited

8. Rupali Bank Limited

9. Social Islami Bank Limited

10. Standard Chartered Bank Limited


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CHAPTER FOUR


4.1 GREEN BANKING IN PRIME BANK LIMITED

The Prime Bank Limited started its journey in 1995 and within a very short period of

time the bank achieved a very good reputation in the industry. From the inception

sustainable development and reputation building was the focus of all banking activities

of the bank. As a result the bank has been graded as top class bank by the

internationally excepted CAMELS rating.

Md. Shirajul Islam, the Ex Chairman of the Prime Bank Limited was the pioneer of the

Green Banking Initiatives in the organization. Under his direction the Prime Bank

Limited started its online banking service from 2010.

At the beginning of the year 2011 when Bangladesh Bank formulated the Policy

Guidelines for Green Banking and urged all the commercial banks to introduce the

Green Banking concept, the Prime Bank as a responsible corporate citizen formulated a

Green Banking Committee and a Green Banking Cell under the Risk Management

Division and on December 27, 2011 the GBC developed the Green Banking Policy of

Prime Bank Limited.

During the year 2012, the Prime Bank Limited has made BDT. 3589.37 million Green

Finance for installation of ETP and projects having ETP. Besides, 12 branches and 5

SME/ ATMs have been powered by solar energy. The GBC of the bank has developed a

Green Office Guide and two Sector Specific Policies by this time of the current year.


4.2 CONCEPT OF MANAGEMENT ABOUT GREEN BANKING

As a responsible corporate citizen the Prime Bank Limited has come up with real

initiatives to introduce Green Banking in the organization. By this time the bank has

formulated a Green Banking Cell under the RMD, incorporated the Environmental Risk

Management Guidelines into the Core Risk Management Guidelines and prepared an

indicative Green Banking Policy and instructed employees accordingly.

However, although the management committee of the Prime Bank Limited is conscious

about the environmental responsibilities of a financial institution but it thinks that

taking all the initiatives as instructed by Bangladesh Bank is not possible. For example:

there is a lack of real initiatives of the bank in developing Green Products like Green

Credit Cards or Green Deposit Accounts both of which associates some environmental

features. The management thinks that providing such products will initially increase the

charges from customers and there is also a lack of willingness and awareness of clients

about environmental responsibilities.

Another important issue is that, virtualization of all the banking products like different

kinds of memos, forms, documents, bills etc. and banking services like online facilities

for running different kinds of accounts is very difficult. The reason is that most of the

clients dont have access to internet for running virtual accounts. Besides, clients

demand printed documents as evidence of their banking activities.

Besides, the management of Prime Bank thinks that guidelines of in-house environment

management should be adopted in all branches. But the MANCOM also thinks that it will

take time. Location creates a big problem in transforming existing materials into more

energy efficient one.


4.3 FORMAL DOCUMENTS OF GREEN BANKING

Green Banking Policy Guideline: As per BRPD Circular No. 2 of Bangladesh Bank, the

Prime Bank Limited has formulated its own Green Banking Policy at December 27, 2011

which is called PBLs Environmental Blueprint.

Green Office Guide: The Green Banking Cell as per instructions from the management

committee has formulated an instructive Green Office Guide which is yet to be approved

by the MANCOM.

Sector Specific Policy: The GBC of the Prime Bank Limited has also formulated two

sector specific policies recently which are also yet to be approved by the MANCOM.

These are:

1. Sector specific policy for RMG & Textile Industry

2. Sector specific policy for Ship Breaking Industry

Quarterly Report to BB: The bank has also developed a standard reporting format

with the instruction of Bangladesh Bank to report to the BB on a quarterly basis about

the Green Banking activities of the bank.

Sustainability Report: Disclosure of the Green Banking initiatives or sustainability

report is a requirement under phase two of the Green Banking Policy of Bangladesh.

Prime Bank Limited has published two reports about Sustainability & Green Banking

Initiatives of the bank in the annual report of 2012.


4.4 REASONS TO INTRODUCE GREEN BANKING

Prime Bank Limited is one of the reputed private commercial banks in Bangladesh. The

management committee is very conscious about the goodwill of the bank and as a result

there have been some initiatives like assessing the financing process carefully,

providing internet banking facility to the clients etc. taken by the bank before the formal

instruction of Bangladesh Bank regarding Green Banking. So from the viewpoint of GBC

of Prime Bank Limited there are three core reasons side by side of BB instructions to

introduce Green Banking in the organization. These are:

Credit Risk: Unusual weather pattern and global worming can cause financial

institutions to suffer from credit risk. For example, adverse climate change may severely

hamper a project financed by the bank and thus lead to a credit default. Realizing this

issue Prime Bank Limited has rearranged its risk management policy by incorporating

the Environmental Risk Management in its Core Risk Management Policy.

Legal Risk: Legal risk arises when financial institution finance to a project that is

environmentally harmful. In that case the financing institution will be liable by the

environmental acts. So this is another important reason to introduce more environment

friendly financing policies.

Reputational Risk: In recent times bank are facing extreme reputational risk arising

from some recent big loan scandals. Besides, the environmental awareness is also

increasing day by day.

These issues together drive the Board of Directors of Prime Bank Limited to introduce a

Green Banking Policy which is called PBLs Environmental Blueprint by the end of the

year 2011.


4.5 CONCEPT OF GREEN BANKING IN PRIME BANK

Components of Green Banking include the factors that affect the Green Banking

activities of the bank. The following are the major components of Green Banking in

Prime Bank Limited.

GREEN BANKING POLICY

As per the instruction of Bangladesh Bank, Prime Bank Limited formulated its Green

Banking Policy which is called PBLs Environmental Blueprint. According to Green

Banking Policy of Prime Bank Limited, the policy shows PBLs view on environmental

issues and describes the Bank's environmental risk management procedures and

practices.

However, from my observation I have found that the policy is created highlighting the

issues that should be done with reference Bangladesh Bank guidelines and instructions.

Some specific issues of the policy represent unorganized information.

Besides, the effectiveness of policy also depends on the sound understanding of the

policy. However, during my internship program at the organization I found that only

one employee under the risk management division of the bank is overseeing all the

Green Banking activities. The Green Banking Policy is not disclosed to all the concerned

departments.

CLIMATE RISK FUND

Climate Risk Fund is one of the major components of Green Banking. It is required as a

precautionary measure for possible safeguards and mitigating hazards due to climate

change. A Climate Risk Fund is also required for the banks as part of their CSR activities

that relate to climate change conditions.

In 2012, Prime Bank Limited has created a Climate Risk Fund and up to the year 2012 it

has allocated Tk. 60 million for this fund. However, by the end of the year 2012 the bank

made no utilization of this fund.

IN-HOUSE ENVIRONMENT MANAGEMENT

Strategy of reuse, recycling of materials and equipments, and source reduction and

waste minimization strategy is a part of in-house environmental management. The

Green Banking Cell of Prime Bank Limited has developed a Green Office Guide to

reduce water, paper and electricity consumption which is yet to be approved by the

MANCOM. Without this there is no special initiatives taken in the bank to actually

reduce the use of electricity, paper, water etc.


GREEN FINANCE

Green finance as a part of green banking makes great contribution to the transition to

resource efficient and low carbon industries i.e., green industry and green economy.

Prime Bank financed various projects which are environment friendly. The projects

which contribute to degradation or deterioration of the environmental issues are

usually avoided. The bank financed Effluent Treatment Plants (ETP) of RMG and textile

sectors and projects having ETP. In 2012, the bank extended finance of Tk. 94.42 million

for installation of ETP and Tk. 346.28 million for financing projects having ETP.

However, in case of Green Finance, Prime Bank has exposure in only two sectors-

Installation of ETP & Projects having ETP. The bank has no investment in solar plant

project, bio-gas plant project, bio-fertilizer plant project up to year 2012.

GREEN PRODUCTS

Prime Bank has introduced various services which are reducing paper use, fuel

consumption etc. Internet Banking, Online Banking, SMS Banking and Phone Banking

are such services which are gaining popularity day by day. Besides, the bank has already

introduced two specific brands under the Green Banking Products category namely-

ALTITUDE and PRIME CASH.

ALTITUDE: This is basically an internet banking facility that provides opportunity-

PRIME CASH: It is a Biometric Smart Card where the thumb impression of a client will

work as an authentication code. This smart card is very simple because there is no use

of SMS, PIN number or mobile phone. Rather, only the smart card and the clients thumb

impression is required. Besides, the smart card is also secured because it is required the

thumb impression to authenticate a transaction.

GREEN MARKETING

Prime Bank allocated Tk. 15 million per quarter for green marketing, training and

capacity building. After introduction of SMS banking, green marketing is gaining

momentum. Through push and pull system, the customers are becoming aware of

banks new products and initiatives. Employment notices are given on website and


online applications are invited now. Kiosk machines installed at different places for the

awareness to the customers of the banks product instead of sending paper ads and

door to door mail delivery. In addition, CSR activities had contributed to the field of

health and green finance as well.

However, during 2012 the bank has allocated a total of Tk. 60 million for Green

Marketing but utilized only Tk. 0.03 million up to 2012.

EMPLOYEE TRAINING

Actually there has been no formal training program conducted by the Prime Bank

Limited for giving instructions to the employees regarding Green Banking Policy of the

bank. However, the bank has arranged some workshops on Green Banking where only

the top executives of the bank from different branches participated.


4.6 MANAGEMENT FRAMEWORK OF GREEN BANKING

The Green Banking Cell of the Prime Bank Limited is working under the Risk

Management Division. The RMD consists of 6 members which are also the member of

the Green Banking Cell. All the works of the Green Banking Cell are supervised by a

Management Committee regarding Green Banking and the decisions of any Green

Banking initiatives are taken by the Borad of Directors.

Overall Responsibility

The Management Committee responsible for ensuring the integration of Environmental

Risk Management into Credit Risk Management. The operational responsibility is

carried out by the Head of Risk Management Unit/Head of Green Banking Cell Mr.

Debashis Chakraborti. The Board of Directors allocate and approve a considerable

amount of fund in its annual budget for Green Banking.

Internal Reporting

Green Banking Cell (GBC) actively and continuously works with Business Team, HRD,

LSSD, CAD, CRM & RMU to improve its environmental management system and

environmental qualities of the projects which it finances. It reports to the

Management Committee (MANCOM) on Environmental Issues periodically and takes the

initiative to comply with the reporting directions provided by Bangladesh Bank.

External Reporting

Green Banking Practices: GBC reports on the initiatives/activities under the said

program to the Department of Off-site Supervision of Bangladesh Bank on quarterly

basis. Similarly it submits reports on the subsequent quarters within the next 15 days of


the respective quarter end. The GBC also keeps their annual report and websites

updated with the disclosures on green banking initiatives/activities.

Environmental Risk Management: GBC has already developed a reporting system

with the assistance of Bangladesh Bank, with a view to intimating management,

shareholders, and other stakeholders on the use of these Guidelines. This reporting is

done on an annual basis in the Annual Report as the Sustainability Report & Green

Banking. These are enclosed under the ANEX part of this report.

Besides, there are two specific functions which are also considered under the

management framework of Green Banking. These are:

Credit monitoring function

This function is to ensure that environmental risk monitoring shall also be undertaken

as a part of monitoring credit risks. Prime Bank Limited has no separate Credit

Monitoring Unit and thus CAD/CRM performs the credit monitoring functions and

provides the necessary information to the GBC.

Database on Non-Performing Loans (NPLs) due to Environmental Risks

GBC has already established a database of NPLs that are due to environmental reasons.

If the borrower has indicated environmental factors as one of the reasons for delays in

making repayments, then this is noted in the database. The purpose of this database is

to ensure that the Prime Bank Limited streamlines its own institutional knowledge for

better decision-making in its future financing.


4.7 INSTITUTIONAL ARRANGEMENTS FOR GREEN BANKING

The institutional arrangements of the Prime Bank Limited for Green Banking can be

viewed from two perspectives.

1) Arrangements for Environmentally Responsible Internal Operations

2) Arrangements for Environmentally Responsible Financing Policies

ARRANGEMENTS FOR ENVIRONMENTALLY RESPONSIBLE INTERNAL OPERATIONS

To foster a more energy or resource efficient internal operations, the GBC of the Prime

Bank Limited has completed the formulation of an indicative Green Office Guide which

is yet to be approved by the Management Committee.

The principles of the Green Office Guide are formulated in a way so that it will inspire all

the employees of the bank to follow those principles. The purpose of the Green Office

Guide is to inspire and aware the employees of the bank about how they can maximize

their effort to minimize the wastage of resources.

The main Slogan of the Green Office Guide is REDUCE, REUSE & RECYCLE. According

to the Green Office Guide all the employees of the Prime Bank Limited are instructed on

the following issues:

Computers, Printers, Photocopiers

Switching off all the equipments while not in use

Program equipments to Hibernate in office times

All the office equipments must be shut down after office hours

Making sure that all the employees know how to use the equipments as for not to

waste resources in unlearned hands

A LCD or Desktop Monitor use energy as of energy needed for printing 800 Laser

prints if it is left open for 8 hours without use. So it is very important to shut

down all the equipments

Personal computers must be shut down while not using it

Laptops should run in battery saving mode. The charger should not be plugged in

while running on battery.

Photocopiers and Printers have high electricity consumption and these

equipments are mostly turned on idle. All the employees must know how to use

them efficiently and must make sure to turn them off after use.

Air Conditioning

Use of Fans and natural ventilation when possible

Use Energy efficient, Eco-friendly Air Conditioners

Buy Programmed AC which has motion detection on, allowing them to maintain

proper room temperature


Use Central AC system rather than Split or Box AC as the use of resources will be

less.

Close all windows, doors to maximize the cooling while AC is turned on

Set Air Conditioning at a Minimum of 24C which will keep proper balance of Air

All the AC will be turned off after 7pm ( End Of Office Hours)

Switch off all the AC while leaving the room

Lights

Use of natural lights whenever possible. This will save a significant amount of

energy and associated greenhouse gas emissions

Replacing bulbs with energy efficient bulbs. This will not just only reduce costs

but also energy consumption.

Replacing Spotlights with same effect but with more energy saving. Like using

20W halogen light instead of 50W will reduce 60% of energy but serve with

same lighting

Cleaning and maintaining lamps and bulbs will create light efficiency.

Everyone must know Last man to leave the room , turns off the switch rule not

in just lights but in all equipments

All the lights except very important security lights will be turned off after Office

Hours

The Cleaning stuff must be trained to turn off all the lights and equipments while

not necessary

Conservation of Water

Must conserve Water as the best possible way

Use of water bottles which can be reusable

Cleaning Staff must commit to reduce water usage in cleaning procedures.

Install low-flush toilets and water saving faucets in the restrooms.

Purchase of Stationeries

Office Stationeries should be bought which are needed

Seek & Inspect for Energy Saving, Environment Sustainable or Eco-friendly

products for purchase before buying

Seeking for longevity, reusability, refill-ability and recyclability of Products like

Printers, Scanners and Photocopiers before Purchase

Seek products made out of or has elements of Recycled Products

All office elements should be eligible for recycling at the end of its life

Office shall buy Recycled papers for their use.


Reuse of Stationeries

Reuse of Single Sided Paper as notepads or draft copies usable within office

Reusing Clip-files, Covers , Folders

Use of Reusable Cups, Crockery & Cutlery within Office

Encourage the use of Reusable Bottles instead of Single use water Bottles

Making the Office Journals, Journal Subscription common for all Employees

Selling used papers to the firms who are recycling the papers

Use of Email instead of paper works with clients who understand internet

business.

Use telemarketing and email marketing

Reduce the use of Paper to the best possible way

Single Transportation on the Same Rote

Transportation is another important issue when we thinking about energy or resource

consumption. There are a number of employees of every organization who uses the

same rote everyday for reaching to the workplace. To reduce the consumption of diesel

as well as to reduce the emission of CO2 PBL has encouraged its employees to use a

single vehicle for the transportation purpose on a same rote. Besides, all the vehicles

used for banking purposes use CNG which also contributing to the reduction of CO2

emission.

ARRANGEMENTS FOR ENVIRONMENTALLY RESPONSIBLE FINANCING POLICIES

Prime Bank Limited has already incorporated the Environmental Risk Management

Guidelines of Bangladesh Bank into its Core Risk Management Policy. So when the bank

considers any business project for financing purpose the Green Banking Cell under the

Risk Management Division performs a detail Environmental Due Diligence analysis with

the regular Financial or Legal Risk assessment.

However, Environmental Risk Rating assessment is applicable for the following cases

for both new and

Greenfield projects as well as those pertaining to the existing ones:


Credit Processing and Approval Process

For a project that is considering to finance and is applicable to the Environmental Risk

Assessment, a detailed Environmental Due-Diligence is assessed using the General EDD

and the Sector Specific EDD checklist of the Environmental Risk Management Guideline

of Bangladesh Bank.

The General EDD: This checklist is provided under the Technical ANNEX Part of the

Environmental Risk Management Policy of BB based on which the Prime Bank initially

determine the general environmental risk of the project.


The Sector Specific EDD: The Technical ANNEX Part of the Environmental Risk

Management Policy of BB also represents sector specific due diligence checklist for 10

specific sectors. These are:

1. Agri-business 6. Pulp & Paper

2. Cement 7. Sugar & Distilleries

3. Chemicals (Fertilizers, Pesticides 8. Tannery

and Pharmaceuticals) 9. Textile and Apparel

4. Engineering and Basic Metal 10. Ship Breaking

5. Housing

After completing the Sector Specific EDD the following Matrix is used to give the project

a total Environmental Risk Rating (EnvRR).

Now at present the GBC of the Prime Bank Limited has formulated two sector specific

policies. One is for the RMG & Textile Industry and Ship Breaking Industry. The reason

is that the bank has much exposure in these two sectors. But the bank is considering the

other sectors for new financing projects.

However, in general the Prime Bank limited takes a financing decision for those projects

having the low or moderate EnvRR. And in case of High EnvRR projects the bank gives

importance on personal relation with the borrowers and also gives high importance on

the additional documentations in the Environmental Risk Management Policy of BB.


4.8 DIMENSIONS OR COVERAGE OF GREEN BANKING

Green Banking basically considers all the activities and relevant policies of a bank that

have a direct or indirect impact on the environment. As a result, identification of the

areas that are related or associated with the coverage of Green Banking is a difficult

task.

However, in Prime Bank Limited the Green Banking Cell (GBC) is working under the

Risk Management Division (RMD). This is logical because the Risk Management Division

is responsible for assessing the feasibility as well as fitness of a project.

Here the Green Banking Cell uses the policies related to the Green Banking activities

which provide a detail assessment of the projects regarding viability as well as

environmental sustainability.

Besides policy formulation, the GBC also provides necessary dictation regarding Green

Banking Policy to the Retail Department to consider these issues when making any

decision regarding procurement.

The Sales and Marketing Division of PBL is also concerned about the development of

Green Banking Products. PBL has been allocating Tk. 15 million per quarter for green

marketing, training and capacity building. By this time PBL has introduced various

products which are reducing paper use, fuel consumption etc. ALTITUDE (Internet

Banking), Online Banking, SMS Banking, Utility Bill Pay service, EasyCash (Mobile

banking), Phone Banking and Prime Cash (A Biometric Smart Card) are such products

which are gaining popularity day by day.

Besides, the Human Resource Department (HRD) of the Prime Bank Limited is

concerned about the initiative of Green Banking. As part of formal initiatives the HR

division invites ideas from employees for Go Green program at PBL. These ideas are

generally evaluated and selected for implementation from MANCOM.


4.9 GREEN BANKING BEST PRACTICES

Prime Bank Limited has made some mentionable progress with regards to Green

Banking initiatives by the end of the year 2012. The bank has formulated an indicative

Green Banking Policy (as per BB BRPD Circular No. 2), allocated budgets for Green

Finance & Climate Risk Fund, introduced some innovative products like ALTITUDE,

Prime Cash etc to facilitated online banking, prepared two sector specific policies for

RMG & Textile Industry and Ship Breaking Industry etc.

But however, in my view the Green Banking initiatives of Prime Bank Limited has not

reached its expected level up to December 31, 2012. The reasons are:

Budget Allocation: Up to December 31, 2012 Prime Bank has allocated a total of BDT.

500 million (BDT. 380 million for Green Finance and BDT. 60 million for both Climate

Risk Fund & Marketing activities). But during 2012 the industry highest allocation for

Green Banking Activities was BDT. 41700.57 million made by Standard Chartered Bank.

Budget Utilization: Prime Bank has utilized a very small portion of the allocated

budget for Climate Risk Fund and Marketing & Capacity Building activities.

Allocation (In Utilization (In millions)

millions)

Climate Risk Fund 60.00 0.00

Marketing & Capacity 60.00 0.03

Building

In-House Green Activities: The in-house initiatives of Prime Bank Limited regarding

Green Banking are not good. Up to 2012-

Total number of branches of Prime Bank 130

Number of branches powered by solar energy 12

Number of ATMs & SMEs powered by solar energy 5

Besides, there have been no mentionable initiatives taken by the bank to reduce the

internal electricity consumption in the Head Office at Motijhil.

Green Finance: Prime Bank Limited has exposure in only two kinds of projects with

regards to Green Finance. These are ETP and Projects having ETP. During 2012

Prime Bank has financed a total of BDT. 440.70 million in these two kinds of projects

where-

ETP 94.42 million

Projects having ETP 346.28 million


However, the bank is considering some new projects like Bio-Gas Plant, Renewable

Energy Plant etc. to finance in 2013.

Online Banking: Online banking or paperless banking is one of the basic features of the

Green Banking Initiative. Prime Bank Limited is lagging behind in this sector too. Up to

2012 Prime Bank has-

Total number of accounts 663619 100%

Accounts facilitated with internet banking 14959 2.25%

Accounts facilitated with SMS banking 7697 1.16%


4.10 POLICY FRAMEWORK OF GREEN BANKING

PBLs Environmental Blueprint is prepared and structured according to the policy

guideline of Bangladesh Bank. From the 2011 to the year 2013, the bank has been able

to take necessary steps to complete the objective of phase one.

1.1 Policy formation And Governance

As per the BRPD Circular No. 2, the Prime Bank Limited has formulated its Green

Banking Policy at 27 December, 2011. The policy basically contains a framework of

Green Banking of the bank. The effectiveness of the policy largely depends on the

awareness of the employees regarding the policy. However, in my view there is a lack of

awareness about the green banking policy among the employees of the bank. Besides,

the policy is prepared reviewing only the published material of Bangladesh Bank. As a

result it is lack of company specific factors and international standards.

1.2 Incorporation of Environmental Risk In Core Risk Management

Prime bank has reviewed its Core Risk Management Guidelines considering the

Environmental Risk Management Guidelines of Bangladesh Bank. I think for

incorporating the Environmental Risk Management Guidelines in the Core Risk

Management, the banks risk management policy has been strengthened.

1.3 Initiating in-House Environment management

The Green Banking Unit has formed a Green Banking Office Guide. This guide

implicates all the necessary means to ensure Energy efficiency, Paperless

communication, equipment purchase, recycling of office equipment. This proves a

complete Guideline for the employees and management to comply to reduce carbon

omission and provide Eco-friendly banking.

However, although the GBC has prepared a Green Office Guide but I think there is a lack

of interest of employees to know about it and there is also a lack of publicity of this

guide.

1.4 Introducing To Green Finance

Although the bank has made Green Finance against its allocated budget during the year

2012 (Allocation BDT. 380 million & Utilization BDT. 3589 million) but it was lower

compared to other banks in the industry. Besides, Prime Bank has exposure in only to

types of projects- ETP and projects having ETP. So I think Prime Bank may consider

other green projects like Solar Plant, Bio-Gas Plant etc.


1.5 Creation of Climate Risk Fund

As a requirement of the Green Banking Initiative of Bangladesh Bank, the Prime Bank

Limited allocated BDT. 60 million during the year 2012 for the creation of a climate risk

fund. But the bank did not utilize any portion of the money during the said period.

1.6 Introduction of Green marketing

To communicate with the customers, potential clients the Prime Bank Limited has

implemented ATM screenshots, Email messages, SMS, and other electronic medias to

reduce previous paper based communications. But I think the bank should focus more

on developing products or services that is associated with some environmental features

and which will give the bank a unique identity.

1.7 Online Banking

The Prime Bank Limited started its online banking services by the end of the year 2008.

But still only 2.25% of its total account is facilitated with internet banking.

1.8 Supporting Employee Training, Consumer Awareness and Green Event

From the formulation of the Green Banking Policy by the end of the year 2011 Prime

Bank Limited conducted around 6 workshops mostly held in Dhaka and covered only

the company executives. There is also a lack of proactiveness of the bank to encourage

its clients to invest in more environment friendly projects.

1.9 Disclosure and Reporting of Green banking Activities

Prime Bank disclosed its first Sustainability Report in the Annual Report 2012. The bank

also discloses green banking initiatives time to time in newspapers. However, there is a

little disclosed materials in the website of the bank regarding Green Banking. But I think

the website is a very good source of making publicity about any new initiatives.


RECOMMENDATIONS

As a renowned private commercial bank in Bangladesh, the Prime Bank Limited has

already given much importance in balancing non-financial issues such as environmental

and social issues with financial priorities to demonstrate the characteristics of good

corporate governance throughout the bank. Up to the year 2012 the bank has made

complementary progress and has taken some real initiatives regarding Green Banking

like: formulation of an active and responsive Green Banking Cell (GBC), financing ETP

projects, formulation of Green Office Guide for in-house environment management,

formulation of two Sector Specific Policies, investment for installation of Solar Plant etc.

However, since the idea of Green Banking is getting new dimensions day by day and

there is a good opportunity of the banks to link their goodwill and image with there

initiatives of Green Banking, I think PBL still has a long way to go I also think that the

Prime Bank Limited should focus on the following issues more in the upcoming years to

make a good position in this regard:

Make regular adjustments and updates of the Green Banking Policies.

Increase the exposure of Green Finance to new projects.

The Management Committee should take necessary steps to circulate the

principles of the Green Office Guide to all the branches of the Prime Bank

Limited.

The Management committee should take necessary steps to develop new

products or services with environmental features.

And finally the bank should arrange more training and workshop programs to

encourage the employees to follow and foster the Green Banking Concept in their

day to day banking affairs.


CONCLUSIONS

Green banking is no longer a new concept. The term has become popular among the

conscientious people in the backdrop of climate change. Human activities have caused

serious damage to the environment. All have the responsibility to save the ecology by

prudent activities. The professional segment of the population of every country has a

greater role to play than the common man to check environmental degradation. Bankers

are an important professional group which has interaction with all strata of people in

the society. By adopting various green initiatives within their in-house environment and

also initiating prevention of air and water pollution through their clients, bankers can

contribute in a big way to this noble cause. In a rapidly changing market economy

where globalization of markets has intensified the competition, the industries and firms

are vulnerable to stringent public policies, severe law suits or consumer boycotts. This

would affect the banks and financial institutions to recover their return from

investment. Thus, the banks should play a pro-active role to take environmental and

ecological aspects as part of their lending principle which would force industries to go

for mandated investment for environmental management, use of appropriate

technologies and management systems.

Green Banking if implemented sincerely will act as an effective ex ante deterrent for the

polluting industries that give a pass by to the other institutional regulatory mechanisms.

There has not been much initiative in this regard by the banks and other financial

institutions in Bangladesh though they play an active role in its emerging economy. The

banking and financial sector should be made to work for sustainable development. As

far as green banking in concerned, Bangladeshs banks and financial institutions are

running behind time. None of them are signatory to the UNEP Financial Initiative

statement. It is time now that Bangladesh takes some major steps to gradually adhere to

the equator principles-guidelines that use environment-sensitive parameters, apart

from financial, to fund projects.


REFERENCES

1. Khondokar Morshed Millat, Rubayat Chowdhury, Edward Apurba Singha, n.d., About

Green Banking, Green Banking in Bangladesh- Fostering Environmentally Sustainable

Inclusive Growth Process, pp. 11. 2. Olaf Weber, n.d., Introduction, Sustainable Banking- History and Current

Developments, pp. 2-4. 3. Md. Maruf Ullah, n.d., Steps in Green Banking, Green Banking in

Bangladesh-A Comparative Analysis, pp. 7.

4. Pravankar Sahoo, Bibhu Prasad Nayak, 2008, Green Banking: International Initiatives,

Green Banking in India, Ser. No. 125/2008, pp. 8-10. 5. The Equator Principles 2006, Statement of Principles, pp. 2-6. 6. Khondokar Morshed Millat, Rafeza Akhter Kanta, Md. Mahfuzur Rahman

Khan et al. 2012, Bangladesh Bank Green Banking Activities Other than In-House,

Green Banking Report: March 2012, pp. 5. 7. IFC Consulting Canada Inc. 2007, Green Financial Products & Services-CuCrrent

Trends and Future Opportunities in North America, pp. 15-38.

internship report on green banking 2013 (prime bank limited)

Documents

concept green banking

green banking unit

ethical banking

banking activities

internship report

report comprehensive

internship program

business administration