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SBP Green Banking
1. Introduction to SBP Green Banking Guidelines
Implementation in Banking Sector
Issuing Department:
Operational Risk Management Department
Risk Management Division
September ‘2020
2. Introduction to Green Banking
Green Banking acknowledges responsibility of the financial sector in supporting policy initiatives for
transforming country’s economy towards low carbon and climate resilient economy.
And contributes towards sustainability to reduce the vulnerability and risks arising from banking operations in
accordance with green banking guidelines issued by State Bank of Pakistan.
Green Banking envisions inculcation of environmental consciousness as part of organizational culture and
reorientation of banking products/ services and operations to reduce environmental impact of banks on the
economy.
3. Regulatory Requirements for Green Banking
.
• SBP issued the Guidelines on October 08, 2017.
• A comprehensive policy on green banking.
• Procedures to identify, assess, mitigate, monitor and report on environmental risks.
• Financial mechanisms which are adapted to fit green investments.
• A system that reduces environmental impacts stemming from banks /DFI’s own operations.
• Review banks overall portfolio, its environmental risk positions and report to relevant stakeholders
• SBP is monitoring progress of banks and DFIs in implementation of Green Banking Guidelines.
4. What is Green Banking
A shift from banking as usual that provides necessary tools and techniques to leverage banking channels for promotion of
resource efficiency, environmental protection and climate resilience for an equitable and sustainable development of
economy”.
Banking sector’s interacts with the environment in two ways.
Direct: Day to day operations such as use of paper, electricity, stationary, lighting, air conditioning,
electronic equipment etc.
Indirect: Through on-lending to business/ industries which include sectors like steel, paper, cement,
chemicals, fertilizers, power, textiles etc.
What is Green Culture
Green culture may be defined as a lifestyle of making deliberate choices and decisions regarding the resources used for daily
living for the purpose of minimizing resources used or to use resources that are renewable.
5. Objectives of Green Banking
Motivate Banks/ DFIs for green / Sustainable banking practice.
Reduce vulnerability of financial system from risks arising from the environment.
Facilitate banks/ DFIs to play their role for transformation of economy into a resource efficient and climate.
resilient one.
Scope Applicability
Guidelines is applicable to all banks and DFIs.
Guidelines intend to set minimum standards for a fair and competitive environment.
6. Concept of Green Banking
Green
Banking
Promoting Environmental
Friendly Practices
Banking Practices that
contribute towards Protecting
the Environment
Banking Practice that bring
in Social Welfare
7. Benefits of Green banking
The concept of Green Banking will be mutually beneficial to the banks, industries and the economy in following
ways;
Operating Cost Savings
Demand for Green Products
Risk Mitigation
Market Leadership
Tax Incentives
Employee Retention
Brand Reputation and Publicity
Resource Consumption
Keeping up with the Competition
New Revenue Opportunities
8. “Green” for a Bank
Corporate identity
Being green is fashionable today and helps to sell all products, finance is not different
Compliance with standards
Nationally applicable environmental laws, regulations or standards (environmental protection acts)
Risk management
Portfolios are threatened by environmental risks, incl. climate change
Business opportunity for further growth
Markets are huge in the “Green Space”.
Examples include:
Renewable Energy,
Energy Efficiency,
Water Efficiency,
Waste Treatment
9. Core Areas of Green Banking
Environmental Risk Assessment and Management
Design a policy to identify, assess, mitigate and monitor environmental risks arising from operations of a business.
Green Business Facilitation
To adopt Profitable business opportunities in DIBPL in the form of investments, resource efficiency and alternative
energy generation.
Own Impact Reduction
To reduce our own impact on the environment through conscious management of the consumption of energy and other
natural resources used in banking operations.
10. Shariah Perspective for Environmental Protection (Cleanliness)
Prophet Muhammad (SAW) not only gave importance to personal hygiene but also informed us to keep the
environment clean.
• Abu Malik Al-Ash`ari (RA) reported that the Messenger of Allah (SAW) said:
“Cleanliness is half of iman (faith).“
• Abu Dharr Al-Ghafari (RA) reported that the Prophet (SAW) said,
“Removing harmful things from the road is an act of charity (sadaqah).”
11. Shariah Perspective for Own Impact Reduction
• Prophet Muhammad (SAW) said:
"By Allah, he does not believe!
By Allah, he does not believe!
By Allah, he does not believe!"
It was said, "Who is that, O Allah's Messenger " He (SAW) said, "That person whose neighbor does not feel safe from his
evil (Bad Deeds)."
(Sahih Bukhari Vol #8, Hadith # 6016)
• Prophet Muhammad (SAW) said:
“Whoever believes in Allah and the Last Day should not harm his neighbor.”
(Sahih Bukhari Vol #7, Hadith # 5185)
12. Environmental Risks of Bank
Growing sector beyond control/ limits
Debt repayments lead to increase production
Environmental risk of clients / loans
Economic growth vs. Environment
Unequal resource distribution
Environmental disaster can collapse whole system
Property Damage
Financial Losses
Complete Shutdown
13. Benefits for Banks and Their Clients
For Clients
Cost savings –Improved Productivity/Quality of Output –Competitiveness
Reasonable pay-back period –Investments recovered from energy cost savings
Reduced footprint –Sustainable access to global supply chains
For FIs
1. Expanded market through a new business line:
Innovative product
Monetize existing client base-Attract quality new clients
Sell on value to customer, not pricing
New marketing channels through vendor partnerships
2. Improved risk profile of portfolio:
Energy cost savings as a part of cash-flow
Positive social and environmental impacts
Enhanced brand reputation, PR opportunities
14. Roles and Responsibilities for Green Banking Office
Green Banking
Office
Policy
Strategy
Processes
Institutional changes
• Green Business Facilitation
• Own Resource Reduction
• Environmental Risk Assessment and Management
Data Collection Budget Allocation
15. Roles and Responsibilities (Contd.)
BoDs
Policy (Environmental risk management, own impact reduction, green business facilitation)
Maximum exposure limits
Strategies and budget
CSR reporting
Management
Green culture
Green strategies
Data management and reporting
Internal capacity building
Dissemination of information
Audit and compliance
Green awareness campaign
16. Organization
Green Banking Office
Compliance with GBG
Facilitate other dept. in development of GBG
Periodic review of policies ,strategies
Third party advice
Institutional arrangements-ERM
Environmental risk management
ERM system
Institutional Arrangements - Green Business Facilitation
Green Financing Product
Institutional Arrangements - Resource Efficiency
Own Impact Reduction
17. Environmental Risk Management
Identify, Assess, Mitigate and Monitor Environmental Risks arising from operations of a business
Environmental Risk Avoidance List
Environmental Due-Diligence
Environmental Checklists
Environmental Risk Rating
Environmental Risk Monitoring
Reporting and Documentation
18. Environmental Risk Management System
Identification
• Questionnaire
• Sector Specific
Information
• Other Publicly
Available Information
Analysis
• Internal Policies
• National Policies
• Client Information
Risk Categorization
• Bank‘s Internal
System
19. Environmental Risk Management System
Environmental
Action Plan
• Contractual
Obligations
Monitoring
• Environmental
Performance
Reporting
• SBP
Requirements
20. Green Business Facilitation
Green financing portfolio Agriculture clients.
Pesticides,
Efficient Water Usage,
Efficient Technologies,
Waste Disposal
21. Green Mortgages
Green Loans
Green Credit Cards,
Green Savings Accounts,
Green Checking Accounts
Green CDs
Green Financial Products
Green Money Market Accounts
Remote Deposit (RDC)
Digitalization
Mobile Banking
Online Banking
22.
23.
24. Own Impact/ Resource Reduction
• Energy Efficiency
• Mobility
• Procurement
• Energy
• Waste
• Water
•Mobile Banking
•Internet Banking
•Online Banking
Paperless
Banking
Infrastructure
Green Buildings
Various
Impact Reduction Target
Inventory of consumption of resources
like Electricity, Water, Petroleum,
Paper etc., along with targets to
minimize ‘Baseline scenario ”
• Green Branches
• Paperless Banking
Mobile Banking
Data Storage Disk
E-Statements
Internet Banking
25. Green IT Infrastructure
Energy Star Appliances
In 2016 alone, ENERGY STAR helped Americans save approximately 400 billion kWh of electricity with associated emission
reductions of 320 million metric tons of greenhouse gas emissions
Renewable energy ATM/offices
26. • Discourage the excessive use of lighting.
• Use technology for virtual meetings.
• Consider installing solar panels.
• Upgrade all equipment with energy star appliances.
• Use centralized air cooling systems.
• 3R (Reduce, Reuse, Recycle)
• Waste segregation system
• Reducing packaging amounts
Green Practices
• Print documents double-sided.
• Print preview documents before hitting print button.
• Proof read the document on screen before you print.
• Print only the required pages you need from a large document.
• Use, paper printed on one side, to use for scrap or note paper.
• Use second quality paper.