G reen or Sustainable Banking: Bangladesh Bank’s Initiatives & Bank’s Activities

1. Green or Sustainable Banking:Bangladesh Bank’s Initiatives& Bank’s Activities AtiurRahman, Ph.D. Governor Bangladesh Bank email: governor@bb.org.bd Bangladesh Bank

2. Declaration in Rio+20 UN Conference on Sustainable Development The Future We Want “We view the green economy as a means to achieve sustainable development, which must remain our overarching goal. We acknowledge that a green economy in the context of sustainable development and poverty eradication should protect and enhance the natural resource base, increase resource efficiency, promote sustainable consumption and production patterns, and move the world toward low-carbon development.” Bangladesh Bank

3. Bangladesh Economy: Major Macro Economic Indicators • Development strategies of Government of Bangladesh laid down in the Perspective Plan and the Sixth Five Year Plan declare clear commitment of pursuing sustainable growth. • Over the past 40 years, nominal GDP in USD has increased more than eighteen-fold, while the population has increased a little over two-fold. • Real GDP growth averaged at around 6.0% annually over the last 10 years. And this growth has been less extractive of the natural resources. • Trade openness has increased in globalized Bangladesh economy; with trade/GDP ratio rising from around 20.0% during the1970s and 1980s to 52% around in FY 2011-12. • Poverty has come down to 31.5% (2010) of the population now, from round 57.0% in the 1990s. • Bangladesh has increased her human development index with lower level of per capita material consumption compared to many other developing economies implying greener economic growth. • Bangladesh is one of the star performers in reducing poverty and enhancing Human Development Index (HDI) Bangladesh Bank

4. Climate Change-Vulnerabilities Despite the developments as mentioned, Bangladesh falls into the group of most climate change vulnerable countries. Climate change is already affecting Bangladesh in terms of : • Increased susceptibility to natural disasters. • Storm surges, floods, and prolonged droughts. • Water logging, rough seas and cyclones. • Sea level rise. • Increased air and sea surface temperatures. • Reduced dry season precipitation o Reduced dry season precipitation. • Loss of bio-diversity and deforestation. • Destruction of wetlands and inland fisheries. • Arsenic contamination in the ground water and inland salinity intrusion. Bangladesh Bank

5. Bangladesh Bank’s Response Bangladesh Bank is probably the first central bank which has issued an indicative guideline for Green Banking. The financial sector of Bangladesh is contributing towards green economic development through initiating various green banking activities. Green Banking makes great contribution to the transition to resource-efficient and low carbon industries i.e. green industry and green economy in general. Bangladesh Bank

6. Green Banking Green Bank Ethical, Socially Responsible and Sustainable Bank Green Banking Sustainable Banking BB’s Initiatives Policy Support, Refinance Line, In-house Green Activities Bank’s Activities Environmental Risk Rating Green Financing Direct & Indirect CSR Activities for Green Event and Green Project Green Marketing In-house Green Initiatives/Activities Capacity Building Research & Development Bangladesh Bank

7. Bangladesh Bank’s Initiatives Policy Support Bangladesh Environmental Risk Management Guidelines, 2011 Environmental Risk may be a facilitating element of Credit Risk due to change in the environmental condition or climate change but not a part of Credit Risk Credit Risk Management will take care of Environmental issues. Environmental Risk Rating for 4 Category Industrial Units [Green (least polluted), Orange A (medium scale polluted), Orange B (large scale polluted) & Red (most polluted) EnvRR - Low, Moderate, High Assessment: Qualitative Basis Policy Guidelines for Green Banking, 2011 Environmental Risk Management Guidelines is for assessing environmental risks from the environmental perspective Assessment on Environmental Due Diligence(EDD) Checklists Environmental Risk Management Guidelines are part of Green Banking and Quarterly Reporting System as well • Quarterly Reporting System • Reporting of Green Banking Activities • BB’s evaluation upon Bank’s: • Policy Formulation & Implementation • Budget Allocation & Utilization • Activities of Green Banking Unit of the bank • Environmental Risk Rating • Green Financing • Climate Risk Fund Utilization • Green Marketing and Capacity Building • Online Banking • In-house Environment Management • Sector Specific Environmental Policy • Green Strategic Planning • Environmental Risk Management Plan • Designing & Introducing Innovative Product • Disclosure and Reporting Bangladesh Bank

8. Bangladesh Bank’s Green Banking Initiatives(Refinance line for Renewable Energy) Bangladesh Bank (BB) has introduced Taka 2 billion refinance line at only 5% rate of interest. Refinancing at bank rate (currently 5%) Investor Commercial Bank Bangladesh Bank Payback at 5% payback at 9% Margin (9%-5%)=4% Bangladesh Bank

9. Bangladesh Bank’s Green Banking Initiatives (Refinance line for Renewable Energy) Bank rate + 4%(Maximum)=9% Refinancing at bank rate (currently 5%) 9%(maximum)+1%=10% NGO Linkage Investor Bangladesh Bank Commercial Banks payback at 5% payback at 9% payback at 10% Margin (9%-5%)=4% Margin (10%-9%)=1% Bangladesh Bank

10. Bangladesh Bank’s Green Banking Initiatives (Categorywise refinance line for Renewable Energy) Bangladesh Bank supporting financing of renewable energy generation and other environmentally benign projects. BB has disbursed taka 251.23 million & taka 853.54 million till Dec. 2011 & Dec. 2012 respectively. Bangladesh Bank

11. Bangladesh Bank’s Green Banking Initiatives Automation. Installation of 8 kilowatt solar power system Online Credit Information Bureau Bangladesh Automated Clearing House National Payment Switch Enterprise Data Warehouse Refinance program Enterprise Resources Planning Initiatives to convert 30 storied BB Building to Green Building with rain water harvesting, waste water recycling and motion sensor energy efficient bulbs supported by window based solar panels e-recruitment e-tendering Bangladesh Bank

12. Sources of Environmental Risk Mental Agony Effect of Earth Quake Mental agony of a female worker of a Garment factory because of wage discrimination. She earns less than a male worker for the same working hour inclination of buildings one over another Bangladesh Bank

13. Sources of Environmental Risks Air Pollution Sound Pollution Climate Change Impact Water Pollution Bangladesh Bank

14. Environmental Risk Rating by Banks Number of projects/business financed after EnvRR Bangladesh Bank

15. Bank’s Activities- Direct Green Finance Effluent Treatment Plant Automatic Brick Manufacturing plant Reducing CO₂ emission Solar Panel Solar driven ATM Booth Minimization of emission of CO₂ & Cl₂ by Chemical Plant Recycling Flue Gas & Water Bio Gas Plant Bio Gas driven stove/cooking Bio Gas driven irrigation pump Bangladesh Bank

16. Bank’s Activities- Indirect Green Finance Solar driven ATM Booth Automatic Brick Manufacturing plant Reducing CO₂ emission Textile Factory Effluent Treatment Plant (ETP) Insight of the Factory Bank Finance for the Textile Factory having ETP Bangladesh Bank

17. Green Finance (Comparison between 2011 & 2012) Bangladesh Bank

18. Direct Green Finance in 2012 Bangladesh Bank

19. Bank’s Green Banking Activities (Green Finance in 2012) Bangladesh Bank

20. Bank’s Green Banking Activities CSR Activities for Green event and Green Project Bank’s Climate Risk Fund covers their part of CSR activities as green event or green projects related to Climate Change Risk. Banks have utilized US Dollar 3.22million in 2012 from their Climate Risk Fund. Bangladesh Bank

21. Bank’s Green Banking Activities CSR Activities for Green event and Green Project CSR activities that will ease climate change risk. A small contribution to environment was plantation of 5000 saplings in those areas by EBL while opening new branches Bank extends hand through Corporate Social Responsibility to make the country Green Distribution of Blankets as part of CSR Activities Setting up Deep tube wells at “Sidr” hit area, Barguna, Barisal under “Climate Risk Fund” of Bank Asia Ltd.

22. Bank’s Green Banking Activities Usage of Solar Power in a small village shop. Online Banking for saving natural resource & energy. Express Cash & Alert Pay (Payza) of Bank Asia Ltd. Launching Green Product for Sustainable Financing Effluent Treatment Plant

23. Capacity Building • Awareness & Practice • Bank’s Relevance in ESMS: Linkage between Credit Risk and Environmental Risk • Preparing sector specific environmental policy guidelines • Quantitative approach for more justified Environmental Risk Rating (EnvRR) Bangladesh Bank

24. Preferential Treatments Points on Management component of CAMELS rating for compliant banks Top 10 Banks in the BB website BB’sPreferential Treatments for Green Banking Priority in opening new bank branch SME branch subject to installation of solar panel in place Weight assignment for Environmental Risk in computing Adequate Capital Bangladesh Bank

25. Challenges Ahead • Six Major Challenges • Coordination among all the • concerned authorities for a • green economy. • Speeding up awareness • and capacity building. • Immediate concentration on sectoral lending policies and procedures. • Need for applying a quantitative approach for EnvRR for a more justified rating. • Shifting of different categories of industry (such as, Garments, Textiles, Tannery) to a proper location. • Awareness of the Top Management

26. Many Thanks Bangladesh Bank

27. Lets have a look in video of green banking

28. Lets have a look in video of green banking