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Primarily there are two major reasons why todays economic system and financial institution system are
causing unsustainable development: first, they methodically transfer money and resources from poor to
rich; second, the money-must-grow paradigm drives production to even higher levels (Pinter Eva,
Deutsch Nikolett , Ottmar Zoltan(2014))
Very often when we talk about sustainability we discuss manufacturing plants, their role in pollution,
greenhouse gases and new technology which can help in creating a sustainable environment. Often in
these discussions, role of Financial Institutions is conveniently neglected. The market capitalization of
banking assets in India has reached US$ 1.4 trillion as on August 21, 2015 and is expected to reach
US$ 28.5 trillion by FY 2025[10]. This clearly talks about how big this industry is and the impact it can
have on our system.
In the last 2-3 decades, lot of publications have come up which discuss social and natural obligation of
firms. Moderately, ecological mindfulness has grown less in financial institutions than manufacturing
firms in light of the fact that these establishments view themselves as environment benevolent generally.
Through this article, an endeavor has been made to see how financial institutions can assume a part in
supportable advancement.
Internal
Direct impact on environment
Utilization of water, energy,
paper and amount of waste
generated during operations
External
Indirect impact on environment
Investments in manufacturing
firms, lending and risk
management activities.
Although, internal issues have direct impact on environment they have less impact compared to external
issues.
Internal issues are internal to the institution and governed by employees, shareholders, directors of
institutions, environmental awareness, individual goals, reputation of financial institution, etc.
External issues are governed by environmental awareness of customers, behavior of competitors, rules
and regulations from government and pressure from society.
Financial resources turn into a key element in coming to economic improvement. Financial Institutions
can choose around a great deal of undertakings in which they are going to contribute, they can impact
green ventures in light of the fact that their budgetary influence and position permits them to bolster
organizations which show socially and environmentally responsible behavior.
Financial Institutions can adopt two strategies while making decisions to integrate environment in their
business:
1. Core Strategies
They can see environment as a potential business avenue. With growing concern towards
environment, many firms want to become environment friendly. Financial institutions can help
them in realizing their goals by following means:
i.
to build the ability to 100 MW in next 5 years with the point of decreasing the reliance on thermal power
plants which cause contamination. The bank likewise plans to offer advances on need and at lower loan
costs to bolster green activities of customers. It has likewise launched a loan item called 'Carbon Credit
Plus' to bolster money related needs of SUZLON CMD [Dr. Nishikant Jha and Shraddha Bhome (2013)]
Initiatives taken in International Market
Standard & Poors has recently incorporated sustainability factors while giving ratings to
sovereign bonds. In this process, they have identified climate change as one of the key factor
affecting bond prices. [14]
Dow Jones Sustainability Index has been launched by RobecoSAM in collaboration with S&P
Dow Jones Indices. Index comprises of companies which have a sustainable business model and a
yearly review
Brazils banking regulations mandate socio-environment risk management along with other credit
risk and operations risk management.
Dutch bankers have pledged to incorporate sustainability factors while making investments to take
care of all the stakeholders ( not just the investors)
In US, tax exemptions are given to bonds which are made for renewable energy investments.
United Nations Environment Programme (UNEP) Inquiry into the Design of a Sustainable
Financial system was established in 2014 to align the financial system with sustainable
development by incorporating social and environmental factors.[14]
Conclusion
With growing concern regarding sustainability of planet and Indias recent Carbon emission pledge to
reduce carbon emissions by 33-35% by 2030 from 2005 levels needs cooperation from all fields of the
society. Financial Institutions can no more shrug off their role in sustainable development. Financial
institutions need to come up with innovative products and methods to support sustainable development of
society and environment. This will not only keep our environment and society healthy but also help in
survival of banking industry as environmental hazards possess one of the highest risk to banks assets.
Therefore, Indian Banks should focus towards Green banking as a business model without any delay.
I declare that this written submission represents my ideas in my own words and where others ideas or
words have been included, I have adequately cited and referenced the original sources. I also declare that
I have adhered to all principles of academic honesty and integrity and have not misrepresented or
fabricated or falsified any idea/data/fact/source in my submission. I understand that any violation of the
above will be cause for disciplinary action by the institute.
REFERENCES