The Effect of Green Banking Practices on Banks’ Environmental Performance and Green Financing: An Empirical Study

Abstract

Every sector of the global economy is faced with environmental problems and their resulting consequences to their day-to-day operations. Due to the rising threat of global climate change, the green banking (GB) concept has been given significant attention in recent green finance literature. Therefore, the main purpose of this study was to identify the impact of GB practices on banks’ environmental performance and sources of green financing of private commercial banks (PCBs) in Bangladesh. Using a survey method, the primary data were obtained from a cross-sectional sample of 322 banking employees of PCBs in Bangladesh. In order to identify the key relationships existing between the study variables, structural equation modelling (SEM) approach was employed. The empirical findings indicated that banks’ employees, daily-operations, and policy-related GB practices have significant positive effects on green financing, contrary to banks’ customer-related GB practice, which was not statistically significant. Additionally, banks’ green project financing exhibited a strong and positive influence on banks’ environmental performance. Moreover, banks’ daily operation and policy-related practices of GB were observed to have significant impacts on banks’ environmental performances, in contrast to banks’ employee and customer-related GB practices. Therefore, major policy implications and directions for future research in the concerned area are discussed.