Evaluation of Green Banking in Pakistan Using Framework of the Central Bank: Employing TOPSIS Approach

Abstract

The purpose of current research is to evaluate commercial banks’ performance regarding Green Banking (GB) practices using State Bank of Pakistan’s (SBP) framework as criteria. The study aims to rank and compare commercial banks with respect to their acceptance, adoption and implementation of green guidelines issued by SBP. The research design comprises of systematic review of literature, data extraction and analysis. Literature review consists of overview of GB practices in global banking industry as well as local industry of Pakistan. SBP has issued guidelines and required its commercial banks to transform banking practices towards green practices as a step towards sustainable green economy. The study is cross-sectional; the data collection involves content analysis of annual reports of commercial banks of Pakistan for the year 2021. Out of total forty-one banks, fourteen banks are shortlisted, using purposive sampling method, that have disclosed information about their GB practices in their annual reports. Analysis is performed using Multi-Criteria Decision Making technique (MCDM) of ‘Technique for Order Preference by Similarity to Ideal Solution’ (TOPSIS). As per findings, Habib Bank Ltd. is at the top of bank rankings, Allied Bank is at the second and Soneri Bank is at the third rank in initiating, implementing, disclosing and obtaining positive outcomes out of their green banking initiatives. The study has implications for regulators, policy makers and practitioners. It can fill the gap in literature by adding a discussion on an important topic that is being ignored by previous researchers. The regulatory institution (i.e. SBP) can learn performance of its banks on GB guidelines. The practitioners can evaluate themselves on green practices scale and learn on how to improve their practices to perform better ahead of competitors.