Even though industrialization has been the biggest blessing for us, the drawback of overusing the resources, pollution and deforestation have led the universe to a point where our very existence has become perilous. As global warming and adverse impacts of climate change are on the rise, the presence of our accommodation and habitat has come to a point where it is imperative that every individuals focus their attention towards saving the planet. In this milieu, green finance has been defined as finance focused in increasing the positive impacts of the environment (or decreasing the negative impacts) and conserving natural resources. At the same time, sustainable finance integrates the environmental, social and governance criteria in the financing decisions. Both green and sustainable finance is a step towards addressing the drastic climate change and also ensuring long term sustainability of the society.

Green & sustainable finance promote and support the flow of financial instruments towards the development and implementation of sustainable projects, which include sustainable business models, investments, trade, and economic, environmental and social development. As the financial sector plays a key role through its intermediary functions and risk management in advancing sustainable economic growth while directing investment to the real economy, the intertwinement of green finance and sustainable finance is crucial. Moreover, global initiatives like United Nations Sustainable Development Goals (SDGs), Paris Agreement, United Nations Environment Programme Finance Initiative (UNEP FI) all are dedicated to addressing the global changes and countries including Bangladesh, have exhibited their unity towards these initiatives with an aspiration to mitigate the current hazardous impact of climate change. Thus, green and sustainable finance have become a crucial basis for securing investments for greater commitment to the climate. Green finance can help to motivate clients and other stakeholders by introducing energy efficient technologies, biological ETP, renewable energy and lowering the carbon emission and conserving natural resources. Again, banks and FIs being business entities, it is their responsibility to consider social and economic impact while performing their functions. Thus, green and sustainable finance give financial institutions opportunities in leaving their marks for a better and greener future.

Sustainable and green finance open opportunities by integrating the environment, social and governance criteria while taking business or investment decisions. It creates long term value for economy, environment and society. Sustainability in financing can be achieved by linking vision, mission and objectives with sustainable economic, environmental, social contribution and governance. Financial institutions are committed to play an active role of being an intermediary between the economy, environment and society to address this global challenge. The central bank and financial institutions are taking initiatives more seriously as the financial risks from climate change are becoming more apparent and relevant to the banking sector. Financial institutions are mobilizing the finance to promote the transition of the global economy towards low carbon activities. One of the ways in which banks can facilitate this transition is by issuing green debt financing instruments (including bonds, loans, commercial paper, certificates of deposit and other debt or financing structures) to facilitate capital for low-carbon emission and environmentally sustainable economic activity. Moreover, to attain the global target of limiting the temperature rise by 2 preferably 1.5 degrees Celsius, compared to pre-industrial levels, different development financial institutions, nations, and international organizations are offering subsidies, grants and concessional loans for motivating banks and end borrowers. Financial institutions can use these opportunities for onboarding new clients and instilling sustainability in the society and economy.

Bangladesh Bank first introduced the term Green Banking in the investment world in 2009 and it began to popularize sustainable financing more broadly in 2011 by issuing guidelines on green banking in the country. The main ambition behind the advent of this journey was to contribute in the aspiration of transforming Bangladesh to a sustainable economy. The policies and regulations by Bangladesh Bank were incorporated to create an eco-friendly environment and healthy society, which would boost our economy in a broader perspective. To further bolster this initiative Green banking policy was issued to NBFI and scheduled banks in 2013 by Bangladesh Bank. As the time evolved and the need of clients became diversified, Bangladesh Bank came up with new refinancing schemes and grants like “Refinance Scheme for Green Product/ Initiative/Project” – a fund of BDT 400 cr and “Technology Development/Up-gradation Fund” – a fund of BDT 1,000 cr which were some of the noble steps of onboarding banks and FIs to collaborate sustainability in their financing decisions. In July 2015, Bangladesh Bank to deliver the message to the broader stakeholders, decided to abolish separate Green and CSR department from Bangladesh Bank and introduced Sustainable Finance Unit. Moreover, Bangladesh Bank also instructed all the Banks & FIs to do the same (SFD Circular No. 02 dated December 01, 2016). The main desire behind this measure was to ensure that stakeholders are receiving the message that Bangladesh Bank sees the whole CSR activities, Green financing and Financial Inclusion as a collaborative initiative towards society and the environment.

For all these years, Bangladesh Bank has continuously tried to integrate international funding like - JICA and SREUP, to provide the clients and banks with better opportunities. These funds and concessional loans would increase the number of renewable energy technology, energy-efficient machineries, waste treatment plant, safety related machineries and much more. Investing in these projects would positively impact the environment and society which further instil sustainability in the economy.

Bangladesh government being dedicated towards sustainability, is recently working on the Green Credit Guarantee Schemes (GCGS), which will initially focus on brick field industry, solid waste management, rooftop solar projects and Biogas Sector and later would be expanded to more sectors depending on the demand and opportunities. These sectors have been chosen carefully to bolster the opportunities for the end borrowers and giving them new ways to shape their businesses while ensuring sustainability.

The fact that Bangladesh Government is dedicated to developing a sustainable economy has been substantiated by its recent sustainable finance policy, which has crucially pointed out the difference between green and sustainable finance. Through this policy, 68 products have been defined as green products under 9 categories. Among these products, 55 have been selected for which end borrowers can apply for refinancing at a lower interest rate (6% to 7%). This initiative has contributed to the flow of investments towards products that would positively impact the environment by reducing carbon emission and by treating the waste materials. Similarly, “Technology Development/Upgradation Fund” (currently available at an interest rate of 5%-6%) was introduced to make this country more technologically updated and thus to conserve the resources. Even though Bangladesh Bank has taken commendable measures in the path of sustainability, this country requires more facilitating opportunities and training from public, private and development sectors to educate the mass and to motivate them for a prosperous future.

Without considering the environmental and social impact of the investments, businesses cannot sustain in the long run. As the global entities are focusing their attention on the drastic rise of temperature and the deterioration of the climate, it is evident that soon every nation and regulatory body will compel individuals to consider the environment, society and governance in their decisions. Being one of the most pivotal bodies in the economy, financial institutions need to understand this and use this as an opportunity for long term sustainability and gain while conserving the society and environment.

As profit margins and risk management remain the key criteria for both investors, and fund providers, societies are concerned that those who respect the environmental profile and impact of a project should be fully recognized and supported by the policies and regulations of sustainable finance. The central bank and financial regulators emphasize on long-term, well connected and beyond self- preserving growth policies that work for the society as a whole. Obviously, sustainable finance has become the centerpiece of this paradigm-shifting policy discourse.

Green financing boosts financial flows in banking, financial institutions, and investments. Many countries like the USA, China, Japan etc., focus on green finance more to save our planet. Ecological benefits and accountability are also critical parts of green finance. UN is already working with the governments and more institutions to integrate the economic systems with the help of 2030 schedule. It also helps to achieve sustainable development goals too.