Financial institutions

What can banks and financial institutions do?

We believe the central bank will come up with pragmatic targets for banks and financial institutions to reduce carbon emissions to achieve sustainability in line with the global banking industry.

For all the latest news, follow the Daily Star’s Google News channel.

The increase in greenhouse gas (GHG) emissions, air and water pollution, the eruption of the ozone layer and these devastating environmental events have significantly affected the climate, the ecosystem and livelihoods.

The crisis began in the 18th century on the brink of the industrial revolution of Europe and the United States when people strongly aspired to consumption beyond their basic needs. Over time, unprecedented events like massive energy use and environmental degradation have led to global warming, drought, sea level rise, loss of biodiversity, heat waves extremes, catastrophic climate change and resource depletion.

The impact of these events is quite evident and has become a global concern. If this continues, we are heading towards mass extinction and every country, developed or developing, will fall victim to this dramatic event.

Organizations such as the United Nations, the United Nations Framework Convention on Climate Change, the United Nations Global Compact, the United Nations Environment Program Finance Initiative (UNEP FI) are taking as many initiatives as possible to onboard stakeholders and entities to address climate change and mitigate the ongoing disaster.

The Paris Agreement is a legally binding international treaty adopted by 196 Parties at COP 21 in Paris where countries recognized climate change and signed the treaty with the ambition to limit global warming to well below two degrees Celsius , preferably below 1.5 degrees Celsius relative to pre-industrial levels by reducing GHGs.

Under the agreement, countries are required to strive for social and economic transformation and have been asked to submit their Intended Nationally Determined Contributions (NDCs) by 2020. The Sustainable Development Goals (SDGs ) of the UN, introduced in 2015, also aim to ensure the long-term viability of society and the economy.

All of these initiatives and evidence of radical climate change have made it clear that every group and entity must participate in reducing GHG emissions, conserving limited resources and protecting biodiversity.

Banks and financial institutions (FIs) are not reimbursed for this. FIs are the intermediary between households and businesses. These entities decide who should receive individuals’ savings and where they should be invested for the future growth and development of the economy. Thus, their responsibilities become enormous and vital when it comes to fighting climate change and reducing GHG emissions.

UNEP FI has been very strong in guiding banks and FIs to recognize climate change and the impact of GHG emissions on the environment. He has launched different programs like the Collective Commitment to Climate Action (CCCA) and the Net Zero Banking Alliance (NZBA) to unite the banking sector to reduce GHG emissions by setting intermediate SMART targets and thus achieve net zero emissions or carbon neutrality by 2050. .

In Bangladesh, IDLC Finance Ltd is the only financial institution that has been a signatory member of UNEP FI since 2010 and signed the CCCA and NZBA agreements in 2019 and 2021, respectively, to achieve net zero emissions by 2050 through its inner workings. and loan portfolio.

It is high time that other banks and financial institutions come forward to fight climate change and address GHG emissions through their operations and loan portfolio. By setting SMART goals and developing a sustainable portfolio, banks and FIs can achieve net zero emissions, which would ultimately help reduce global temperature and increase environmental, economic and social sustainability.

Bangladesh, as a member of the UN and a signatory to the Paris Agreement, has a responsibility to incorporate imminent constructive strategies to mitigate carbon emissions and thereby mitigate drastic climate change.

Banks and FIs are responsible for injecting development into the economy and can therefore play an active role in mitigating climate change. In this regard, as a regulator, Bangladesh Bank has played a vigorous role in guiding banks and financial institutions to reduce global temperature and GHG emissions.

The introduction of the sustainable finance policy in 2020, the obligation for banks and financial institutions to set annual targets for green and sustainable finance, the deployment of various refinancing/pre-financing programs for green and sustainable finance and increased stakeholder awareness are some of the commendable steps taken by the BB.

We believe the central bank will also propose pragmatic targets for banks and financial institutions to reduce carbon emissions to achieve sustainability in line with the global banking industry.

If we do not take imminent action, we will fail to conserve nature and it will hit us drastically where our own existence would become questionable. So, along with various other sectors, banks and FIs must also contribute to this effect with vigilance.

The author is a business manager at IDLC Finance Ltd. He can be contacted at [email protected]