Do Green Banking Activities Improve the Banks’ Environmental Performance? The Mediating Effect of Green Financing

Xin Zhang,Zhihui Wang,Shouzhi Yang,Xiaobing Zhong,Abu Bakkar Siddik

doi:10.3390/su14020989

Abstract

The main purpose of this study is to identify the impact of green banking activities on green financing and banks’ environmental performance. It also identifies the mediating effect of green financing on the relationship between green banking activities and environmental performance of private commercial banks (PCBs) in Bangladesh. Besides, this study also examines the major challenges and benefits of green banking development in an emerging economy like Bangladesh. The convenience sampling technique was used to collect primary data from bankers of PCBs in Bangladesh, and a final sample size of 352 was recorded. To assess the relationship among the study variables, the Structural Equation Modelling (SEM) approach was employed. The empirical results revealed that green banking activities exhibit a significantly positive effect on banks’ environmental performance and sources of green financing, and that sources of green financing significantly influence banks’ environmental performance. Additionally, it was observed that green financing mediates the association between green banking activities and banks’ environmental performance. Furthermore, the study identified customers’ insufficient awareness towards green banking, high investment costs, technical obstacles, lack of capable and competent staff in appraising green credits/loans, and difficulties and complexity in assessing green projects as major challenges affecting the development of green banking in Bangladesh. Moreover, the study also discovered that increasing banks’ competitiveness, reducing long-term costs and expenses, providing online banking facilities, improving customers’ goodwill, and reducing carbon footprints are the key benefits of green banking development, as it helps in the achievement of the sustainable economic development of the country. Therefore, major theoretical and managerial policy implications are further discussed with study limitations and future research directions.

Highlights

The study further identifies the major challenges encountered in the implementation of Green banking (GB) by private commercial banks (PCBs) in Bangladesh and presents the significant benefits of GB
Primary data were used in this study to achieve the above research objectives, and data were collected from bankers of the selected PCBs in Bangladesh through structured questionnaires
The outcome indicates that Hypothesis 1 is supported, highlighting a significant positive relationship between GB activities and banks’ environmental performance

Summary

Introduction

The planet suffers from climate crises such as droughts, storms, coastal flooding, rising sea level, and tsunamis. These climate changes endanger the sustainable lifestyle on this globe, prompting developed and developing countries, Bangladesh, to act urgently and collectively [1]. Bangladesh is perceived as one of the world’s growing economies, as it is characterized by enormous investments, development, and economic potential to become a prominent market in the 21st century [2,3] Emerging countries such as Bangladesh experience challenges of climate change and its associated implications on the environment [1,4].

Objectives

Methods

Results

Conclusion