Green Loans in Bank Portfolio: Financial and Marketing Implications

Abstract

Banks represent important subjects in business, with dominant positions in the financial system in the world. Banks developed various financial products and services that can cover most market needs. As a result of adequate portfolio diversifications, banks recorded positive profitability rates. In addition to being adjusted to competition, banks should also focus on the environment. Therefore, banks have recognized an opportunity to offer green products and services and support environmentally-friendly initiatives and projects. The aim of this paper is to identify whether crucial determinants of bank profitability are moderated by the presence of green loans in the bank portfolio. For this purpose, a panel fixed-effects approach was applied to data from the Republic of Serbia (2014–2021). The obtained results indicate that the presence of green loans in a bank’s portfolio moderates the influences of a bank’s liquidity on the bank’s profitability measured by return on assets (ROA) and return on equity (ROE). The contribution of the conducted research is that it is, according to the authors’ knowledge, the first measurement and estimation of the moderating effects of green loans’ presence in banks’ portfolios on their profitability. In addition to financial, marketing implications were considered.