Evaluation of Green Banking Performance in Pakistan in The Light of State Bank of Pakistan's Green Banking Guidelines 2017

Abstract

The green finance sector in the banking industry serves as a pillar for making economy of Pakistan resource-efficient and low-carbon economy in this era of climate crisis by following State bank of Pakistan (SBP) Green banking Guidelines. integrating the social, environmental, and economic dimensions. This paper aims to explore the ongoing green banking activities being practiced with reference to SBP’s green guidelines and gauge the awareness of bank’s employees on green banking. Survey questionnaire method was adopted, and report analysis was done to assess the organizational efforts to implement green banking. SmartPLS4.0 structural equation modelling was used for understanding the significance of each SBP pillar on bank’s environmental performance. The study finds that green business facilitation has the most significant positive influence on bank’s environmental performance. It suggests that the green banking performance of Bank of Khyber is the highest and UBL and Dubai Islamic Bank is the weakest in all three pillars of SBP. It also finds that lack of awareness and resources prove to be the two major constraints in banks ability to comply effectively with SBP’s green guidelines. The banking sector in Pakistan must fully comply with SBP’s green guidelines with better performance in the Environment and Social Risk Management (ESRM) sector. Certain banks across Pakistan need to strengthen their environmental performance in all three pillars of SBP. Banks should create Management Employee Awareness (MEA) on green banking and strengthening their resources to invest in green projects.