Website: www.bb.org.

bd

Green Banking and CSR Department

Bangladesh Bank
Head Office
Dhaka

August 11, 2013

GBCSRD Circular No- 04 Date: ------------------------------
Sraban 27, 1420

Managing Directors/Chief Executives

All Financial Institutions Licensed under Financial Institution Act, 1993.

Dear Sir,

Policy Guidelines for Green Banking

Introduction:

You are aware that global warming is an issue that calls for a global response. The rapid change in
climate will be too great to allow many eco-systems to suitably adapt, since the change have direct
impact on biodiversity, agriculture, forestry, dry land, water resources and human health. Due to
unusual weather pattern, rising greenhouse gas, declining air quality etc. society demands that
business also take responsibility in safeguarding the planet. Green finance as a part of Green
Banking makes great contribution to the transition to resource-efficient and low carbon industries
i.e. green industry and green economy in general. Green banking is a component of the global
initiative by a group of stakeholders to save environment. The state of environment in Bangladesh is
rapidly deteriorating. The key areas of environmental degradation cover air pollution, water
pollution and scarcity, encroachment of rivers, improper disposal of industrial, medical and house-
hold waste, deforestation and loss of open space and loss of biodiversity. In addition, Bangladesh is
one of the most climate change vulnerable countries. In line with global development and response
to the environmental degradation, financial sector in Bangladesh should play important roles as one
of the key stake holders.

In response to the above, urgent measures are required by stake holders for sustainable development
and thereby save the planet. Financial Institutions (FIs) as financial intermediary hold a unique
position in an economic system that can affect production, business and other economic activities
through their financing activities and thus may contribute to pollute environment. Moreover, energy
and water efficiency and waste reduction are of high concern for FIs. Green FIs or environmentally
responsible FIs do not only improve their own standards but also affect socially responsible
behavior of other business.

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Adopting Green Banking Policy:

Now it is the high time for the FIs to adopt a comprehensive Green Banking Policy in a formal and
structured manner in line with global norms so as to protect environmental degradation and ensure
sustainable banking practices. With a view to developing green banking practices in the country, an
indicative Green Banking Policy and Strategy framework has been developed for the FIs in the
following manner:

Green Banking Policy needs to be covered through time frame work which will be segregated into 3
phases.

1. Phase-I

FIs are to develop green banking policies and show general commitment on environment through
in-house performance. The time lining for the actions to be taken under Phase-I should not exceed
June 30, 2014.

1.1 Policy Formulation and Governance

FIs shall formulate and adopt broad environmental or Green Banking policy and strategy approved
by their Board of Directors. A high powered Committee comprises of directors from the Board in
should be responsible to review the FIs environmental policies, strategies and program. FIs shall
approve a considerable fund in their annual budget allocation for green banking. FIs are required to
establish a separate Green Banking Unit or Cell having the responsibility of designing, evaluating
and administering related green banking issues of the FIs. A senior executive should be assigned
with the responsibility of heading the unit. The unit will report to the high powered committee time
to time.

1.2 Incorporation of Environmental Risk in CRM

FIs shall comply with the instructions stipulated in the detailed guidelines on Environmental Risk
Management (ERM) in consideration of a part of the Green Banking Policy. FIs shall incorporate
Environmental and Climate Change Risk as part of the existing overall credit risk methodology
prescribed to assess a prospective borrower from both credit and environmental risk point of view.
This will include integrating environmental risks in the checklists, audit guidelines and reporting
formats. All of this will help to mainstream Environmental Risk that cover possible sources of
Environmental Risk such as Land use, Climate change related events (cyclone, drought), animal
diseases/pathogens such as avian influenza, solid waste including waste feed, animal waste,
carcasses, sediments, wastewater discharges, hazardous materials, etc will be reviewed under
Environmental Due Diligence (EDD) checklists.

1.3 Initiating In-house Environment Management

FIs shall prepare an inventory of the consumption of water, paper, electricity, energy etc. by its
offices and branches in different places. Then it should take measures to save electricity, water and
paper consumption. A 'Green Office Guide' or at least a set of general instructions should be
circulated to the employees for efficient use of electricity, water, paper and reuse of equipments. In
place of relying on printed documents, online communication should be extensively used (where
possible) for office management and make sure that the printers are defaulted to duplex for double-
side printing to save papers. FIs may apply Eco-font in printing to reduce use of ink, use scrap paper
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as notepads and avoid disposable cups/glasses to become more eco- friendly. Installation of energy
efficient electronic equipments and automatic shutdown of computers, fans, lights, air coolers etc.
will help reducing electricity consumption. Energy saving bulbs should replace normal bulbs in
branches/offices of the FIs. FIs should make plan to use solar energy at their premises to save
electricity. FIs should take steps to save energy from corporate business travel and encourage
employees to purchase energy efficient cars (that consume less fuel) can reduce gas and petroleum
consumption. FIs should give more emphasis to make the easiest way to help environment by
eliminating paper waste, saving gas and carbon emission, reducing printing costs and postage
expenses.

1.4 Introducing Green finance

Eco friendly business activities and energy efficient industries will be given preference in financing
by FIs. Environmental infrastructure such as renewable energy project, clean water supply project,
wastewater treatment plant, solid and hazardous waste disposal plant, bio-gas plant, bio-fertilizer
plant should be encouraged and financed by FIs. Consumer credit programs may be applied for
promoting environmental practices among clients.

1.5 Creation of Climate Risk Fund

FIs should finance the economic activities of the flood, cyclone and drought prone areas at the
regular interest rate without charging additional risk premium. However, FIs should assess their
environmental risks for financing the sectors in different areas for creating a Climate Change Risk
Fund. This will be used in case of emergency. FIs would ensure regular financing flows in these
vulnerable areas and sectors. The fund could be created as part of FIs CSR expenditures.

1.6 Introducing Green Marketing

Green marketing is the marketing of products that are presumed to be environmentally safe. Green
marketing incorporates a broad range of activities, including product modification, changes to the
production process, packaging changes, as well as modifying advertising. It refers to the process of
selling products and/or services based on their environmental benefits. Such a product or service
may be environmentally friendly in itself or produced and/or packaged in an environmentally
friendly way. FIs should use environmental causes for marketing their services to consumer. Green
marketing is expected to help awareness development among common people.

1.7 Supporting Employee Training, Consumer Awareness and Green Event

Employee awareness development and training on environmental and social risk and the relevant
issues should be a continuous process as part of the FIs Human Recourse Development. Awareness
development among consumers and clients would be a continuous job of a FI under its public
relation department.

1.8 Disclosure and Reporting of Green Banking Activities

FIs shall report on the initiatives/practices to Green Banking and CSR Department of Bangladesh
Bank in specified format (Annexure-A) on quarterly basis and disclose in their respective websites.
FIs have to submit the report within the next 15 days of each quarter.

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2. Phase-II

The time lining for the actions to be taken under Phase-II should not exceed December 31, 2014.

2.1 Sector Specific Environmental Policies

FIs need to formulate strategies to design specific policies for different environmental sensitive
sectors such as Agriculture, Agri-business (Poultry and Dairy), Agro farming, Leather(Tannery),
Fisheries, Textile and Apparels, Renewable Energy, Pulp and Paper, Sugar and distilleries,
Construction and Housing, Engineering and Basic Metal, Chemicals (Fertilizers, Pesticides and
Pharmaceuticals), Rubber and Plastic Industry, Hospital/Clinic, Chemical Trading, Brick
Manufacturing, Ship breaking etc.

2.2 Green Strategic Planning

A FI should determine green targets to be attained through strategic planning. FIs should determine
a set of achievable targets and strategies, and disclose these in their annual reports and websites for
green financing and in-house environment management as well. For in-house environment
management, the target areas should cover attaining energy efficiency in the form of the use of
renewable energy, reduction of electricity, gas, and petrol consumption, reduction of Green House
Gas (GHG) emissions, issuance of e-statements, electronic bill pay, saving papers, environment
friendly office buildings etc. For Green Financing, the target areas should cover reducing loans for
certain environmentally harmful activities, attaining a particular percentage of environmental loans
as percentage of total, introducing eco-friendly financial products etc.

2.3 Setting up Green Branches

A Green Branch should be featured by the provision of the maximum use of natural light, use of
renewable energy, use of energy saving bulbs and other equipments, reduced water and electricity
use, use of recycled water etc. Such a branch of a FI would be specifically designated as a Green
Branch. A Green Branch will be entitled to display a special logo approved by Bangladesh Bank.
The criteria for certification of a Green Branch will be circulated by Bangladesh Bank in due
course of time.

2.4 Improved In-house Environment Management

Strategy of reuse, recycling of materials and equipments, and source reduction and waste
minimization strategy should be part of in-house environmental management in Phase-II. FIs should
increasingly rely on virtual meeting through the use of video conferencing in lieu of physical travel
which would help saving cost and energy.

2.5 Formulation of FI Specific Environmental Risk Management Plan and Guidelines

A FI should develop and follow an environmental risk management manual or guidelines in their
assessment and monitoring of project and working capital loans. In addition to the compliance of
national regulation the FIs may set internationally accepted higher environmental standards. In this
connection, Green initiatives by a group of FIs will not only be effective but will also offer
competitive advantage. FIs alliances may prepare standard and guidelines for themselves for
improving Green Banking practices.

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2.6 Rigorous Programs to Educate Clients

Clients and business houses should be encouraged and influenced to comply with the environmental
regulations and undertake resource efficient and environmental activities. FIs should introduce
rigorous programs to educate clients.

2.7 Disclosure and Reporting of Green Banking Activities

FIs should start publishing independent Green Banking and Sustainability reports showing past
performances, current activities, and future initiatives. Updated and detailed information about FIs
environmental activities and performances of major clients should be disclosed.

3. Phase-III:

A system of Environmental Management should be in place in a FI before the initiation of the

activities of Phase-III. FIs are expected to address the whole eco-system through environment
friendly initiatives and introducing innovative products. Standard environmental reporting with
external verification should be part of the phase. The time lining for the actions to be taken under
Phase-III should not exceed June 30, 2015.

3.1 Designing and Introducing Innovative Products

Alongside avoiding negative impacts on environment through banking activities, FIs are expected
to introduce environment friendly innovative green products to address the core environmental
challenges of the country.

3.2 Reporting in Standard Format with External Verification

FIs should publish independent Green Annual Report following internationally accepted format like
Global Reporting Initiatives (GRI) targeting their stakeholders. There should be arrangement for
verification of these publications by an independent agency or acceptable third party.

4. Reporting Green Banking Practices on Quarterly Basis

FIs shall report their initiatives/activities under the said program to Green Banking and CSR
Department of Bangladesh Bank in specified format (Annexure-A) on quarterly basis. FIs shall
submit their first quarterly report on September 30, 2013 basis within October 15, 2013 and
similarly they will be required to continue to submit reports on the subsequent quarters within the
next 15 days of the respective quarter end.

FIs shall keep their annual report and websites updated with the disclosures on green banking
initiatives/activities.

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5. The compliant FIs practicing Green Banking will have the following preferential
treatments:

(i) BB will award points to FIs on Management component while computing CAMELS rating
where there will ultimately be a positive impact on overall rating of a FI.

(ii) BB will declare the names of the Top Ten FIs for their overall performance in green banking
activities in the BB websites.

(iii) BB will actively consider green banking activities/practices of a FI while according permission
for opening new FI branch.

Please acknowledge receipt.

Yours sincerely,

(Khondkar Morshed Millat)

Deputy General Manager
Phone: 9530292
Fax: 9530327
E-mail: [email protected]

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 Annexure-A
(Name of the FI)
Statement on Green Banking as of dd/mm/yyyy
1.1 Policy Formulation and Governance
Formulation and Board/Regional Head approval of Green Banking Yes No Remarks
1.1.1 Policy

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Remarks

1.1.2 Allocation of Fund in the Budget for Green Banking (in million Taka)
Green Finance
Climate Risk Fund
Marketing, Training and Capacity Building
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Remarks
1.1.3 Utilization of Funds (in million Taka)
Green Finance
Climate Risk Fund
Marketing, Training and Capacity Building
Composition (Name,
Yes No Designation & Deptt.) Remarks
1.1.4 Formation of Green Banking Unit
1.2 Incorporation of Environmental Risk in Core Risks Management (CRM)
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Remarks
1.2.1 No. of Projects applicable for Environmental Due Dilligence (EDD)

No. of Projects Rated (Environmental Risk Rating)

1.2.2 Low
Moderate
High
Total Number
Low
Moderate
High
Total Amount Disbursed (in
million Taka)
1.2.3 Rated Projects financed Low
Moderate
High
Loan classification as of Quarter End
UC (standard) SMA SS DF BL
No. of projects
Amount(in million taka)

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1.3 Initiating In-house Environment Management

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Remarks

No. of Branches and Booths (Data in each quarter will reflect the
1.3.1 cumulative figure)

No. of Branches powered by Solar Energy (Data in each quarter will

1.3.2 reflect the cumulative figure)

No. of Booths powered by Solar Energy (Data in each quarter will

1.3.3 reflect the cumulative figure)

Yes No Remarks

1.3.4 Introduction of Green Office Guide or General Instructions

1.3.5 Pin Points of Green Office Guide or General Instructions

1.3.6 Inventory Details Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Remarks

Consumption of Water (in million Taka)

Consumption of Paper (in million Taka)

Electricity
Energy Consumption (in million Taka) Gas
Fuel

1.3.7 Others (Please Specify)

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1.4 Introducing Green Finance
Amount in million Taka
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Remarks
Number Amount Number Amount Number Amount Number Number Amount

For Installation of ETP (Amount Disbursed)

ETP
Projects financed having ETP(Full amount
disbursed)

Bio-gas Plant

Solar Panel/Renewable Energy Plant

Bio-fertilizer Plant

Hybrid Hoffman Kiln (HHK)

Others (Please specify)

Green Finance at reduce rate of interest

1.5 Utilization of Climate Risk Fund

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Remarks
Fund for part of CSR activities (event) related to
1.5.1 Climate Change (in million Taka)

Fund for part of CSR activities (Project) related to

1.5.2
Climate Change (in million Taka)

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 1.6 Introducing Green Marketing

Introduction of Green Banking Products

1.6.1
(Please Specify)

1.7 Employee Training, Consumer Awareness and Green Event

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Remarks

No. of Training Programs/Seminars /Workshops/
Awareness Programs exclusively conducted for Green
1.7.1 Banking

1.7.2 No. of Participants covered

Employees
Customers

1.7.3 Green Events (Please Specify)

1.8 Disclosure of Green Banking Activities

Disclosure in
Annual Repot
Website
Media
Preparation of Independent Green Banking & Sustainability
Report

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2.1 Sector Specific Environment Policy

Formulation of Sector Specific Environment Policy (Under Yes No Remarks

Phase 2) (If yes, please give the pin points in a separate
2.1.1 sheet)
Name of the Sectors for which Specific Environment Policy
2.1.2 Formulated

2.2 Green Strategic Planning

Yes No Remarks
Formulation of Green Strategic Planning (If yes, please
2.2.1 describe in a separate sheet)

2.3 Environment Risk Management Plan

Yes No Remarks
Formulation of FIs Specific Environment Risk Management
2.3.1 Plan and Guideline

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