Environmental Management practices: Banking Sector
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The document provides an overview of environmental management practices within the banking sector, emphasizing the shift from a passive to a proactive approach towards sustainability through green banking initiatives. It discusses various strategies for banks to minimize their environmental impact and highlights case studies, such as ICICI Bank's Go Green initiative. The Indian banking sector is noted to be lagging behind global standards, although efforts are being made by some banks to adopt greener practices.
Environmental Management practices: Banking Sector
- 1. Environmental Management Practices: Banking Sector I001- Akash Subramanian I002 - Pratyaksh Agarwal I003 - Karan Aggarwal I004 - Aditya Bansal I005 - Saloni Bansal
- 2. Flow of the presentation Banking Sector & the Environment Green Banking Green Banking Strategies Environmental Management Practices: Global & Indian Scenario Key Indicators/Standards Case Study: ICICI Bank’s GoGreen Initiative
- 3. Banking Sector & The Environment Banks do not affect the environment directly Banks always had a passive approach to the environment Various regulations, laws and movements are changing that trend to a more proactive approach Banks are generally considered to be clean in terms of their internal processes and emissions Environmental impact of banks is not physically related to their banking activities, but with their customer’s activities
- 4. What is Green Banking? Green Banking is an term referring to practices and guidelines that make banks sustainable in economic, environment, and social dimensions. It is an initiative by Banking, Financial Services, and Insurance (BFSI) sector in creating a greener and sustainable environment. Green Banking broadly covers processes, products, services & strategies Greening of the IT sector (related to the bank) also plays a major role in Green Banking
- 5. Need for Green Banking Banks interact directly with the environment. For instance, Banks contribute towards the carbon emission directly in their day-to-day operations in terms of use of paper, electricity, lighting, air conditioning, electronic equipment and other things. Banks also interact indirectly with the environment. By financing intermediaries who are the major source of long term funding to various industries that pollute the environment heavily
- 6. Guidelines for Green Banking Greening Processes, Products, Services, and Strategies Making day-to-day business operations, banking products and services greener Greening Infrastructure Making IT Infrastructure and physical infrastructure greener and taking initiatives
- 7. Strategies for Green Banking Strategies Managing environmental risk Identifying opportunities for innovation “Environment management for banks is like risk management”
- 8. Strategies for Green Banking Banks should conduct EIA before investing in a project Adopt Annual Reporting System (ARS) which is an annual report on environmental risk guidelines for every project The rate of interest on loans given for green projects should comparatively less than the normal rate of interest Adoption of Green Street lending, which means offering low rate of interest to businesses for installing solar energy systems and energy saving equipment like solar hot water systems, highly efficient furnaces, heat pumps and replacement windows Set SMART (Specific, Measurable, Attainable, Realistic, and Timely) green goals as the internal targets to reduce carbon footprint along with timelines
- 9. Importance of Green Banking Although banks are not directly affected by environmental degradation, there are indirect costs to banks Strict regulations imposed by countries may lead to closure of industries resulting in default to banks Example: Comprehensive Environmental Response, Compensation and Liability Act in 1980 (CERCLA) in the US in late 1980s held banks directly responsible for the environmental pollution of their clients and made them pay the remediation cost Reputation Risk Legal Risk Conservation of environmental resources
- 10. Environment Management practices: Global picture In the early 1990s, UNEP launched the UNEP Finance Initiative (UNEPFI). It counts over 200 members among leading banks, investment funds, and insurance companies. UNEP Finance Initiative Statements recognize the role of financial service sector in making global economies sustainable. In 2002, a global coalition of NGOs formed a network named BankTrack to promote sustainable banking practices. The network consists of 40 organizations, including Greenpeace International, Rainforest Action Network and various national Friends of the Earth groups.
- 11. Environment Management practices: Global picture In 2003, IFC came up with a risk management framework known as The Equator Principles. It is adopted by financial institutions for determining, assessing and managing environmental and social risk in projects. As of 2013, 79 financial institutions in 35 countries have officially adopted the Equator Principles The Financial Times and IFC launched the Sustainable Finance Awards. World Bank has also formed E&S norms for financial institutions to outline their role in managing environmental and social impact. Many leading banks around the world have embraced Green Banking.
- 12. The Equator Principles 1. Review and Categorization 2. Environmental and Social Assessment 3. Applicable Environmental and Social Standards 4. Environmental and Social Management System and Equator Principles Action Plan 5. Stakeholder Engagement 6. Grievance Mechanism 7. Independent Review 8. Covenants 9. Independent Monitoring and Reporting 10. Reporting and Transparency The third iteration of the Equator Principles was launched on 4th June 2013
- 14. Environment Management practices: Indian scenario As far as environmental management practices in India are concerned, the banking sector is running behind the schedules compared to global trends. Only one Indian organization namely IDFC Ltd has signed Equators Principles Yes Bank is the one and only Indian signatory to UNEPFI However, the scenario is gradually improving as public sector banks like SBI, Canara Bank and Vijaya Bank and private sector banks like Yes Bank and ICICI Bank are undertaking various green initiatives.
- 15. Indian Banks: Going green SBI • Introduced Green Channel Counters and no queue banking in over 5000 branches across India • Installing windmills for green power generation • Implementing policies aimed at achieving carbon neutrality • Became a signatory to the Carbon Disclosure Project Yes Bank • One of the first signatories in India to the UN Global Compact • Recognized as the ‘Sustainable Bank of the Year in Asia-Pacific’ twice • Launched ‘Yes Community’ and ‘War on Waste’ initiatives • Engages in clean and green drives, energy efficiency and waste reduction practices Kotak Mahindra • Launched ‘Think Green’ initiative: partnered with Grow-Trees.com • Plants one sapling for every e-statement • 16,628 saplings were planted in FY 2012-13 • Established the ‘Social, Environmental Management System Plan’ to evaluate the environmental risk
- 16. Key Indicators Green Grid performance metrics UNEP Standards LEED standards Carbon Credits/Footprint
- 17. Green Grid Power Usage Effectiveness (PUE) • How efficiently a computer data center uses energy (focusing on IT equipment) Data Centre Infrastructure Efficiency (DCIE) • Energy efficiency of a data center (by dividing information technology equipment power by total facility power) Carbon Usage Effectiveness (CUE) • Carbon gas a data center emits on a daily basis Water Usage Effectiveness (WUE) • How much water a facility uses for cooling and other building needs. Data Centre Productivity (DCP) • Useful work compared to the energy it requires It is a non-profit consortium of professional entities, has developed standards such as
- 18. UNEP It has taken a large number of measures in this direction They have published an exhaustive guide on environmental initiatives specifically for banks The guide also gives illustrations on various member institutions
- 19. LEEDS Developed by the US GREEN BUILDING COUNCIL (USGBC) with almost 20,000 member organizations It is a set of rating systems for the design, construction, operation, and maintenance of green buildings, homes and neighborhoods For Example: The Bank Of America Manhattan Tower Construction completed in 2009 55 Floors, 1200 ft-tall, 52 elevators. Over 1 billion $USD invested Has PLATINUM-LEED CERTIFICATION
- 21. Carbon Footprint & Carbon Credits Carbon Footprint: - The total sets of greenhouse gas emissions caused by an organization, event, product or person Carbon Credits: - New era of “EMISSION TRADING” - These credits are bought and sold as stocks/bonds to safeguard environment as well as harboring environmental activity and growth - 1 CARBON CREDIT = 1 TONNE OF CO2 , issued by UNFCCC
- 23. Green Products & Services Instabanking • Bank Anywhere • Convenient • Reduces Emissions Vehicle Finance • 50% waiver on processing fee of auto loans using Green technology Home Finance • Reduced processing fee for LEED certified buildings
- 24. Green Engagements Celebration of World Environment Day annually with activities like Green Pledge, Signature campaigns, plantation & distribution of saplings Partnership with the Green Theme CNBC Overdrive awards Celebration of Earth Hour annually in all premises, ATM facilities and branches ‘Solar Branches’ in rural areas where 294 low-cost rural branches have been fitted with solar panels by July 2014 Partnering with active NGOs to promote education about the Go Green campaign and the environment
- 25. Green Communication & Paperless Banking ICICI Bank has approximately 2.8 million mobile banking customers Registration drive to encourage customers to register for e- statements, e-banking, online funds transfer to save paper ICICI paperless account opening process to save paper consumption and reduce complexity of the account opening procedure ICICI pockets app which uses a virtual VISA card enabling users to use it in any online transaction, savings account, investments and transfers
- 26. Employee Participation Encouraging employees to switch off lights & electrical appliances when not in use Recycling & Refilling ink cartridges of printers Replacing incandescent bulbs with CFLs Promoting use of ‘webinars’ for meetings to reduce travel Encouraging car-pool among employees Using emails and e-memos internally instead of written memos Using in-house sewage water treatment in towers to conserve water
- 27. Impact Green Banking 380 mn USD 30,000 trees 3.6 mn reams of paper Solar Branch
- 28. THANK YOU
- 29. References Research Papers: Green Banking Framework by the Institute for Development & Research in Banking Technology (IDRBT) established by the Reserve Bank of India Green Banking in India by Pravakar Sahoo & Bibhu Prasad Nayak, Institute of Economic Growth University of Delhi Enclave Green Banking Practices – A Review by Vikas Nath, Nitin Nayak & Ankit Goel, Bharati Vidyapeeth Institute of Management & Research, New Delhi Websites: http://www.icicibank.com/go-green/Index.html http://in.usgbc.org/leed http://www.thegreengrid.org/ http://about.bankofamerica.com/en-us/global-impact/operations.html#fbid=QROGDTZtG0P http://www.unepfi.org/work-streams/climate-change/tools-training/ http://www.unepfi.org/work-streams/reporting/
- 30. Questions?
Editor's Notes
- #10: First 3 points with the example are called ‘Credit Risk’ overall. Next point is Reputation Risk and after that is Legal Risk Reputation Risk: In all likelihood, due to growing awareness about environment safety, banking institutions are more prone to loose their reputations if they are involved in big projects, which are viewed as socially and environmentally damaging. There are also few cases where environmental management system has resulted in cost savings, increase in bond value etc Legal Risk: It can occur in different forms. Most obviously, banks like other companies are at risk if they themselves do not comply with relevant environmental legislation. But more specifically, they are at risk of direct lender liability for clean up costs or claims for damages if they have actually taken possession of contaminated or pollution causing assets.
- #24: Instabanking: Convience to customers to bank from anywhere using the phone app, IVR application. Reduces the paper consumption in case of applications, etc and saves a travel to the bank. Hence, reduces the carbon footprint Vehicle Finance: The bank is offering upto 50% waiver on the processing fee for vehicles using alternative technologies like Maruti Reva, Civic Hybrid, Indica CNG, etc. Home Finance: The bank had reduced the processing fee for the customers who are purchasing homes in LEED certified buildings. [Leadership in Energy and Environmental Design]
- #25: Certain partnerships or gestures that show the commitment of the bank towards Green Banking Earth Hour: 1 day in March where lights are switched off between 8:30 pm to 9:30 pm. Social media campaign : Go social Solar Branhes: As part of the Bank’s Go Green initiative, about 294 rural low cost branches have been fitted with solar panels, with a plan to extend the same to 122 more branches by July 2014. Solar power is a source of renewable and non-polluting clean energy. As a result of this initiative, 1440 Units of solar energy is generated per branch annually and the energy consumption cost has reduced considerably.
- #26: ‘E- Drive’- We have sent nearly 200 thousand annual reports in electronic form. In the last quarter we have saved more than 60 tonnes of paper by sending e-statements to over 6.5 million Bank accounts and 300 thousand credit card customers.
- #28: A carbon credit (often called a carbon offset) is a financial instrument that represents a tonne of CO2(carbon dioxide) or CO2e (carbon dioxide equivalent gases) removed or reduced from the atmosphere from an emission reduction project, which can be used, by governments, industry or private individuals to offset .