Investment in sustainable finance grows 87% YoY

Financing to the sustainable finance sector as of the end of June this year stood at Tk31,622 crore, which is 87.20% year-on-year increase in investment, according to the Bangladesh Bank data.

At the end of June, financing in this sector increased to 12% of the country's total loan disbursement against the central bank's target of 20%. However, in June last year, financing in this sector was only 6.48% of the total loans.

According to a central bank report, the banking sector is one of the major sources of financing industrial projects such as steel, paper, cement, chemicals, fertilisers, power, textiles, etc., which cause maximum carbon emission. Therefore, the banking sector can play an intermediary role between economic and social development, and environmental protection, for promoting environmentally sustainable and socially responsible investment.

Arfan Ali, former managing director at Bank Asia Limited, told The Business Standard that sustainable finance and investment in the green financing sector is very important to bring sustainability to the country's economy. In order to overcome the country's investment risk, social and corporate governance risk, it is necessary to invest in this sector.

He also said the banks that follow the rules to finance this sector will do well in the future. Besides, there are some international standards for investment in these sectors, if they are followed, more progress will come.

Meanwhile, the central bank has set a target of 5% of the country's total term loan from 2016 to further develop the country's green financing. Green financing of banks and financial institutions has almost reached the yearly target by the end of June this year.

At the end of June, the amount of green financing loans of the country's banks and financial institutions stood at Tk2,621 crores, which is 4.13% of the total term loans of the country. However, during the same period last year, the loan amount was Tk1,788 crore, which was 2.39% of the total term loan.

According to the central bank report, during the said quarter 14 banks have surpassed the target of green finance (5%) compared to the total term loan disbursement. Besides, seven non-bank financial institutions (NBFIs) met their target.

Simultaneously, in April-June, 2022 quarter 11 banks have been able to stand up against their target (20%) of sustainable finance compared to the total loan disbursement.

A senior central bank official said, "Refinance support from BB is also playing an important role to incentivise the green banking activities. As the outcome of these initiatives, it is expected that positive impact will be evidenced in the trend of sustainable finance by banks and NBFIs gradually."

Meanwhile, the Bangladesh Institute of Bank Management (BIBM), last month awarded 10 banks and 5 NBFIs for their best performance in sustainable finance.

Bank Asia, Brac Bank, Dutch-Bangla Bank, Eastern Bank, Exim Bank, Islami Bank Bangladesh, NRB Bank, Pubali Bank, Southeast Bank, and City Bank received the honour in the bank category and Agrani SME Financing, Bangladesh Finance and Investment, Bangladesh Infrastructure Finance Fund, IDLC Finance, and IPDC in the NBFI category.