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by Dr. Mahmudul Haque
To meet international considerations of environmental, social and governance challenges, the financial sector, and especially banks, have initiated ‘Go Green’ practices to help support the environment and improve ‘banking’ around the world .
Amid the green and climate-friendly drivers, there is scant literature highlighting banks’ green practices, environmental awareness and their effects on banks’ reputations, especially the reputation of Islamic banks.
Research shows that focusing on banks’ greening ambitions can better enhance the reputation of Islamic banks through the adoption of green banking initiatives that will deliver better climate outcomes in Muslim communities.
As the demand for ethical and responsible investments increases, the role of Islamic finance in advancing the Sustainable Development Goals (SDGs) has also increased. Islamic finance provides an alternative source of funds to invest in green and sustainable projects guided by the values and principles of Sharia.
Improving human well-being and preventing harm are the main objectives of Sharia, which is also adopted by the SDGs.
The researcher also shows that a robust ecosystem and good guidelines and policies are crucial for the growth of Islamic green finance. Combining the public and private sectors and educating investors will help to develop the industry quickly.
To meet the needs of the UN Sustainable Development Goals (SDGs), the scope of banks must be expanded from purely conventional to more strategic and environmentally friendly institutions.
The growing population, use of conventional energies, carbon dioxide emissions and hectic economic activities has deteriorated the global environment. The worrying environmental conditions have led to the banking sector experiencing a major increase in sustainable banking practices, prioritizing green financing and investment activities.
The banks recognise the increasing concern about the environment and are working holistically to promote a sustainable and clean environment.
With the aim of saving money and protecting the environment, the banking sector has become the main engine of sustainable economic growth. As an active partner of the global greening initiatives, the green banks work responsibly to preserve and promote the environment, proving their existence as an indispensable part of the sustainability movements. Green banking prevents damage to the environment by encouraging investments in environmentally friendly goods and services.
Climate changes are having a major impact on financial systems, and accordingly, financial institutions are working to ensure environmental, social and governance considerations that ultimately generate sustainable growth.
Banks’ credit management, which plays an important role in the financial system, should be modeled primarily to support those industries that invest in environmentally friendly activities and introduce technologies for green environmental management.
The waves of global warming, deteriorating air quality and greenhouse gas emissions have laid the foundation for working together to protect the environment from further degradation.
By abdicating their responsibilities, bank customers feel guilty when their banks do not support green projects that improve the environment. In this regard, environmental awareness, banks’ willingness and the regulatory framework to govern banking activities are fundamental to the success of green banking.
In the evolving ‘Go Green’ era, all banking efforts aimed at depolluting the environment would be counted in the green banking initiatives. Several activities have been identified as green banking practices, such as online banking, issuing green loans, using green credit cards, reducing the use of equipment that produces CO2 emissions, providing financial support to climate-friendly projects, while banning projects with intensive CO2 emissions.
The proactive role of banks is indispensable to honor environmental considerations as a starting point for lending, which would encourage industries to work primarily on environmental management.
The research is also dealing with the economics of stock market volatility and Islamic stocks impact on those planning to invest simultaneously in green finance and also trying to project in Islamic finance deals and research topics include Islamic banking and finance, econometrics, green finance and energy economics.
The writer is a senior lecturer (finance) at Labuan Faculty of International Islamic University Malaysia and completed his Ph.D (Islamic finance) from Ohio University.
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