Daily Times

At a global scale, there is a discernible paradigm shift unfolding within the business landscape, catalyzed by the acute awareness of resource scarcity and the detrimental consequences stemming from decades of unsustainable business paradigms.

This transition towards “Green” methodologies, denoting practices that are environmentally conscious, eco-friendly, and geared towards minimizing carbon footprints or achieving net-zero emissions, is increasingly gaining traction as an imperative. The cornerstone of any nation’s economic framework lies inherently within its banking sector, presenting a ripe opportunity for financial institutions to spearhead the Green Revolution by facilitating the emergence and growth of environmentally sustainable enterprises. This metamorphosis necessitates concerted, cross-sectoral collaboration aimed at crafting integrated, accessible, and enduring financial solutions that uphold environmental sustainability. In this context, the role of banks is pivotal.

Through initiatives such as Green Banking, Green Financing, and the implementation of Environmental & Social Risk Management (ESRM) protocols, banks wield the potential to steer economies towards greener, more sustainable business trajectories. For Pakistan, a country grappling with the stark realities of climate change and environmental degradation, the prioritization of a comprehensive ESRM framework across diverse economic sectors assumes paramount importance in cultivating an ecosystem conducive to the facilitation of Green Business endeavours. Green business facilitation involves creating an enabling environment and providing support mechanisms for businesses to embrace environmentally sustainable practices.

The cornerstone of any nation’s economic framework lies inherently within its banking sector.

It includes a range of initiatives aimed at promoting the growth of green enterprises, such as providing access to green financing, offering incentives for adopting eco-friendly technologies, and streamlining regulatory processes for sustainable businesses. By fostering collaboration between government agencies, financial institutions, businesses, and other stakeholders, green business facilitation shall accelerate the transition towards a low-carbon economy and mitigate environmental degradation. Through effective policies, capacity-building programs, and public-private partnerships, green business facilitation holds the key to unlock opportunities for innovation, job creation, and economic growth.

Recognizing the urgency of this endeavour, the State Bank of Pakistan (SBP), in November 2022, has undertaken a significant stride by unveiling the Environmental and Social Risk Management (ESRM) Implementation Manual for Banks and Development Financial Institutions (DFIs). This landmark initiative seeks to promulgate and institutionalize Green Banking practices on a national scale by seamlessly integrating social and environmental risk management principles into the core operational fabric of banks. However, it’s crucial to acknowledge that the onus of managing environmental and social risks extends beyond the purview of the SBP and individual banks. Rather, the banking sector assumes a critical role as a frontline agent in identifying, assessing, and mitigating potential risks associated with projects under its purview, thereby fostering the adoption of environmentally sound alternatives.

The realm of Green Business Facilitation presents a plethora of opportunities for Pakistan’s economy, particularly through avenues like green financing.

The banking industry stands poised to wield considerable influence in sculpting an environment conducive to sustainable business practices across diverse economic sectors, thereby unlocking avenues for profitable investments in initiatives aligned with environmental and social sustainability objectives. Setting an exemplary precedent, institutions like the Bank of Punjab have pioneered various Green and Sustainable Financing Schemes aimed at supporting a spectrum of initiatives ranging from renewable energy ventures to eco-friendly transportation solutions and sustainable agricultural practices. Through the promotion of such initiatives, banks not only cultivate a vibrant ecosystem for green businesses but also contribute tangibly towards the realization of the country’s sustainable development aspirations.

Pakistan harbours immense untapped potential in the domain of Green Financing, including climate finance. To actualize its ambitious targets, the nation must craft robust policies and implementation frameworks aimed at securing financial backing for environmentally friendly projects. Herein, the banking sector assumes a pivotal role by providing tailored green financing solutions for a myriad of net-zero projects spanning various industrial domains.

Combatting the multifaceted challenges posed by climate change demands a collective and concerted effort from all stakeholders to implement enduring, comprehensive, and sustainable solutions. The banking sector, owing to its pervasive influence and substantial resource base, stands poised to emerge as a linchpin in this endeavour, steering societies towards a greener, more resilient future for generations to come, however, Banks alone cannot do this, all stakeholders must join hands in this green endeavour for a better tomorrow.

Arslan M Iqbal works as SEVP/Chief Risk Officer and Dr Syed Asim Ali Bukhari works as SVP/Unit Head – ESG in The Bank of Punjab.