Environmental Management Practices: Banking Sector

I001- Akash SubramanianI002 - Pratyaksh Agarwal

I003 - Karan AggarwalI004 - Aditya BansalI005 - Saloni Bansal

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

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

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

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

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

Strategies forGreen Banking

Strategies

Managing environmenta

l risk

Identifying opportunitie

s for innovation

“Environment management for banks is like risk management”

Strategies forGreen 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

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

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.

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.

The Equator Principles

1. Review and Categorization2. Environmental and Social Assessment3. Applicable Environmental and Social Standards4. Environmental and Social Management System and Equator Principles Action Plan5. Stakeholder Engagement6. Grievance Mechanism7. Independent Review8. Covenants9. Independent Monitoring and Reporting10. Reporting and Transparency

The third iteration of the Equator Principles was launched on 4th June 2013

Environment Management practices:

Indianscenario

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.

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: partneredwith 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

Key Indicators

Green Grid performance metrics UNEP Standards LEED standards Carbon Credits/Footprint

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

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

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

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

Case Study

ICICI Bank: GoGreen Initiative

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

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

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

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

Impact Green

Banking

380 mn USD

30,000 trees

3.6 mn reams

of paper

Solar Branch

THANK YOU

ReferencesResearch 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 DelhiWebsites: 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/

Questions?