Green banking practices and perceived financial performance of Nepalese commercial banks

Abstract

Climate change is a very complex topic in today's society. People are increasingly aware of global warming today and its obvious effects on human life. The government, direct polluters, as well as other stakeholders like financial institutions, are all concerned about it. This includes banks, which have a significant impact on how society develops. Even while banks' activities have no direct environmental impact, their external effects on the consumers are very important to them. Banks must support the products, processes, and technology that conform to it to significantly minimize their carbon impact. Therefore, banks are incorporating green practices into their operations, investments, and financing plans. The concept of Green Banking or Ethical Banking taken by banks aims to protect the environment by promoting environmental-friendly practices and reducing the carbon footprint from banking activities. Introduction of Green Products and Services, such as Internet Banking, Mobile Banking, Banking through ATMs, Green Deposits, Green Mortgages and Loans, Green Credit Cards, and Green Reward Checking Accounts, are examples of environmentally friendly activities. By implementing certain strategies, such as paperless banking, energy awareness, mass transit use, and solar and wind energy use, banks can lessen their carbon footprints. This study investigates the presence of green banking practices and the impact of green banking practices on the perceived financial performance of Nepalese commercial banks. The study has employed a descriptive research design to estimate the relationship between dependent variables (Efficiency, Effectiveness, and Economy) with independent variables (Green Investment, Risk Management, Green Human Resources, Green Products and Services, and Green Business Strategy). The study is based on primary sources of data. The primary data are used to extract information about green banking practices and the effect of green banking variables on the perceived financial performance of Nepalese commercial banks. Altogether 13 commercial banks and 2 development banks were selected for the study and a total of 400 responses were collected from the prepared structured questionnaire. The study shows that Green Investment, Green Human Resources, Green Products and Services, and Green Business Strategy have a significant impact on perceived financial indicators. Likewise, Green Investment, Green Human Resources, Green Products and Services, and Green Business Strategy have a positive relation over the perceived xii financial indicators whereas Risk Management has a negative relation over the perceived financial indicators. Similarly, the results of the study suggest that management should realize the importance of green banking activities for getting a better financial performance. Therefore, the study concludes that green banking practices in the form of Green Investment, Risk Management, Green Human Resources, Green Products and Services, and Green Business Strategy will tend to increase the firm performance.