Navigating Sustainable Finance in Bangladesh: The Role of Banks and Financial Institutions

Abstract

This paper analyzes the current scenario and performance of banks and financial institutions (FIs) in Bangladesh's sustainable finance landscape, focusing on trends in Green Finance and Sustainable Finance. Green Finance, which supports projects like renewable energy, has steadily grown through banks, with significant portfolio expansions by the end of 2023 due to rising environmental awareness. In contrast, Sustainable Finance, encompassing broader ESG goals, has faced variability due to market and policy changes. Leading banks like BRAC Bank and Eastern Bank excel in promoting sustainability, while some FIs, such as IDCOL, meet targets, whereas others, like Agrani SME Financing, do not, indicating a need for capacity-building. Banks typically focus CSR efforts on disaster management, while FIs contribute less to long-term sustainability. The 2023 International Green Bond Market highlights the importance of sustainable finance in decarbonization, with banks adopting ESG standards to boost investor confidence. This is also noteworthy that, while banks have made significant strides, FIs need to enhance capacity and target achievement, necessitating stronger policy support and increased FI participation for a balanced approach to sustainable finance in Bangladesh.