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• Published: 13 July 2023

Mapping barriers to green supply chains in empirical research on green banking

• Teresa C. Herrador-Alcaide 1 ,
• Montserrat Hernández-Solís 1 &
• Susana Cortés Rodríguez 1  

Humanities and Social Sciences Communications volume  10 , Article number:  411 ( 2023 ) Cite this article

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• Business and management

The role of green banking (GB) in the green supply chain (CSC) is a relevant issue for green growth. The literature has pointed to some barriers identified as obstacles to the development of GSC. Since the publish of the framework of OECD for green growth, which is a reference for most of the countries, empirical research on GB has proliferated. Despite this, the barriers to the development of GSC have not yet been linked to empirical research on GB.Through a literature review of the empirical research on GB, this paper identifies by scientific impact the banking role, and we contribute with a mapping of the relationship among barriers to the development of GSC and conclusions of empirical research regarding GB, also considering the link with main topics of GB research. Additionally, it displays the main vectors related to area, year and methodology for each barrier and topic of empirical research on GB.

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Introduction

In 2009, a group of 34 countries signed a declaration of Green Growth, recognizing that “growth” and “green” can go hand in hand in order to add value to the sustainable development, resulting so the green growth strategies (OEDC, 2011 ). The green development links the growth of green businesses and innovation processes within green supply chain (GSC). The transition towards the GSC entails many difficulties (Zhu et al., 2005 ), that supposes the existence of barriers to GSC development. Despite the relevant role of the green banking (GB) for green growth, the seemingly abundant literature draws few conclusions about the contributions of GB to the GSC, and consequently, to the social value of the GB is not being sufficiently endorsed.

We have conducted a literature review to identify barriers to the development of CSG in the literature on GB, and draw qualitative conclusions about the evolution of research, since as Andrew Booth et al. ( 2012 ) indicate, a review of the literature must obtain qualitative conclusions.

Our work displays two types of contributions to green values. First, we contribute to cataloging of findings of empirical research on GB but associating them with the barriers to the development of GSC. Second, we contribute with an analysis of literature on empirical research on GB according to its scientific impact. Consequently, we map the barriers to CSG according to the scientific impact and relating it to the cataloging of topics on GB. Therefore, we can offer a perspective on the gaps and future lines in research on GB as a key agent in the development of GSC.

Our findings display relevant conclusions on how the empirical research on GB makes a proactive role or not for the development of GSC. Furthermore, we identify key differences on the research published by analyzing principal vectors in several dimensions of investigation.

After this section, the rest of the paper is structured as follows: Background, Method, Scientific production: sample and descriptives, Barriers to GSC identified in empirical research on GB, Mapping of scientific impact of empirical research on GB, and Conclusions, and suggestions.

The concept of GSC is also linked to the impact that supply chain causes on the environment (Beamon, 1999 ), that involves a set of processes (e.g., purchasing, manufacturing, marketing, logistics, etc.) in order to integrate customers satisfaction, efficiency, quality, and responsiveness (Zelbst et al., 2010 ). Thus, sustainability has been incorporated as an indispensable concept in supply chain (Seuring and Müller, 2008 ) to make socially and environmentally responsible business, that considers sustainable development, corporate social responsibility (CSR), stakeholder concerns, and corporate accountability (Council of Supply Chain Management Professionals, 2013 ). To achieve this goal, everyone plays their role, involving all economic agents in the sustainability of economic processes, that supposes the environmental sustainability as key concept to growth (Green et al., 2012 ; Seuring and Müller, 2008 ). The concepts of “sustainability” and “green going” are linked to the supply chain management (Srivastava, 2007 ), emerging the approach of GSC as a manner of integration of environment, sustainability, and performance in the supply chain. The integration of green initiatives implies the assumption of complete responsibility for the impacts of the different members of the chain (Kaur et al., 2018 ). Thus, each agent apport a value to contribute to the sustainable GSC, being necessary the understanding of business (Beltramello et al., 2013 ) and the different stakeholders´ roles (Meherishi et al., 2019 ).

Considering GSC as the framework for sustainable development, on the one hand, GB can be considered as the company who implements pollution-free banking processes (GBP), that is, when a bank company works using less-polluting banking services. On the other hand, GB also can be considered as the bank company who makes green banking business (GBB), such as green investments or green credit, as a manner of providing the necessary financing for the GSC. Under this second approach, the term GB will include those bank companies with a business approach of financial products for the environmental sustainability. In this second one, the final objective of the green process is focused on the supporting of other members of GSC, being GB a mediator or driver of the green growth (see Fig. 1 ). This growth is associated with terms of sustainability and social ethics (Rao et al., 2015 ). Thus, banking can apport a determinant value for the eco-innovative business model (Beltramello et al., 2013 ). The absence of green financing causes that the managers must solve financial constrictions (Yang et al., 2019 ). Financial problems for green innovation are consider as a barrier for green growth (OEDC, 2011 ; Kaur et al., 2018 ; Sun et al., 2020 ), due to bank loans continue being the main sources of financing for some green companies (Belltramello et al., 3013), but the problems to access to this type of financing causes financial constrains (Kaur et al., 2018 ). It leads us to consider the analysis of GB as driver of green economy.

In literature, the GB plays two roles, one as any other industry trying to reduce its environmental footprint, and the other as a driver of GSC by facilitating the financing of green industries. Source: Authors.

Oher problem is the disclosure about sustainability in GB (Dissanayake et al., 2016 ), that could be linked to the problems of lack of environmental knowledge and environmental awareness (Kaur et al., 2018 ). Likewise, the lack of knowledge about the benefits of green business is associated with the lack of green commitment of some members of the GSC, such as bank companies or governments (Belltramello et al., 2013 ).

Thus, three groups of barriers have been identified, (1) those related to environmental knowledge, (2) the scarce of green awareness (linked to the lack of CSR), and (3) the problems to green production (Kaur et al., 2018 ) due to financial problems. Financial difficulties for green innovation are a real barrier (OECD, 2011 ), due to the financial risk that green investments entail (Sun et al., 2020 ; Wu et al., 2019 ; Yang et al., 2019 ) and consequently with effect on the real capacity to make green products.

According to the usual barriers to development of GCS and the key role of GB, we consider the following research questions (RQ):

RQ1: Can barriers to GSC development be identified in the empirical literature on GB?

RQ2: Can we identify which barriers to GSC development have received the most attention in research?

We use a systematic literature review (SLR), because according to Pierre Pluye et al. ( 2016 ) this research approach allows the categorization of qualitative-quantitative contributions to identify items and deficiencies in emerging issues of the economy (see see Masi et al., 2017 ; Meherishi et al., 2019 , and Munaro et al., 2020 ) for circular economy; Rashid and Ratten ( 2020 ) for entrepreneurship and innovation; or Gollapudi et al. ( 2019 ) and Queiroz et al. ( 2019 ) for financial technology and digital economy.

Nevertheless, this approach has not been applied to map the contributions of GB to the green growth as relevant value in the GSC.

To define stable thematic categories on the role of GB in green businesses, the present SLR was designed by considering the approach of Booth et al. ( 2012 ) and the Cochrane review protocol (Higgins and Green, 2011 ). Thus, various sequential phases were applied for the SLR (see Grant and Booth, 2009 ): selection and qualitative assessment of articles (phase 1), data systematization (phase 2), and data analysis (phase 3).

Selection and quality assessment of articles (phase 1)

We emphasize that according to the main objective of this work, which is the qualitative analysis of the empirical research on GB to identify barriers to the development of CSG, only the papers associated with the research terms “green” and “banking” are analyzed. For the inclusion we only selected those in which we could identify possible barriers to the development of CSG.

In the present SLR were included articles from ABI/INFORM and IsI Web of Science—Core collection (Thomson Reuters) and Scopus (Elsevier) databases—only published papers in English between 2011 and 2020 were included.

2011 was chosen as starting point because the OECD published in this year the document entitled “Towards green growth: A summary for policy makers” (2011). This document is considered as a real starting point for the development of the green economy under the current conception of sustainable economy (Bina, 2013 ). The disruption caused by the COVID-19 pandemic has affected research objectives in all fields, including in the field of Economics, and specifically also in green banking. Therefore, the COVID-19 and post-COVID-19 period would not be comparable with the data series analyzed, which is why half of 2020 was taken as the end point of the paper series to be analyzed. On the other hand, there is not yet a sufficient post-COVID-19 data series to make a pre- and post-COVID-19 comparison in the green banking literature, from the approach of barriers to development of the GSC.

According to the research objective, in this phase, we applied a usual protocol for literature reviews. To perform a data quality screening, several actions were carried out to obtain a reliable database. In four steps: (1) Identification, (2) Screening, (3) Suitability, and (4) Inclusion (see Fig. 2 ).

The SLR has been developed in the usual steps, so that the process guarantees the verification and quality of the sample of resulting papers. Source: Authors.

For the step 1 (Identification) tow searches were made in databases, one in ABI/INFORM collection and other in Web of Science (WoS). The search path was in ABI/INFORM: /green AND banking/ abstract or title/English/article/Scientific reviews/peer review/2011–2020/full paper. The search in WoS was done in a similar way. Both according to Fig. 1 , ending the search on July 21, 2020. After identification and screening steps according to Fig. 2 , the data were tabulated and submitted to the check list. Thus, in the step 3 (suitability) articles that without an adequate indication on methodology, objectives, conclusions, and other relevant dimensions were eliminated. For this qualitative selection process, a triple-blind review of the 46 articles was carried out by each author. As result, in the step 4 (Inclusion) a whole of 30 articles met the requirements (see Supplementary Appendix I ). They provided conclusions on the relationship between green banking as part of GSC for green growth.

After step 3 (suitability), only 46 papers associated “green” and “banking” also considering the usual eligibility criteria (journals with quality signs, full paper, Economics Area, or Social Sciences). And more specifically the sample is specified in 30 works in step 4 (inclusion), considering furthermore only those that fall within the scope of the research objective (identification of barriers to the development of CSG in the conclusions of empirical research on GB). At this point, one might ask why it is interesting for the scientific community to review the literature within such specific parameters. It is precisely that we observe that the GB contributions to the GSC have not been associated to the research term “GB” yet. This is diminishing the visible value of the GB for the GSC, what’s both a limitation as a goal in terms of identifying research gaps. As in other reviews of the specialized literature whose objective is qualitative and not strictly bibliometric, the final sample is reduced to a small number of articles (Queiroz et al., 2019 ; Tseng et al., 2019 ).

Thus, our research is framed in the field of social sciences under the approach of Spash ( 2020 ), and it seeks to improve knowledge about GB-GSC in order to contribute to the social change of the economy, improving social welfare. In line with Bardsley ( 2020 ), we consider that social and ecological stimuli can redirect credit towards green infrastructure. This must be done from the different positions of each agent in the GSC, where undoubtedly the bank companies must develop a more proactive role. This in the long term must contribute to mitigating greenhouse gas emissions.

Data systematization (phase 2)

A coding template was designed in Microsoft Excel to provide an adequate coding for data treatment. This template included a whole of 19 fields. A questionnaire run play on 20% of the initially selected articles to verify the reliability of the template in a triple review (one by researcher) (see Supplementary Appendix I ). After filtering the results, the final coding template included 17 fields: Article ID (numbering assigned by researchers), paper´s name, year, authors, country authors, continent authors, country of empirical analysis, Continent of empirical analysis (GB location), research topic, GB approach within GSC, research objective, analysis methodology, type of data, identification of specific conclusions on green banking, conclusions on green banking research, journal, and database. Most of the fields were synthesized using numerical coding, but some of them required a summary narrative approach for the qualitative treatment of mapping of conclusions (Queiroz et al., 2019 ; Rumrill and Fitzgerald, 2001 ). To avoid bias, each author revised the coding made by the other authors.

Data analysis (phase 3)

For the qualitative analysis some fields were considered as primary fields, due to the objective of the research is to identify the real contributions of GB empirical research and making a map of the current research situation. Thus, the primary fields were research topic, country, methodology, year, and conclusion, following Masi et al. ( 2017 ) and Queiroz et al. ( 2019 ).

First, we analyze the relationships between several fields of the coding template by using the specific statistical analysis software (Statistical Package for Social Sciences Software—SPSS—-version 20.0) plus Excel for graphs. Second, we identified the similarities and differences in the conclusions related to GB regarding the barriers to GSC, by using a specific software for qualitative analysis (Atas.ti software). Thus, the research paper follows cross-sectional qualitative research with descriptive outcomes.

Limitations

This study performs the search by combining two databases (ABI/INFORM and WoS), selecting only bibliography in English, and in scientific quality journals (peer-reviewed), which guarantees the initial inclusion of relevant literature. However, as indicated by other authors, a limitation of this work could be the framework of the study (Roy et al., 2022 ), which is delimited by the GSC, which makes the analysis of empirical research on GB focus exclusively on papers whose conclusions of GB can be associated with some of the barriers to the development of CSG. This affects the number of articles finally selected for analysis. However, this objective is simultaneously an opportunity to develop research about relationship between the theoretical knowledge about CSG and the empirical knowledge about GB. The fact of use a small sample (with a small number of articles) does not affect the qualitative conclusions of the study, since it does not seek to carry out statistical inference. Even in quantitative analyses for modeling, a small sample size would not be sufficient to discard the results, as they could be showing valuable latent patterns (Everitt, 1975 ). In spite that the use of a sample size of 30 or more observations ensures a normal distribution of the sample in statistical terms, as it happens in our sample; some authors also indicate that the sample size cannot be considered strictly in statistical terms, since in exploratory phases it cannot be considered as a limitation to the approach of an investigation (Sapnas and Zeller, 2002 ; Mundfrom et al., 2005 ), even less so, when the literature review focuses on the narrative in order to obtain a qualitative synthesis of results. Despite the application of a protocol to systematize the study, it is not uncommon for different studies to obtain different results (Rodrigo, 2012 ). Therefore, the sample size of our study does not compromise our findings, taking into account that the sample selection was carried out following an internationally accepted systematization protocol. Nevertheless, the results must be interpreted with caution, within the theoretical framework of the work, which must be taken into account for its interpretation.

Scientific production: sample and descriptives

The GB research is considered as an interesting field (Queiroz et al., 2019 ) because it offers a way to analysis. However, green banking has not reached an equal level of technological processes even within the same country, so there is still a long way to go to achieve a development of environmental sustainability through green banking (Deka, 2015 ), highlighting its social responsibility in reducing environmental damage (Kondyukova et al., 2018 ). Thus, the company location is considered a key variable in economic research (Herrador-Alcaide and Hernandez-Solis, 2019 ), also for literature review in most of the research fields (e.g., Masi et al., 2017 ; Queiroz et al., 2019 ; Rumrill and Fitzgerald, 2001 ), and even more when the analysis is focused to identify differences, gaps and opportunities. As it is usual, we used location, year, and topic to frame the main descriptives of scientific production about empirical research on GB.

Figure 3 displays location of GB research by considering each research topic.

Figure 3 displays radial area by topic, continent and number of papers by authors´ location (first spider chart) and by the location of empirical research. Source: Authors.

By considering the year, the largest scientific production is concentrated in 2019, and secondly in 2017 and 2018 (sea Fig. 4 ).

The geographical distribution based on the number of papers shows a greater scientific production in Asia in 2017. Source: Authors.

Additionally, we use methodology as other complementary vector to classify the status of scientific production, due to some methodologies as the descriptive statistic normally with secondary data (Masud et al., 2017 ) could be considered as first steps in research (Shampa and Jobaid, 2017 ), opposite to others as Structural Equation Modeling (SEM), that could be linked to a more advanced research phase (Tarka, 2018 ). Our sample displays majorly the use of descriptive methodology (the 46.66% of papers apply descriptive methodology) and only in the topic of GB disclosure the most used methodology is the regression analysis.

All the above shows the descriptive of the scientific production on GB of our sample, strictly considering the number of articles published in each topic, using as descriptives the geographical area (continent), the year of publication and the methodology. However, these descriptives based on the number of articles do not display the scientific impact of the publications, for which we have considered the citation criterion (see section on mapping by impact).

Barriers to GSC identified in empirical research on GB

The qualitative analysis of the research on GB was focused to the identification of the research lines by topic and their relationships with GSC barriers. This section shows our primer contribution through the identification of relationships between the GB and GSC. Furthermore, we identified also how GB could be or not a barrier for GSC. The analysis of relationships has been carried out by using the software, Atlas.ti. The findings are commented according to previous literature. It should be noted that for the qualitative analysis we have considered the location where the empirical analysis on GB has been performed, not the location per researcher (author), because our analysis focuses on discerning the barriers to the development of the GSC originated in the development of GB. Therefore, it does not make sense to link the results of the research to the location of the researcher, but to that of the continent on which the analysis has been carried out.

Barriers for GSC development in research on GB disclosure

The literature on GB disclosure is mainly focused on GBP role. Thus, the value apported by GB to GSC is oriented to the banking process (see Fig. 5 ), being green disclosure associated to GB (Masud et al., 2017 ).

The GB disclosure in its GBP role is linked to two barriers, one for lack of green knowledge and another for lack of green awareness. Source: Authors.

Attending to the literature map on Gb disclosure (research conclusions)-GSC (barriers for) shown in the Fig. 5 , we identified the following qualitative connexions:

Some conclusions point out the lack of green awareness. The main line of conclusions relates the size of the bank company with levels of GB disclosure on climate change (Kılıç and Kuzey, 2019 ), but the reduction of carbon footprint and the saving of energy are hardly linked to the GB disclosure. The information is concentrated on board and ownership (Bose et al., 2018 ) and consequently on CSR. This line can be linked to the research carried out in 2018 in multiple countries.

Other conclusions point out the lack of green knowledge. When bank companies adopt voluntary guidelines for environmental performance, they disclose green qualitative information, but not quantitative data about sustainability (Kumar and Prakash, 2018 ). An international reporting framework (Masud et al., 2018 ) and the awareness of e-banking users (Lekakos et al., 2014 ) are necessary for the contribution of GB to the sustainable growth.

These barriers suppose that GB disclosure may be at an early stage, more focused on corporate image than a real accountability. Despite GB is starting to reduce this barrier through disclosure information on CSR for green management, however, the absence of quantitative data and heterogeneity in the content of the disclosure do not allow GB to show itself as a green member of the GSC.

Barriers for GSC development in research on GB as driver of economy

We find that GB as driver of economy is focused mayorly on the GBB role. Thus, the GBB plays a key role for the development and sustainability (Manohar and Kumar, 2012 ; Ramila and Gurusamy, 2015 ; Islam et al., 2017 ; Miah et al., 2021 ), and reduction of pollution (Ramila and Gurusamy, 2015 ), but it is not free of barriers for de develop of GSC (Fig. 6 ). Green corporate performance, that it measured throughout CSR, is linked to green marketing strategies (Lymperopoulos et al., 2012 ).

The GB as driver of Economy in its GBB role is linked to all barriers for developing the GSC. Source: Authors.

Accordingly, we found three types of GSC barriers when GB literature is focus on GB as driver of economy:

Financial difficulties can cause a lower development of green growth (Miah et al., 2021 ; Radović-Marković and Živanović, 2019 ; Nieto, 2019 ; He et al., 2019 ; Julia and Kassim, 2019 ), because green regulation and financing policies maybe cause financial constraints in eco-industries. Regulation can hinder the distribution of bank credit for the green investment (He et al., 2019 ). This line of conclusions has been mainly analyzed in Asia and Europe, during 2019.

GSC barrier based on green unknowledge can be linked to two key conclusions. First conclusion shows that GBB can chain stakeholders towards sustainable industries (Manohar and Kumar, 2012 ; Miah et al., 2021 ), but other conclusion shows that a low GBB can be caused by the low knowledge of which must be the adequate green regulations to expand green growth. These barriers are concentrated in Asia, in a plurality of years, and they have been mainly identified by using descriptive analysis.

We can identify in the literature barriers based on lack of green awareness. Thus, literature shows that GBB research has not been able to associate reduction of pollution to GB products. The ecological offer of banking products is linked to banking philosophy of ethics and equity (Julia and Kassim, 2019 ), but transition to a low-carbon economy requires that banks integrate environmental risks into their governance systems (Nieto, 2019 ), being GB considered as a solution for the massive green infrastructure projects (Fashli et al., 2019 ). Also, green guidelines in countries and geopolitical context are necessaries (Julia and Kassim, 2019 ).

Barriers for GSC development in research on GB perceptions-

According to the map of qualitative conclusions of literature on GB perceptions (see Fig. 7 ), we found that the GB perceptions was researched under the approach of GBP.

The GB perceptions in its GBP role is linked to the lack of green awareness for developing the GSC. Source: Authors.

We found that main lines about GB perception could be linked to barriers for GSC based on the lack of green awareness. These barriers are mainly investigated within perception of clients about the use of green banking processes (Jatana and Jain, 2016 ; Jayabal and Soudarya, 2017 ), and how the massive acceptance of the GB practices depend not only on infrastructure and technology (Girish, 2016 ; Subramanian, 2015 ). It depends on the green behavior of banking staff (Girish, 2016 ; Mehedi and Maniruzzaman, 2017 ). Motivation is an important personal predictor of green performance in banking (Iqbal et al., 2018 ). Likewise, stakeholder perceptions are essential for the bank company’s sustainable development (Linh and Anh, 2017 ).

Barriers for GSC development in research on GB practices

We found that this research line on GB practice has been developed in the two GB roles: GBB and GBP. GB practices in GBB role are linked to barriers cause by financial problems for the green growth (see Fig. 8 ). The environmental banking performance has been associated with a larger financial performance (Laguir et al., 2018 ). Regarding the causality of this association, it has been found that the integration of sustainability in the financial sector does not harm financial performance but rather increases it (Weber, 2017 ). However, it has also been found that the green credit index of commercial banks is associated with an inverse relationship with their profitability (Song et al., 2019 ). As solution for this problem, a more active banking regulation could reduce the requirements that affect the cost of capital of green projects (Thomä and Gibhardt, 2019 ).

The GB practices in both roles (GBP and GBB), is linked to the lack of green awareness and lack of green financial resources for developing the GSC. Source: Authors.

GB practices on GBP role is linked to barriers by lack of green awareness. Several studies link GB practices with the sustainability of banking business, environmental commitment, social image, and manage of green practices. The location and temporal distribution of the studies, as well as the methodology used, is so diverse that we do not suggest possible associations. We must highlight that a direct and positive association was found between green banking practices and the green image (Ibe-enwo et al., 2019 ).

Considering previous maps with the qualitative identification of barriers considering these four topics on GB empirical research, the focus of GB concept is concentrated in GBP. According to this GB concept (GBP) and predominant topic of research on barriers to GSC (Lack of green awareness), we can point out that disclosure about GB has mainly focus on corporate image of banking and the capacity of disclosure in order to improve green knowledge of the agents within GSC.

These maps have implemented to define qualitative relationships among barriers to GSC and conclusions of empirical research on GB. Nevertheless, they should not be used to identify the priorities and gaps in the research, being necessary to carry out an analysis by scientific impact.

Mapping the scientific impact of empirical research on GB and barriers to GSC

The impact of research literature of each published article is commonly measured through the number of citations received by it. To collect appointments there are several search specialized engines. Among the most common are the Google Scholar (GS), the Web of Science (WoC) and Scopus (Sc). All of them collect automatically, reliably and systematically the citations received by the articles, papers and other research documents published although they measure the impact with different scope. While GS collects all citations received by publication in any database, WoC collects only those received in its database, and equally does Scopus. In order to measure the importance that research on GB has, all of the above are adequate. It could be interpreted that GS measures the impact for the generality, while WoC and Scopus measure a more relevant impact academically. To draw up our map of the state of empirical research on GB, we will use all three options.

Considering the total number of citations received in each of the bases, we build for each topic a relevance index of the topic by citations based on the following formulas:

Where GSC i , WoSI i, , and SCI i are the citation rates by base and topic, respectively. The numerator of each index represents the number of citations accumulated among all the papers published in a topic (i), while the denominator collects the total number of citations of all topics (all articles reviewed). In this way, the number of citations accumulated in each topic is relativized according to the total impact of the research analyzed. These indices are initially used to compare the scientific impact of the GB topics by comparing the three bases.

To determine a unique global impact that allows to relate barriers, topics and descriptive, we use an average index ( AIi ), which combines the different citation rates of each database, which ensures that we consider the impact in a broad sense. It is calculated as average of the citation indexes of each database. This average index allows us to apply a uniform measure to different aspects through the common measure of scientific impact per citation.

Correction of the time effect (age of publication) on the impact per citation

Table 1 shows the impact of each topic calculated based on citations. However, articles with a higher tenure (earliest date of publication) could have accumulated a greater number of citations just because of their longer publication time. In this way, if the effect of time on the AIi were not considered, a greater scientific interest could be attributed to older research whose greater volume of citations could be due more to the time effect than to a greater relevance for its interest to the scientific community. That is why we must consider the effect of time in the calculation of the impact per appointment. To do this, we built a correcting factor of the time effect. This correcting factor is based on the “Citation Rates” published in Field Baseline of InCitess Essential Science Indicators (Clarivate Analytics, 2023). From Clarivate’s Citation Rates we build an index to correct the AIi of each year, thus eliminating the effect of time on the citations received, which are placed in a homogeneous temporal context.

First, we construct a ratio that divides the Citation Rate (CRi) of each year by the Citation Rate of the base year (CR20). We take the last year of publication of the analyzed period (2020) as the base year for the conversion of the citations received by each paper to homogeneous values. Accordingly, the citation correction factor for the time elapsed since publication effect (TFCi) is constructed as: TFCi = CR i /CR20, where “ i ” corresponds to each year of the series. The CR i and CR20 corresponding to all the fields considered together are taken. TFCi allows the value of each AIi to be recalculated, transforming it into a homogeneous number in tenure to the average citations of the 2020 values, thus allowing the comparability of all the citations accumulated by the papers in the base year.

Second, the AIi-TFC is obtained as AIi-TFC = AIi/TFCi. In this way, the impact per appointment has been homogenized to average values of citations of 2020 (see Table 1).

Third, the sample rate (SR) is calculated, which is the proportion that each AIi-TFC represents over the 100% of the sample. The SR serves to compare the specific weight that the relevance by volume of citations (corrected for the time effect) has on the sample analyzed. In this way we can establish the appropriate priority among topics, barriers, and other vectors analyzed; neutralizing the effect of time on the scientific relevance attributed to the impact per citation.

According of all above by considering the scientific impact measured by citations, Table 2 and Fig. 9 displays that GB as driver of economy is most relevant topic of the empirical research on GB in all indices. According to the average impact index of each topic (AIi), followed by the topic on GB disclosure, GB practices, GB perceptions.

The main topic by scientific impact is the GB as driver of GSC. Source: Authors.

When TFCi is applied to correct the time effect, the AIi-TFCi are 16.66%, 28.04%, 2.80%, and 14.24% for Disclosure, Driver, Perception, and Practices, respectively. This means that Disclosure, Driver, Perception and Practices have a specific relevance weight (SR) of 26.99, 45.42, 4.53, and 23.06% over 100% of the sample. It can be observed that by scientific impact by citation (isolated time effect) the order of most researched topics continues to be maintained as shown in Table 2 (Driver: 45.42%, Disclosure: 26.99%, Practices: 23.06%, and Perceptions: 4.53%).

It is observed that once the corrective factor of the time effect has been applied, the proportionality of the corrected cumulative citations does not affect the research preferences in terms of topics. This confirms that the method of analysis and the indices applied are a solvent tool for the measurement of scientific relevance calculated by citations, according to the objectives of the research.

To identify the main vectors according to area, year, and methodology, we also use the SR (AIi-TFC) of each paper. According to Fig. 10 , Asia receives the 75.01% of citations, and the main temporal vector indicates that the year 2019 concentrates the 45.49% of citations. The main vector by methodology indicates that the 52.91% of the citations are for methodology based on regression models. The Lack of Financial Resources is the main barrier to GSC with the 52.20% of citations.

The main vectors considering the scientific impact are as continent Asia, as a method of analysis the regressions, as year 2019, and as a barrier the absence of financial resources. Source: Authors.

Mapping of barriers to GSC in empirical research on GB

The specific weights of each barrier considering the AIi are 51.33%, 31.99%, and 16.68%, for the barriers of Lack of Green Financial Resources, Lack of Green Awareness, and Lack of Green Knowledge, respectively. The specific weights of each of the three barriers indicated by applying the time correction factor (SR for each barrier) are 52.20%, 30.30%, and 14.50%, respectively. It is observed that the adjustment of the specific weight of each barrier due to the accumulation of citations that could be due to the time effect is scarce. As in the topics, we can affirm that the differences in the scientific attention paid to each of the barriers is not due to a greater accumulation of citations by the age of the publication. Thus, the most relevant barriers corrected for the time effect remain in the same descending order: Lack of Green Financial Resources, Lack of Green Awareness, and Lack of Green Knowledge.

The results of scientific impact of each barrier, breaking it down by GB topics and their impact by the different types of descriptives (area, year, and methodology), once considered the time effect (see Table 3 ). So, we can identify the priorities by Relating barriers, topics, and descriptive, by considering their relevancy by scientific impact.

Accordingly, the most relevancy by scientific impact is focused first on the lack of green financial resources (52.20%), second on the lack of green awareness (33.30%), and thirdly on the lack of green knowledge (14.40%).

For the lack of financial resources, the main topic is GB as driver of economy (37.25%) and its main descriptives vectors are Asia (31.58%) / 2019 (31.19%) / RG (19.21%). For the second barrier to GSC (lack of green awareness), the main topic is driver (13.28%) and its vectors are Asia/2019/DC. For the third barrier, the main topic is disclosure (10.17%) and its main vectors are Asia / 2018 / DC.

In addition, Fig. 11 shows the conclusions for the barrier related to the lack of green financial resources, but also associating barrier with conclusions, topic, and main vectors by topic.

Regarding the lack of green financial resources, the main topic is the GB as driver of Economy. Source: Authors.

The barrier to GSC associated with the lack of green financial resources analyzed through the results of empirical research on GB, shows that barrier can be mostly associated with limitations found in the role that GB should play as an engine for green development. The conclusions of empirical research suggest that banking fails to drive its function towards goals related to the carbon-free economy. The research also leads to the conclusion that companies operating within the GSC indicate that the role of the GB is not allowing them access to financing for green projects, possibly because banks have not yet found adequate pro-environmental strategies in the performance of their role as conduits of financial resources.

Figure 12 indicates that the barrier due to lack of green awareness for the development of GSC, considering the scientific impact of empirical research on GB, is shown to be relevantly associated with problems in driving financial resources to GSC. The conclusions of the empirical research analyzed lead to limit the lack of green awareness around three agents: banks, companies, and regulators.

Regarding the lack of green awareness, the main topic is the GB as driver of Economy. Source: Authors.

For banks, the problem lies in how to insert environmental risk, so as to make it attractive to raise financial resources in the capital markets in order to direct them towards the needs of funds demanded by the companies that act in the GSC. As for regulators, the problem is how to make green policies that allow both establishing economic incentives for banks to attract resources and for companies to act in favor of green sustainability. For companies, the problem is limited access to green finance.

Figure 13 shows how in the empirical literature on GB the barriers to the development of GSC are relative to disclosure. Specifically, due to the lack of green knowledge associated with the absence of disclosure about technology to improve green production, the strategies for its implementation and banking management tools. This lack of disclosure that motivates ignorance would affect various economic agents, not only the banks themselves.

Regarding the lack of green knowledge, the main topic is the GB disclosure. Source: Authors.

Conclusions and suggestions

The degree of commitment of all sectors with green growth means that most companies are increasingly involved in the transformation towards non-polluting processes. In this green transformation, the empirical research can shed light on how GB role is adding value to GSC. According to literature, GB is hardly starting to finance the green growth.

The empirical research on GB can be grouped around 4 topics: GB as driver of green economy, Disclosure on GB, Perceptions on GB, and Practices of GB (They were coded as GB driver, GB disclosure, GB perceptions, and GB practices, respectively). Considering the scientific attention received, measured by the scientific input (by citations), the most relevant topic has been GB driver (45.42%), but with a near attention received for the topics GB disclosure and GB practices (26.99% and 23.06%, respectively). Scientific attention on perceptions related to GB has had little scientific impact. Considering the differentiation between the role of the GB as GBP or GBB, some papers have focused on research on GB as green banking processes (GBP) but considering the scientific impact the research have been majorly focused on green banking business (GBB).

By considering the barriers to the development of CSG identified in empirical research on GB, applying the scientific impact of publications, the most relevant barrier is that related to the lack of access to green financing, which accounts for more than 52.20% of scientific attention; compared to just over 33.30% and 14.50% for barriers due to lack of green awareness and green knowledge, respectively.

Regarding the relationships between barriers and topics, we found that in the literature analyzed the most relevant topics are the following: Lack of green financial resources-GB driver, Lack of green awareness-GB driver, and Lack of green knowledge-GB disclosure. In this barrier-topic context, no geographical area reaches a scientific interest higher than 33%, although Asia are revealed as the areas of greatest interest for scientific research. Also, by scientific impact, the most relevant year has been 2019 and the methodology more applied was regression (modeling).

Since the OECD declaration—“Towards green growth: A summary for policy makers”—(2011), the findings about what is relevant to the development found within the conclusions of the empirical research on GB, allow us to point out an initial mapping on how the role of the GB could be holding back green development. Nevertheless, our findings must be interpreted with caution, and must be considered in the research framework that combines the empirical research published related to GB and the theorization about barriers to GSC, because only those papers that are in this intersection allow to draw valid conclusions according to the research objective. Consequently, and despite complying with the protocols that guarantee quality literature review process, this does not exempt from the existence of other publications not adjusted to the criteria established for the research objective that could contain interesting conclusions about GB, but they are framed within other approaches.

Considering, our contributions within the research framework of present work, we may remark the following conclusions and suggestions:

The research on GB that has attracted more attention considering impact per citation is not conditioned by the age of the publication. This indicates that the relevant topics of scientific interest related to GB within the GSC are not linked to a specific temporal space, being these topics of interest in all the periods analyzed.

It would be interesting the extension of research about GB towards the GBB approach to improve the knowledge about GB as key support for developing the GSC. Accordingly, the analysis of GB should be considered under the role of banking products to finance green business. On the contrary, the GBP approach implies that green transformation of the bank processes in green process does not differ from other companies do. The mere digitalization of the bank processes is a common adaptation to a global market, but it does not suppose that banking takes a key role to develop the GSC.

Most research topics on GB should focus on measuring the effect that green investment and loans could have on the advancement of a cleaner industry for the expansion of the GSC. Maybe the focus could be directed towards cataloging associations between research results and the term GB.

The relevancy of the topic related to GB driver as a main topic in two of the barriers to the development of the GSC, shows how society needs to improve different aspects of the role of green banking business to build a financial bridge between those who offer economic resources and those who demand them. The lack of disclosure, understood as lack of accountability towards society, may be hindering the development of CSG due to lack of knowledge. Consequently, the measuring of GB disclosure and its modeling could be considered a relevant goal for future research.

The concentration of publications in the topic of GB as driver of economy point out to consider this topic as the main issue in future lines on GB research. According to barriers, they have been majorly focused on the barriers to the development of GSC based on lack of green financial resources and green awareness. A key idea for next research is the need to increase research from the perspective of the value that GB plays for the development of sustainable green growth, that is, when GB plays the role of promoter of GSC (GBB role), and how it should be channeled the necessary financing for the renewal of business models towards green business models.

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Herrador-Alcaide, T.C., Hernández-Solís, M. & Cortés Rodríguez, S. Mapping barriers to green supply chains in empirical research on green banking. Humanit Soc Sci Commun 10 , 411 (2023). https://doi.org/10.1057/s41599-023-01900-x

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• Published: 06 March 2020

Transition towards green banking: role of financial regulators and financial institutions

• Hyoungkun Park 1 , 2 &
• Jong Dae Kim 3  

Asian Journal of Sustainability and Social Responsibility volume  5 , Article number:  5 ( 2020 ) Cite this article

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This paper provides an overview of green banking as an emerging area of creating competitive advantages and new business opportunities for private sector banks and expanding the mandate of central banks and supervisors to protect the financial system and manage risks of individual financial institutions. Climate change is expected to accelerate and is no longer considered only as an environmental threat because it affects all economic sectors. Furthermore, climate-related risks are causing physical and transitional risks for the financial sector. To mitigate the negative impacts, central banks, supervisors and policymakers started undertaking various green banking initiatives, although the approach taken so far is slightly different between developed and developing countries. In parallel, both private and public financial institutions, individually and collectively, are trying to address the issues on the horizon especially from a risk management perspective. Particularly, private sector banks have developed climate strategies and rolled out diverse green financial instruments to seize the business opportunities. This paper uses the theory of change conceptual framework at the sectoral, institutional and combined level as a tool to identify barriers in green banking and analyze activities that are needed to mitigate those barriers and to reach desired results and impacts.

Introduction

The latest IPCC report (IPCC 2018 ) reaffirmed that human activities caused global warming and are likely to further accelerate it by reaching 1.5 °C above pre-industrial levels between 2030 and 2052 based on a business-as-usual scenario. The IPCC report set highly ambitious targets of reducing global net anthropogenic CO 2 emissions by approximately 45% from 2010 levels by 2030 and reaching net zero around 2050 to meet 1.5 °C of global warming. Limiting global warming to 1.5 °C certainly requires social and business transformations and emissions reductions across all sectors. Whilst the National Climate Assessment (USGCRP 2018 ) was more limited in scope by focusing its findings on the United States, it reached similar conclusions and suggested measures to reduce risks through emissions mitigation and adaptation actions. These findings prove that there is still a long way to go despite negative impacts arising from climate change and global warming (Doran and Zimmerman 2009 ; Cook et al. 2013 ).

To achieve such a structural transformation, the magnitude of the investment required is enormous. The IPCC report projected USD 2.4 trillion in clean energy is needed every year through 2035 and between USD 1.6 and USD 3.8 trillion in energy system supply-side investments every year through 2050, which is equivalent to USD 51.2 and USD 122 trillion exclusively for energy investments. Considering the significant investment needs, the financial sector is expected to play a pivotal role in providing necessary financial resources as it is the backbone of the real economy (OECD 2017 ). The role of the banking sector is central in meeting financial needs of the private sector and delivering credit to households and individuals (Beck and Demirguc-Kunt 2006 ; Wang 2016 ). The banking sector also plays a critical role in supporting a country’s adaptation to climate change and enhancing its financial resilience to climate risks. Banks can help reduce risks associated with climate change and sustainability, mitigate the impact of these risks, adapt to climate change and support recovery by reallocating financing to climate-sensitive sectors.

Climate change is affecting the financial system because of its far-reaching impact across all sectors and geographies, and the high degree of certainty that risks will emerge and have irreversible consequences if no actions are taken today. However, climate-related risks are not yet fully assessed and factored into current valuation of assets (NGFS 2019 ). The role of banks in financing the transition to a green economy is to unlock private investments, to bridge supply and demand while considering the entire spectrum of risks and to evaluate projects from both an economic and environmental perspective (EBF 2017 ). Although several banks have demonstrated their leadership in financing green or climate projects, the green portfolio of most banks is still very low. The International Finance Corporation (IFC) estimated the total green loans and credits of banks in developing countries to the private sector in 2016 to be approximately USD 1.5 trillion, or about 7% of total claims on the private sector in emerging markets (IFC 2018a , 2018b ). This outcome results from both a lack of the necessary regulatory and supervisory framework and failure to integrate environment and climate change risks into banks’ strategies and risk management systems. Additionally, the current financial framework often makes the required investment difficult to be met due to barriers exist at the sectoral and institutional level (Mazzucato and Semieniuk 2018 ). In response to the lack of regulatory and supervisory framework, a growing number of central banks and regulators around the world are becoming aware of their role and potential mandate in addressing climate change and environment risks faced by the banking and financial sector and taking actions (Volz 2017 ). For example, a group of central banks and supervisors launched the Networking for Greening the Financial System (NGFS) in 2017 to contribute to the analysis and management of climate and environment-related risks in the financial sector, and to mobilize mainstream finance to support the transition toward a sustainable economy (NGFS 2018 ). In parallel, more banks, especially private sector commercial banks, have started greening their operations by integrating environmental and climate change risks into their strategies and risk management systems and rolling out green financial products to expand their business horizons.

While green banking is still a new concept in the field of climate finance, it can serve the United Nations Framework Convention on Climate Change (UNFCCC)‘s objectives by financing climate change mitigation and adaptation activities in collaboration with the private sector. This paper aims to identify the challenges that climate change presents to the financial sector and describes and analyzes various tools for financial institutions that can help manage climate and credit risks while developing business opportunities in parallel.

The paper proceeds as follows. Section 2 introduces the topic of green banking and reviews the relevant literature. Section 3 shows the green banking initiatives being undertaken by central banks and regulators and recent discussions about the mandates of central banks in their efforts to make the bank’s operations green and sustainable. It will also analyze the key difference in the approaches taken by developed and developing countries. This is followed by a discussion of the range of strategies, policies, tools and instruments that are being adopted and deployed by banks and presents the framework in Section 4. Section 5 introduces the theory of change conceptual framework as a tool to analyze current barriers and gaps, activities to be performed to mitigate the barriers and expected results and impacts that can be created. The final section discusses implications for academia, policy makers and practitioners and provides directions for future research.

Overview of green banking

Definition of green banking.

There is no universally accepted definition of green banking (Alexander 2016 ) and it varies widely between countries. However, some researchers and organizations tried to come up with their own definition. The Indian Institute for Development and Research in Banking Technology (IDRBT), which is established by the Reserve Bank of India, defined green banking as an umbrella term referring to practices and guidelines that make banks sustainable in economic, environmental and social dimensions (IDRBT, 2013 ). Green banking is similar to the concept of ethical banking, which starts with the aim of protecting the environment, as it involves promoting environmental and social responsibility while providing excellent banking services (Bihari 2011 ). The State Bank of Pakistan defined green banking as promoting environmentally friendly practices that aid banks and customers in reducing their carbon footprints (SBP 2015 ). Green banking can be also called social or responsible banking because it covers the social responsibility of banks towards environmental protection, illustrating that social issues often intersect with environmental issues. Social banking is broadly defined as addressing some of the most pressing issues of our time and aiming to have a positive impact on people, the environment and culture by meaning of banking (Kaeufer 2010 ; Weber and Remer 2011 ). Similarly, responsible banking encompasses a strong commitment by banks to sustainable development and addressing corporate social responsibility as an integral part of its business activities. Finally, green banking can be a subset of sustainable banking which tends to capture broader environmental and social dimensions (Dufays 2012 ). Global Alliance for Banking on Values (GABV) is an independent network of banks and banking cooperatives with a shared mission to use finance to deliver sustainable economic, social and environmental development. GABV has endorsed the principles of sustainable banking which include triple bottom line approach (social, environmental and financial aspects) at the heart of the business model, grounded in communities and transparent and inclusive governance (GABV 2012 ). There are many overlaps between these definitions and concepts which can be confusing to some extent. To make the scope and definitions a little clearer, UNEP provided a good comparison on respective definitions of green vs. sustainable vs. socioenvironmental (UNEP, 2016 ), as shown in Fig.  1 . According to UNEP, sustainable finance is the most inclusive concept which contains social, environmental and economic aspects while green finance includes climate and other environmental finance but excludes social and economic aspects.

A simplified schema for understanding broad terms. Source: UNEP, 2016

Whilst the definition of green finance in the UNEP paper was used to address environmental concerns in general and therefore became broader than the definition of climate finance, the scope of this paper will only apply to banking activities related to climate change mitigation and adaptation. In this respect, the concept of green banking is similar to that of climate finance defined by the UNFCCC which refers to finance that aims at reducing emissions and enhancing sinks of greenhouse gases and aims at reducing vulnerability of, and maintaining and increasing the resilience of, human and ecological systems to negative climate change impacts. In this paper, green banking is defined as financing activities by banking and non-banking financial institutions with an aim to reduce greenhouse gas emissions and increase the resilience of the society to negative climate change impacts while considering other sustainable development goals such as economic growth, job creation and gender equality.

Need for green banking as a risk assessment and management tool

IPCC rightfully claimed that there is no clear scientific evidence on how the banking sector will be affected by the impacts of climate change (IPCC 2001 ). Whilst there may not be clear scientific evidence, central banks, regulators and the academia have been analyzing the climate change challenges from a financial risk and stability point of view (Kim et al. 2015 ; Carney 2015 ; Battiston et al. 2017 ; Volz 2017 ). Prudential Regulation Authority (PRA) within the Bank of England identified two primary financial risk factors associated with climate change: physical and transition (PRA 2018 ). Physical risk is defined as the first-order risks which arise from climate and weather-related events, such as floods, storms, heatwaves, droughts and sea-level rise with the vulnerability of exposure of human and natural systems (PRA 2015 ; Batten et al. 2016 ; PRA 2018 ). Physical risks can lead to higher credit risks and financial losses by impairing asset values. Transition risks are those that can arise while adjusting, frequently in a disorderly fashion, towards a low-carbon economy (Carney 2015 ; Platinga and Scholtens). Given that climate change mitigation actions often require radical changes and adjustments by the public and private sector and households, a large range of assets are at risk of becoming stranded. This is especially prevalent for fossil-fuel related sectors and assets, which as a result of a revaluation, can in turn lead to higher credit exposure for banking and non-banking financial institutions. Additionally, liability risks can be another primary financial risk factor. Liability risks can arise if parties suffering losses from the damages of climate change seek compensation from those they hold accountable (Heede 2014 ; Carney 2015 ). Liability risks can be more relevant to the insurance sector rather than banking sector due their nature and compensation mechanism. The three types of financial risk factors constitute a major threat to the stability of the financial system (Carney 2015 ; Arezki et al. 2016 ; Christophers 2017 ).

Those risks can come in parallel as they are interdependent. For example, an agriculture-dominated economy can suffer in many ways. Drought or flood, which is a physical risk, can lead to direct losses in agriculture and other agriculture- and food-related value-added sectors. Such a damage in turn can trigger liability risks if their properties were insured. Extreme weather events will not only reduce incomes generated by those sectors but also hamper economic growth by lowering the gross domestic product (GDP) and affecting the job market and thus threaten macroeconomic stability. As a result, affected corporates and individuals may not be able to repay their loans. Once loan default rates increase, banks with heavy agriculture portfolios will suffer. Ultimately, the stability of the whole financial system can be threatened. Additionally, changes in agricultural input can affect food security and food prices which in turn can influence the inflation rate and threaten price stability (Heinen et al. 2016 ). Figure  2 shows an example of climate change affecting in an agriculture-dominant economy.

Climate change effects in an agriculture-dominant economy

For banking and non-banking financial institutions, the transition risks of policy changes can cause more immediate and serious consequences compared to the other two types of financial risks, especially from a credit risk perspective. For example, valuation of collaterals such as land and properties may have to be downgraded if the governments decide to give up on coastal lands and properties vulnerable to sea-level rise for economic reasons or introduce more stringent building energy efficiency standards. Additionally, more extreme hot weather can decrease agricultural productivity leading to lower valuations. Borrowers in the tourism sector relying on coral ecosystems are likely to suffer from a significant decline of coral reefs of 70–90% under a 1.5 °C global warming scenario. Those banks that hold such collaterals and assets would be expected to reserve more capital against them or require more collaterals to offset the shortfall and manage the probability of default and loss-given-default which will become a financial burden by borrowers. Many banks have high exposure to carbon-intensive industries whose business models may not fit into the transition to a low-carbon economy. As a result, the borrowers in the carbon-intensive sector may face challenges in repaying loans due to a decrease in their earnings and asset value. As a result, more banks can be under pressure to shift their investment and lending patterns by divesting from fossil-fuels and investing more in low carbon and energy efficient technologies.

Additionally, the climate risk factors may increase market and operational risks for banks. Market risks can arise from significant fluctuations in energy and commodity prices due to the transition on carbon-intensive industries. Coupled with weakened macroeconomic conditions such as inflation and economic growth, these market risks can increase transaction costs for banks. Banks may also have to bear higher insurance risk premiums on their own assets vulnerable to climate change. Operational risks associated with business continuity can also increase due to climate change and frequency and depth of extreme weather events. For example, banks may have to relocate their headquarters and data centers. Reputational risks by banks could also arise from investing in carbon-intensive assets and borrowers as some might view such activities as breach of fiduciary duty for failing to consider long-term investment value drivers (Table 1 ).

Banks have increasingly started assessing the risks associated with exposure to their loans by adopting risk management frameworks such as the Equator Principles, which are essentially a credit risk management tool that can be used to identify, evaluate and manage environmental and social risks in project finance transactions. However, many frameworks like the Equator Principles are voluntary, legally non-binding industry benchmark and demonstrated inherent limitations including limited scope, a lack of transparency and publicly disclosed information, inadequate monitoring and a lack of accountability, liability, implementation and enforcement (Wörsdörfer 2016 ).

Arguably, the most effective means to address those issues would be to make such tools more enforceable within the boundary of the regulatory and prudential frameworks, assuming that most banks would not voluntarily undertake such measures. However, with exceptions of a few countries such as Bangladesh, China and Indonesia, most countries have just started exploring this possibility. In the case of China, the People’s Bank of China and the China Banking Regulatory Commission developed Green Credit Guidelines based on their Banking Industry Regulation and Administration Law and Commercial Banking Law. China’s Green Credit Guidelines require that banks establish a monitoring and evaluating system for green credit. The effectiveness of such policies is not easy to measure, and they are mostly still in mixed form between voluntary guidelines and enforceable regulations. Nonetheless, even voluntary guidelines can provide a very strong signal to banks if they come from central banks and supervisors, or organically from banks themselves, and are expected to encourage banks to assess and manage credit risks which may transit from climate risks.

Some argue that green loans possess better credit quality than non-green loans, particularly in terms of a lower non-performing loan (NPL) ratio (Weber et al. 2010 , 2015 ; Cui et al. 2018 ). On the other hand, NGFS conducted a preliminary stock-taking of research on credit risk differentials in terms of default rates and NPL ratio between green and non-green assets and concluded that there were no potential risk differentials (NGFS 2019 ). Existing data gaps is one of the factors that make a conclusion difficult to be drawn. Simply put, there isn’t much data available in this field given this is still a very new area and it’s been only a few years since countries and banks have started analyzing the potential risk exposure. Consistent and reliable data covering the credit exposure to climate risks and risk-return profiles of green and non-green assets over a sufficient period of time is needed (NGFS 2019 ).

The role of central banks and financial regulators in responding to climate change challenges

Debates on the role of the central banks and financial regulators.

As the financial risks from climate change are becoming more apparent and relevant to the banking sector, a growing number of central banks and financial regulators are taking them more seriously (Monnin 2018 ). NGFS members also acknowledge that climate-related risks are becoming financial risks and therefore taking care of climate risks is within the mandates of central banks and supervisors (NGFS 2018 ). Prior to the launch of the NGFS, the Task Force on Climate-related Financial Disclosure (TCFD) and the G20 Sustainable Finance Study Group, which was formerly known as G20 Green Finance Study Group, were established to serve similar objectives. The TCFD was established by the Financial Stability Board, which is an international body that monitors and makes recommendations about the global financial system, with an aim to develop voluntary, consistent climate-related financial risk disclosures that would be helpful to investors, lenders, insurance companies and asset managers in identifying and managing financial risks (TCFD 2017 ). Similarly, the G20 Sustainable Finance Study Group was created to identify barriers to green finance and improve the financial system to mobilize private capital for green and sustainable investment (G20 Green Finance Study Group 2017 ). While these kinds of frameworks and industry-led initiatives are major drivers of innovation and risk management, the public sector, namely central banks and financial regulators, also must play a supporting role in mainstreaming green finance and making sure climate-related risks are properly measured, verified and reported. However, many central banks are still reluctant to ease capital requirements for green lending without clear evidence that green finance indeed carries lower risks. Many debates are now arising regarding the climate change and environmental mandate of central banks and financial regulators (Volz 2017 ).

According to the statutes of the Bank for International Settlements (BIS), a central bank is defined as the bank that has been entrusted the duty of regulating the volume of currency and credit in the country. Central banks have historically had three main functional roles, which are to maintain price stability and financial stability, to support a country’s financing needs at times of crisis and to constrain misuse of its financial powers in normal times (Goodhart 2010 ). Additionally, central banks are often required to contribute to stabilizing exchange rate, creating jobs and fueling economic growth (Barkawi and Monnin 2015 ). Central banks often act as financial regulators that define the rules for banking and non-banking financial institutions such as the minimum capital requirement and specific restrictions on certain types of lending. However, there are other cases where an independent supervisory authority is established with the power of financial regulations and supervision while a central bank solely focuses on the monetary policy. The recent financial crisis between 2007 and 2008 indeed accelerated and expanded the role of central banks as the guardian of the financial system and as a lender of last resort. In this respect, the main job of a central bank is to control inflation and macroeconomic and financial stability. Thus, in a narrow sense evaluating climate-related risks and adjusting its monetary and macroprudential policies accordingly can be seen as overstepping its mandate. Volz ( 2017 ) also described potential conflicts with core objectives and mandates of central banks, overstretching their powers and resistance within the central banking community by incorporating the green objective in the mandate of central banks. Additionally, there is a question on the legal mandate of central banks. Some central banks in developing countries such as the Bangladesh Bank, the Banco Central do Brasil and the People’s Bank of China are active in pursuing green central banking policies and explicitly included sustainability in their mandate (Dikau and Ryan-Collins 2017 ). Also, the Financial Services Authority (OJK), the financial market regulator in Indonesia, has safeguarding financial system stability as a foundation of sustainable development in their corporate objectives and subsequently launched a roadmap for sustainable finance in 2014 and regulation on sustainable finance in 2017 (OJK 2014 ; OJK 2017 ). However, such an environmental sustainability mandate is relatively ambiguous for those in developed countries. For example, Article 127 (1) of the Treaty on the Functioning of the European Union defines price stability as the main objective of the European System of Central Banks (ESCB). Although some rely on Article 3 (3) of the Treaty on European Union, which states that the European Central Bank (ECB) shall support the general economic policies in the Union including a high level of protection and improvement of the quality of the environment, to argue that the ECB already integrated the environmental sustainability in its mandate; however, it is still considered as a secondary objective of the ECB and thus there is room for different interpretations. One study found that 54 out of 133 central banks have a mandate to spearhead sustainable economic growth or support sustainability goals set by the government but their mandates are not explicitly linked to climate change (Dikau and Volz 2019 ). To sum up, most central banks have focused on its interventionist role in the world’s economies since the financial crisis and they have not made significant adjustment of their policies to support a low-carbon transition (NEF 2017 ).

An increasing number of central banks and financial regulators, however, started analyzing the negative climate change effects on their banking and non-banking financial sector, and recent research supports the argument that climate change challenges can damage the financial stability (PRA 2015 ; Batten et al. 2016 ; Dietz et al. 2016 ; Volz 2017 ; Campiglio et al. 2018 ). The negative impact of climate change on the banking sector has already been analyzed from the transition, physical and liability perspectives. As shown in Fig. 2 , climate change challenges can pose potential threats to the stability of the financial markets, price and macroeconomics, all of which are within the key mandate of central banks and financial regulators. Moreover, fluctuations in energy prices while transitioning to a low-carbon economy can directly influence price stability and inflation and can hamper economic growth in all sectors, including the financial sector (DNB 2016 ). Stranded assets caused by transition risks can lead to a climate “Minsky” moment whereby a sudden, major collapse of asset values is expected to threaten the financial stability and trigger cascade effects throughout the interconnected financial system (Minsky 1982 ; Minsky 1992 ; Carney 2015 ; ESRB 2016b ; Battiston et al., 2017 ). The latest IPCC special report also mentioned that central banks or financial regulators could be a facilitator of last resort for climate financing instruments which can help lower the systemic risk of stranded assets (Safarzyńska and van den Bergh 2017 ). Other arguments supporting the expanded role of central banks and financial regulators include their responsibility for wider public goals such as the mitigation of market failure and their role in developing long-term national strategies (NEF 2017 ; Volz 2017 ). Given that climate change is becoming a major threat to the global economy, central banks and regulators are increasingly being asked to analyze climate change effects and intervene when necessary to exercise their duty as public institu7pt?>tions. Also, as putting specific restrictions on certain types of lending is one of their responsibilities, central banks and regulators should restrict financial flows and bank lending to carbon-intensive and environmentally-harmful borrowers to mitigate a credit market failure. Central banks and regulators are required to develop and implement a forward-looking monetary policy strategy (Montes 2010 ) because monetary policies usually affect the economy with a lag. The same principle should apply when dealing with climate change challenges. Central banks and regulators should develop a long-term climate change strategy and provide a long-term market signal to investors who need to deliver a vast amount of investment needed for a low-carbon transition. More central banks and regulators tend to accept their evolving roles. The NGFS declared that climate-related risks fell squarely within their mandate. A member of the Executive Board of the ECB also argued that the ECB can and should support the transition to a low-carbon economy acting within its mandate while acknowledging different views and opinions around this topic (Cœuré 2018 ).

Different approach in developing countries vs. developed countries

It is widely acknowledged that countries that established clear guidelines and mandatory regulations to direct public and private financing towards green products, offer an enabling environment for domestic finance institutions to scale up their green investments (GIZ 2019 ). However, approaches toward green banking policy interventions tend to be different between developing and developed countries, although actions taken by prudential authorities in developed countries vary. For example, rule-based authorities such as those within France tend to act more proactively and introduce policies that aim to measure climate risks, while principle-based authorities such as those within Switzerland and Japan tend to take more market-driven approaches (Spiegel et al. 2019 ). As summarized in Table  2 , many of the developing countries have introduced mandatory regulations which require their banks to formalize and implement an environmental and social safeguards policy and report relevant activities to central banks and regulators. In some cases, central banks in developing countries such as Bangladesh and India set specific lending quotas for climate-sensitive sectors. Many developing countries have received support from multilateral development agencies such as IFC in developing their green banking policy framework. According to IFC, developing countries are at different stages of sustainable finance development and Bangladesh, Brazil, China, Colombia, Indonesia, Mongolia, Nigeria and Vietnam are most advanced as they have started reporting on results of their implementation actions (IFC 2018a , 2018b ). On the other hand, most the developed countries have taken an industry-driven, voluntary approach, focusing mainly on the disclosure of climate-related financial risks as part of supporting the TCFD. As of 2018, governments in Belgium, France, Sweden, and the United Kingdom (U.K.) and financial regulators from Australia, Belgium, France, Japan, the Netherlands, Sweden and the U.K. have expressed support for the TCFD, which fully remains a voluntary initiative (TCFD 2018 ). Furthermore, France made the disclosure of climate-related financial information by listed firms, banks and credit providers as well as investors mandatory under its Energy Transition Law for Green Growth. Japan is another case of a developed country, as the Bank of Japan provides concessional loans to banks that lend to environment and energy businesses. However, even those mandatory schemes under implementation often lack details of the enforcement and thus create some ambiguity as to the extent to which authority within the government will take the responsibility of compliance-check and monitoring.

Green banking policy instruments

Green banking policy instruments can be grouped into four different policy areas which include macro-prudential policy, micro-prudential policy, market-making policy and credit allocation policy according to Dikau and Volz ( 2018 ), as summarized in Table  3 .

Green macro-prudential policy aims to define the rules for financial institutions and mitigate the systemic financial risks to the macro-economy caused by climate change. Green macro-prudential tools can include a climate stress-testing of the banking system, differentiated capital requirements depending on the proportion of green portfolio of the bank and restrictions on credit exposure and financial ratios. Such tools can help central banks and regulators influence the lending activity of banks by encouraging them to make more green investments. Arguably, the most powerful macro-prudential tool would be the Basel accord. The current capital and liquidity requirements under the Basel III accord do not necessarily require banks to evaluate the impacts of climate risks on their balance-sheet (BCBS 2016 ; ESRB 2016a ). Given that the Basel III standards have been adopted and are being implemented by all 27 Basel committee member jurisdictions (BCBS 2018 ), they are the most widely accepted standards in the banking industry across developing and developed countries. Therefore, consideration of climate and environmental risks by the Basel committee in assessing their impacts on the stability of the banking sector will give a very strong market signal and further encourage central banks and regulators to adopt robust environmental and social risk management frameworks.

Green micro-prudential policy seeks to encourage individual financial institutions to incorporate environmental and social safeguards into their policies and operations. Green micro-prudential instruments can include information disclosure of climate-related financial risks by banks, adoption and implementation of environmental and social risks management and differentiated reserve requirements. For example, Banque du Liban, the central bank of Lebanon, introduced a climate finance loan scheme whereby commercial banks are exempted from part of the required reserve when they lend to energy-related projects under the National Energy Efficiency and Renewable Energy Action (NEEREA) (CCCU 2014 ).

Central banks and regulators can play a market-making role to promote green investments and operations. For example, they can develop and provide sustainable finance guidelines for banks that can create an enabling environment in the banking sector. This is the core initiative of IFC’s Sustainable Banking Network. Another example is to develop green bond guidelines to encourage the issuance of green bonds by banks because proceeds of green bonds can be exclusively used to finance green projects. Most green bonds issued in the past followed standards set by the International Capital Market Association (ICMA) and Climate Bonds Initiative. However, some countries and regions such as China and ASEAN (Association of Southeast Asian Nations) recently developed their own standards to propel their green bond market.

Finally, green credit allocation policy seeks to promote lending and investment toward climate-sensitive sectors such as agriculture, energy and water. Some central banks have been implementing such a policy by setting a minimum proportion of bank lending to climate and environment-related sectors, creating concessional green refinancing windows and extending concessional loans to banks that lend to climate-sensitive sectors.

Additionally, the NGFS made six recommendations that can help central banks, supervisors, policy makers and financial institutions manage climate risks and ultimately make the financial system green and climate-resilient (NGFS 2019 ). The six recommendations include integrating climate risks into financial stability monitoring and prudential supervision, incorporating environmental, social and governance (ESG) factors into portfolio management, sharing and disclosing climate risk data, capacity building and awareness raising, supporting the work of the TCFD and development of a green and climate taxonomy. Developing a robust green and climate taxonomy can be a key instrument to mitigate the possibility of a green bubble and green washing.

Measuring the effectiveness of green banking policies

Measuring the effectiveness of green banking-related policies at both a sectoral and institutional level can be premature mainly due to the current lack of data and measurement methodologies, let alone comparing the performance and effectiveness between developing and developed countries and among different instruments. Many scholars have been very active in their endeavors to analyze the performance of China’s Green Credit Policy; however, their findings showed mixed results on whether implementing the policy has been effective in serving its goals (Scholtens et al. 2008 ; Aizawa and Yang 2010 ; Zhang. et al., 2011 ; Jin and Mengqi 2011 ; Stephens and Skinner 2013 ; Gong and Gao 2015 ; Lian 2015 ; Liu et al. 2015 ; Ge et al. 2016 ; Yu and Ren 2016 ). Another study analyzed the relationship between corporate environmental information disclosure, as required under the Green Credit Policy in China, and corporate green financing. It concluded that the environmental information disclosure requirement did not become a risk management tool for banks to make their financing decisions (Wang et al. 2019 ).

Also, China has officially started measuring and reporting the effectiveness of its Green Credit Policy based on the NPL ratio. The China Banking and Insurance Regulatory Commission (CBIRC, formerly the China Banking Regulatory Commission) reported that the NPL ratio of green loans provided by the 21 domestic major banks was 0.41%, which is 1.35% lower than the NPL ratio of all loans, in September 2016. In June 2017, CBIRC subsequently released the same data showing that the NPL ratio of green loans decreased to 0.37%, which is 1.32% lower than the that of all loans (Cui et al. 2018 ; NGFS 2019 ).

Despite early attempts, mostly led by China, to measure the effectiveness of green banking policies and green loans, there is still a significant lack of data availability and inconsistency to draw a clear conclusion.

The role of banks in responding to climate change challenges

Financial institutions, especially banks, have a unique market position as they have deep market knowledge and experience across all economic sectors. They arguably have one of the widest networks, outreaches and client bases and can shift consumer behavior by scaling up and redirecting financing flow towards low-carbon and climate-resilient investments.

Many international and local banks have undertaken various green banking initiatives to seize business opportunities, manage risks, comply with national and regional regulations and guidelines, enable countries to deliver their climate ambitions and encourage corporate social responsibility (CSR). According to IFC, there is USD 23 trillion worth of climate-smart investment opportunities in developing countries between 2016 and 2030 (IFC 2018a , 2018b ). Such investment opportunities will be more enormous if those in developed countries are added. Therefore, it is a natural move by commercial banks to enter into a lucrative market. According to a survey of 90% of the UK banking sector, 70% of banks in the country view climate change as a threat to the financial system, although the same survey found that only 10% are building a strategy on climate-related financial risk management (PRA 2018 ). As the banking sector is a heavily regulated market, eventually all the green banking policy efforts by central banks and regulators will seek to change the behavior of commercial banks and lead them to gradually shift their focus toward more climate- and environment-friendly ways of doing business which can help themselves manage their risk exposure and also countries meet their climate goals. Finally, some banks view green banking as a CSR-related activity as they see growing demands for banks to be greener and more sustainable by their clients and foresee potential reputational risks. CSR as a governance tool can be useful for monitoring the behavior of management in financial institutions, especially for those identified as “too big to fail” because they are critical to the economy (Barclift 2011 ). In this section, actions being taken by commercial banks, both collectively and individually, and their performance will be presented and analyzed, and gaps and areas for improvement will be identified and suggested.

Collective actions and their performance

A growing number of financial institutions around the world have voluntarily either created their own networks or initiatives or joined platforms established by international development agencies such as IFC and United Nations Environment Programme (UNEP). Some of the well-known ones are outlined in Table  4 . The common objectives of these frameworks and initiatives include development and adoption of standards, principles and risk management frameworks and sharing knowledge and best practices such as the Equator Principles. The Sustainable Banking Network (SBN), established by IFC, is a network of central banks, regulators and banking associations in developing countries that facilitates the collective learning of members and supports them in policy development (IFC 2016a ). Several developing countries such as Mongolia have received support from IFC SBN when they developed and launched their sustainable finance principles. The Banking Programme, established by the UNEP-Finance Initiative (FI), aims to help banks understand environmental, social and governance challenges for their operations and is probably the largest green banking initiative with over 130 member banks across the world. The UNEP FI also supported some of their members to create the Principles for Responsible Banking which aimed to define the banking industry’s role and responsibilities in shaping a sustainable future and align banks’ business with the objectives of the Sustainable Development Goals (SDGs) and the Paris Climate Agreement (UNEP FI 2018 ).

Performance of some green banking frameworks and initiatives has been analyzed by researchers and the result so far is mixed. For example, Weber and Acheta ( 2016 ) analyzed reports issued by Equator Principles signatories and concluded that the Equator Principles did not make significant contributions to both sustainability of projects and the financial system because they were primarily adopted as a means to enhance reputation and risk management of the signatories. Earlier research also stated that adoption of the Equator Principles was mainly used to signal responsible conduct and did not find significantly improved aspect of financial performance between adopters and non-adopters apart from the size factor (Scholtens and Dam 2007 ). On the contrary, a research by the GABV compared the financial performance of their member banks and that of the global systemically important banks (GSIB), namely the largest banks in the world, and found that their member banks achieved higher return-on-assets and return-on-equity than GSIBs with lower volatility between 2007 and 2016 (GABV 2018 ). Moreover, some studies have found that green tagging, which refers to identifying green attributes of a bank’s loan and asset portfolio, may lead to lower probability of default of borrowers (Principal 2017 ; Sahadi et al. 2013 ). According to a survey conducted by IFC, 62% of a sample of 42 banks from developing countries responded that the non-performing loan ratio of their green portfolios is lower compared to that of other non-green portfolios (IFC 2018a , 2018b ).

Individual actions and instruments

A bank is a complex institution with financial products and numerous services that they offer to their clients. As more green- and climate-related themes have increasingly become mainstreamed in the banking sector and demands by their clients grow, banks started launching dedicated green financial products and services, mostly using and customizing their existing offerings. Table  5 is not an exhaustive list of those products and services but presents the most-widely used instruments by banks. Arguably, the main function of a bank is to lend money. There are different types of borrowers, but the majority of a bank’s lending goes to companies, individuals and projects. As there have been emerging green investment opportunities and ways to lower the costs by reducing energy bills for example, more borrowers rely on bank lending to develop renewable energy projects,climate-resilient infrastructure projects and install more energy-efficient and climate-smart equipment, appliances, houses and vehicles. Small-holder farmers also borrow from a bank or a micro-finance institution to purchase climate-resilient seeds and climate-smart agriculture equipment. Some banks offer an insurance product, often by using their insurance subsidiary. A green auto insurance product can be offered to financially incentivize users by lowering insurance premium when they use electric or hybrid vehicles which emit less greenhouse gases and other pollutants. Banks can also help finance green projects and refinance existing green assets through securitization using bond issuance and warehousing. Securitization can also help free up capital by selling securities to third-party investors to support further lending to low-carbon and climate-resilient assets. Some banks perform principal investing, using their own balance-sheet, to hold a direct equity stake on start-ups and venture firms that develop green and climate-smart technologies. An alternative way is to invest in a private equity fund as an intermediary who will invest into green projects on behalf of its investors. Many banks offer brokerage and market-making services for trading of green bonds and carbon credits to help facilitate green investments. Finally, some banks provide advisory services to their clients usually for financial structuring of a project. Quite a few borrowers consider a green project complicated in terms of structuring the transaction from a financial point of view and a bank can help them using their expertise and experience. A few banks sometimes try to stimulate demands by offering capacity building support to their borrowers or project developers. For example, a bank can help a borrower perform an energy audit of its firm, factory or house by dispatching the bank’s own resources.

According to IFC (IFC 2018a , 2018b ), the proportion of banks from developing countries that provide climate lending increased from 61% in 2016 to 72% in 2017 among 135 sample banks and they have been most active in the renewable energy and energy efficiency sector. Additionally, 49% of the banks offered dedicated green financial products. Green credit was the most widely used financial product, followed by green insurance and advisory services and green investment funds. Finally, although 55% of the banks currently do not provide green financial products, 88% of them expressed their interest in offering such instruments in the future if additional support is provided. A good example for green financial products can be an auto-loan that can be used to purchase electric or hybrid vehicles which emit zero or significantly less greenhouse gases compared to vehicles with a combustion engine. Some countries provide a subsidy to promote the purchase of electric or hybrid vehicles because they usually cost more. However, not many countries can afford it due to budget constraints. Banks can bridge the gap if they can launch affordable eco-car loans which provide financial incentives to their clients to switch their choice of vehicles in addition to fuel cost savings they can benefit from.

Theory of change in green banking

Application of theory of change

The theory of change framework is generally regarded as an assessment of inputs, activities, outputs, outcomes and impacts, articulating how certain types of interventions are expected to lead to changes and achievements (Rauscher et al. 2012 ; Stein and Valters 2012 ). The theory of change framework provides the logical underpinning of changes and goals and highlights the relation between activities and expected outputs, outcomes and impacts from the carrying out of the activities. According to Stein and Valters ( 2012 ), the theory of change framework serves to map the change process and its expected results and facilitates implementation of projects (strategic planning); to articulate anticipated processes and results that can be monitored and evaluated (monitoring and evaluation); to communicate change processes to internal and external stakeholders (description); and to help organizations clarify and improve the theory behind them or their programmes (learning).

The theory of change can be a useful strategic framework and tool to assess status of green banking, conduct a gap analysis, identify activities needed to be performed to mitigate gaps and barriers and describe expected results and impacts that can be created. Given that there is a lack of data availability in this field of research, a theory of change can also be helpful for identifying the data that should be collected and how they can be analyzed in the future (Rogers 2014 ). In linking the theory of change model to green banking, barriers and gaps will be used instead of inputs as a means to identify and narrow the gap between change objectives and actual potential in green banking. Additionally, outputs and outcomes will be merged into results. The data on barriers and activities were collected and developed based on literature review and market observations. Results and impacts are desired outcomes of green banking activities which aim to contribute to reducing greenhouse gas emissions and enhancing climate-resilient sustainable development.

Three types of theory of change framework – sectoral, institutional and integrated - will be presented as different interventions are required to transform an institution versus the whole banking sector. An integrated theory of change framework aims to capture both aspects.

Theory of change at the sectoral level

The theory of change in green banking at the sectoral level is related to making systemic changes and transformation within the entire banking sector which can drive both supply and demand for green banking products and services. Therefore, it is more inclusive than the theory of change at the institutional level as engaging with other stakeholders such as project developers, beneficiaries and government agencies is critical.

There are sectoral barriers that can influence activities of individual banks and can create institutional barriers as shown in Fig.  3 . Lack of regulatory framework and enabling environment often leads to disincentivizing banks to undertake green banking activities as the banking sector is highly regulated. For example, the banking sector can set criteria for the businesses they finance, especially carbon-intensive industries, thereby mitigating the risks related to an energy transition and ultimately making the economy more sustainable (DNB 2016 ). Other sectoral barriers include insufficient financial incentives for both banks and project developers and limited access to affordable finance.

Theory of change in green banking at sectoral level

While some countries may prefer market-led approaches compared to regulations or rules to encourage green banking activities, development and implementation of green banking policy guidelines or regulatory frameworks is expected to accelerate necessary actions by financial institutions. Such policy-level interventions should also include supports for capacity building, knowledge sharing and awareness raising to maximize their impact and to reach desired results and outputs.

Theory of change at the institutional level

The theory of change in green banking at the institutional level, as shown in Fig.  4 , assumes that most financial institutions are not active in terms of providing green banking products and services because they often do not recognize the climate and green sector as commercially viable. This is mainly due to the perception of risks associated with climate change projects and their existing capacity or willingness to develop and grow financial supply in the sector is insufficient. Most financial institutions from developing countries have short-term and high cost funding which prevent them from providing more affordable financing to their borrowers which is critical to stimulate market demands for climate projects. Additionally, other types of barriers include low awareness of business opportunities and best-available climate technologies and absence of overall climate change strategies and environment and social safeguards that are needed to properly finance climate change projects. Establishing green financial products and services is often constrained by such barriers as knowledge gaps to design and operationalize the products and services and high upfront costs necessary to assess and verify technology performance.

Theory of change in green banking at institutional level

To mitigate those barriers, activities such as capacity building and access to long-term and concessional financing are needed. Additionally, financial institutions need to put more efforts into identifying and developing climate change projects and raising internal awareness. All of these activities will lead to an increased supply of financing to climate change projects. Also, developing a climate strategy and environmental and social safeguards including gender policy will help in obtaining buy-in from internal stakeholders and properly managing the projects.

Integrated theory of change framework

Mainstreaming green banking into the core banking policies and practices remains a challenge at both institutional and sectoral level because there are still many barriers and gaps to overcome and activities to be undertaken to achieve desired results and impacts.

As shown in Fig.  5 , barriers or gaps refer to impediments to promotion of green banking and they exist at both the institutional and sectoral level and are often intertwined with each other. For example, the sectoral barriers are likely to naturally become institutional barriers unless financial institutions either individually or collectively take their own action on a voluntary basis. The costs of the transition to green banking by reducing the barriers and undertaking desired activities can be evenly shared among the public sector, private sector and financial institutions, although the financial institutions are expected to be more responsible to cover many of their own activities. The public sector can be divided into domestic and international, depending on the source of financing. The domestic public sector can support the transition through various policy measures such as policy lending, subsidies and tax benefits. On the other hand, the international public sector, such as climate funds and multilateral development banks, can provide grants for technical assistance and capacity building and long-term concessional loans. The private sector can contribute by developing bankable climate projects and technologies. Expected results are also likely to happen at both the sectoral and institutional level.

The application of the theory of change indicates that if the establishment of a green financing programme with more affordable terms for climate purposes is achieved and the capacity of banks is built up, then demand for such a lending product is expected to be stimulated within the country, driving the spread of green banking activities. It is expected that expanding lending for the purpose of investing in greenhouse gas mitigation and climate resilience projects is likely to lead to the achievement of climate change mitigation and resilience impacts throughout the economies of the countries where such green banking activities are being established.

Conclusions and implications for further studies, policy makers and practitioners

The concept of green banking still has a long way to go until it gets fully mainstreamed in the banking sector. However, simultaneous activation of both top-down and bottom-up engagement in raising the awareness of green banking has taken off. Policy makers and regulators have been increasingly realizing the importance of adopting green banking policy interventions as a means to transform the financial sector which can immensely contribute towards helping countries meet their climate targets and goals. Especially, the role of central banks and financial regulators is key as they have the power to change and control dynamics and landscape of the financial sector. Considering that most developed countries rely on a voluntary code of conduct by their banks and focus on the information disclosure while developing countries tend to use more regulatory approaches to promote green banking activities, future research could examine the performance and effectiveness of each green banking policy instrument and identify which approach is proven to be more effective or has the better prospect. However, it is expected to take considerable time before any researcher can undertake such analysis because of a lack of data availability as this is very new research area. It would be equally challenging to design and develop the criteria against which performance and effectiveness of the policy instrument will be measured.

Simultaneously, more banks are willing to become greener either individually or collectively and started launching green financial products, mainly in order to increase their economic value, but also to be good corporate citizens. Green financial products serve banks to fulfill several important objectives: banks can comply with government’s regulations or guidance, enhance firm reputation, and seize emerging business opportunities. The size of the green market has been steadily growing and expected to grow further. Banks that can establish themselves as early-movers and market leaders are more likely to enhance their reputation which can in turn help attract new clients. Further, from strategic perspective, change of consumer buying behavior by encouraging them to maximize the use of green financial products is most desirable. Thus, banks will have to develop and implement robust environmental and social safeguard standards to be able to manage their green financial products and comply with the regulations or guidelines.

While there is a limited number of studies that found a positive relationship between green and social banking activities and financial and operational performance of banks, it is too early to draw such a conclusion. To do so, more data are needed and various studies should be conducted both theoretically and empirically. For example, a formal survey targeting financial institutions on current barriers and desired activities can be a useful tool for collecting the data and making the theory of change more robust. With such data in place, a structure for a more systematic and empirical analysis of root causes of market barriers and activities to address them can be developed. Also, it could be interesting future research to identify if reputation plays a mediating role between green banking activity and financial as well as operational performance of banks. Other future research topics in this area can include investigating whether green banks outperform non-green banks in terms of climate as well as operational and financial performance, and comparing the effectiveness of green banking policy measures. However, parameters and standards need to be developed to measure the green and climate performance of banks and such a task is expected to be a major challenge.

Availability of data and materials

Not applicable.

Abbreviations

Association of Southeast Asian Nations

Bank for International Settlements

Corporate Social Responsibility

European Central Bank

European System of Central Banks

Environmental, Social and Governance

Global Alliance for Banking on Value

Gross Domestic Product

International Capital Market Association

International Finance Corporation

Intergovernmental Panel on Climate Change

National Energy Efficiency and Renewable Energy Action

Network for Greening the Financial System

Non-Performing Loans

Financial Services Authority

Sustainable Banking Network

Sustainable Development Goal

Task Force on Climate-related Financial Disclosures

United Nations Environment Programme Finance Initiative

United Nations Framework Convention on Climate Change

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Green banking initiatives: a qualitative study on Indian banking sector

Meenakshi sharma.

Department of Management, Birla Institute of Technology, Mesra (Ranchi), Noida Campus, A-7, Sector- 1, Gautam Buddh Nagar, Noida, 201301 India

Akanksha Choubey

The environmental concern is on rise in all types of business; however, banking assumes a special niche due to its ability to influence the economic growth and development of the country. The present study proposes conceptual model of Green banking initiatives and studies the impact of three Green banking initiatives, viz. green products development, green corporate social responsibility and green internal process on two possible outcomes, viz. Green brand image and Green trust. The study is qualitative in nature comprising of semistructured in-depth interviews conducted with 36 middle- to senior-level managers of twelve public and private Indian banks. Banking sector can play a crucial role in greening the banking system by enhancing the availability of finance and serve the needs of a “green economy”. The findings of the study revealed that 63% of the total respondents were of view that their bank indulges in development of several green banking products and services, 53% of the bankers said that their bank incorporates green internal processes in their daily activities, and 78% respondents said that their bank undertakes several green corporate social responsibility initiatives. This investigation further highlights that more than 60% respondents believed that Green banking initiatives have positive role in restoring customer trust through enhanced Green brand image. With dearth of studies on green banking in India, the present qualitative study contributes to the body of knowledge and paves way for future research in green banking for sustainable development.

Introduction

Sustainability today is an “emerging mega-trend” (Lubin & Esty, 2020 ) and a very important business objective to drive green business innovation (Raska & Shaw, 2012 ; Royne et al., 2011 ). Companies like Cisco, HP and Walmart have successfully integrated it into their business practices (Sheth et al., 2010 ). The relevance of green marketing in existent scenario is conspicuous because of environmental concerns amongst marketing researchers and practitioners (Chamorro et al., 2009 ; Peattie & Crane, 2005 ; Ottman et al., 2006 ; Lee, 2008 ; Polonsky, 2011 ; Sharma, 2018 ). Industrialization has resulted in ecological inequality, and corporates are blooming at the expense of local community (Porter & Kramer, 2014 ). Uneven industrialization has disturbed ecological balance and has resulted in natural and industrial disasters (Rehman et al., 2021 ). High levels of environmental pollution have raised social concern over environmental issues (Chen, 2010 ). This environmental concern is surging in divergent businesses. Manufacturing, technology, electronics and IT industries (Bae, 2011 ) all are willingly accepting environmental dedication as a paramount business responsibility (Chen et al., 2006 ).

Banks play a pivotal role in sustainable development of a country, and green banking today has become a phraseology. Due to financial, economic and environmental changes, financial services market is re-shaping and an all-inclusive engagement of ethical proposal and values into banking practices is taking place (Lymperopoulos et al., 2012 ; San-Jose et al., 2009 ). Banking sector facilitates adaptation of environment friendly strategies, mitigates climate risks and supports recovery by diverting funds to climate-sensitive sectors (Part & Kim, 2020 ). Today, environmental and green banking has become synonym with sustainability (Kärnä et al., 2003 ), so banks are broadcasting corporate social responsibility (CSR) activities (Scholtens, 2011 ). Banks globally are investing substantially in green strategies (Evangelinos et al., 2009 ) to create green image. Greening of bank is further reducing carbon footprints from banking activities, and this is mutually beneficial to the banks, industries and the economy (Bihari & Pandey, 2015 ).

Many relevant studies have been conducted on green banking before. Scholtens assigns green bank marketing as a component of larger CSR concept. Economic agents banks play an important role in financing environment-friendly projects (Nizam et al., 2019 ) and thus contribute towards society (Rehman et al., 2021 ). Kärnä et al. ( 2003 ) and Grove et al. ( 1996 ) explained association between green marketing and CSR, in non-banking sector. Lymperopoulos et al. ( 2012 ) tested the favorable impact of green bank marketing and green image ; for Evangelinos et al. ( 2009 ) development of green services was the prime focus. Kumar and Prakash ( 2018 ) also opine that implementing sustainable banking practices can be a strong stimulus to sustainable development and points towards scarcity of studies related to sustainable banking in Indian banks. Nizam et al. ( 2019 ) emphasized the need for implementing Green banking initiatives in routine operations, whereas Masukujjaman et al. ( 2017 ) talked about pivotal role played by green banking in developing economies at social, corporate and environmental level.

Developed nations have attracted major research on green banking though developing nations have ignored them (Khan et al., 2015 ; Jeucken, 2015 ; Amacanin, 2005 ; Scholtens, 2011 ; Roca & Searcy, 2012 ; Weber, 2016 ), and in countries like India research on green banking is relatively undiscovered (Prakash et al., 2018 ). Majority of research in India is on corporate social responsibility and management of environment (Biswas, 2011 ; Narwal, 2007 ; Rajput et al., 2013 ; Sahoo & Nayak, 2007 ; Sharma & Mani, 2013 ), green banking strategies (Bihari, 2010 ; Bahl, 2012 ; Jha & Bhoome, 2013 ; Tara & Singh, 2014 ) and green practices adopted by public and private sector banks.

Equator Principles (EPs) and United National Environmental Protection Finance initiative (UNEPF1) and Equator Principles (EPs) promote sustainable development through financial institutions. It has been embraced by more than 200 member nations, and India also being a member nation is following the guidelines of RBI (Reserve Bank of India, 2017). However, despite taking vigorous steps by Indian government, sustainability is yet to dribble down to ordinary people.

Communication gap between the various stakeholders, lack of awareness, lack of green image of the banks and lack of trust are amongst the various reasons why the outcome of the green outreach by the banks is not as expected. Lymperopoulos et al. ( 2012 ) empirically validated that green bank marketing positively influences green image of the bank. However, no such study has been conducted in Indian scenario. The impact of Green banking initiatives to enhance the Green trust and further Green brand image has not been studied so far in Indian scenario.

Henceforth, there is a need to develop a framework that will fill the research gaps by asking following research questions:

What are the Green banking initiatives of leading Indian public and private banks?

What are the major challenges for Indian banks towards “going green”?

How the Green banking initiatives contribute towards creation of Green trust?

How the Green banking initiatives contribute towards creation of Green brand image?

The remaining of this paper is organized as follows: the next section discusses literature review which throws light on green banking, Green banking initiatives in India and challenges of implementing Green banking initiatives in India. Thereafter, the outcomes of Green banking initiatives, viz. Green brand image and Green trust, are discussed as subsections. Afterwards, the research methodology is explained with the help of techniques used for data collection and data analysis. Thereby, findings are discussed which elucidate how research questions are answered. The study is concluded by highlighting the implications and limitations of the research.

Literature review

Green banking.

Green banking was initially introduced in the year 2009 in State of Florida. In India, SBI (state bank of India) being the largest commercial bank took a lead towards setting higher standards of sustainability and undertook foremost step towards “green banking” initiative. SBI was the first bank to inaugurate wind farm project in Coimbatore.

Green banking is a form of banking activity where the banks take initiative to do its daily activates as a conscious entity in the society by considering in-house and external environmental sustainability. The banks who do such type of banking activities are termed as socially responsible and a sustainable bank or green bank or ethical bank (Hossain et al., 2020 ; Zhixia et al., 2018 ).

A green bank is a bank that promotes and enacts green technologies in bank operations both internally and externally to minimize carbon footprints and facilitates environment management (Bose et al., 2017 ). It is an influencer for holistic growth of economy in the nation (Jeucken & Bouma, 1999 ; UNEP FI, 2016 ). Green banks adopt social and economic aspect into their strategies and progress towards sustainable practices (UNEP FI, 2011 , 2017 ).

According to Indian Banks Association, green banking refers to a normal banking system which involves all environmental as well as social factors with an aim to ensure ecological sustainability and optimum use of natural resources (Scholtens, 2009 ; Lymperopoulos et al., 2012 ; Kumar & Prakash, 2018 ; Sahi & Pahuja, 2020 ). Hermes et al. ( 2005 ) said that banks involve a shift from traditional towards sustainable practices and social, governance and environment criteria are being integrated into their core strategy. Scholtens ( 2009 ) has explained the concept of green corporate social responsibility in banking and pronounces that a green bank offers savings accounts to stakeholders, ensuring that the savings will finance sustainable projects. He developed a framework to assess the social responsibility of global banks and further tested it on 30 institutions and concluded that there is a positive and significant association between a bank’s CSR score and its financial size and quality. As per Evangelinos et al. ( 2009 ), development of green products like green financial products, loans for renewable energies, greener technologies, green lending and environmental management strategies is green marketing in bank. This improves banks’ reputation and contribute towards sustainability. This has motivated several banks implementing green strategies to invest in developing environmental image to better prepare for future challenges.

Lymperopoulos et al. ( 2012 ) verified empirically that banking initiatives that are green result in a favorable, green image. His green bank marketing construct is comprised of green corporate social responsibility (GCSR), green internal process (GIP) and green product development (GPD).

According to (Dewi & Dewi, 2017 ), green banking promotes environment-friendly practices in banking sector. He further postulated that green banking guides the bank’s core operation towards sustainability. Kumar and Prakash ( 2018 ) have studied the adoption level of sustainable banking tools and categorized 40 criteria into five heads. They further used content analysis to evaluate the sustainable practices of Indian banks and concluded that green banking adoption is still at the nascent stage in Indian banking.

As a part of Green banking initiatives, several banks throughout the globe and NBFIs have adopted eco-friendly mechanisms for financing as well as green transformation of internal operations. For instance, banks in nations like Bangladesh, Brazil, Columbia and Indonesia have started practicing green banking relatively along the lines of the policy framework (Bahl, 2012 ; Rahman & Akhtar, 2016 ). Bank of Ceylon in its annual report of 2015 stated that all their services and goods are driven towards more technology-oriented platforms which helps in reduction of carbon footprints. Also, peoples bank has initiated a paradigm shift to its old model of banking (Oyegunle & Weber, 2015 ). Banks in China, Turkey, Mongolia, Vietnam, Indonesia, Kenya and Peru have also introduced green banking concepts like SmartGen with mobile and internet-oriented passbook free application, fortune branches being installed and initiation of smart zones (Scholtens, 2009 ; Bank of Ceylon, 2015 ; Herath & Herath, 2019 ).

Currently, Indian banks are seen being desirable towards entering global markets (Laskowska, 2018 ; Nuryakin & Maryati, 2020 ; Paramesswari, 2018 ), and it has become important that they recognize their environmental and social responsibilities (Prasanth et al., 2018 ; Sahi & Pahuja, 2020 ; Zhixia et al., 2018 ). As a result, green strategies have become prevalent, not only amongst smaller alternative and cooperative banks, but also amongst diversified financial service providers, asset management firms and insurance companies (Allen & Craig, 2016 ; Gopalakrishnan & Priya, 2020 ; Hossain et al., 2020 ; Kapoor et al., 2016 ).

Green banking initiatives in India

Green initiatives may be referred to as developing green products which consume less energy, and accordingly distribution, pricing and communication strategies follow. Peattie and Charter ( 1994 ) have defined green marketing as a comprehensive process of management which identify, anticipate and satisfy the needs of customers and society, in a fruitful and sustainable way.

Banking defines green marketing in a similar manner as other industries do. Evangelinos et al. ( 2009 ) defined green bank marketing as developing an innovative environment-friendly financial product like green loans that finance clean technology, and green strategies, like waste management programs and energy efficiency to augment banks’ green reputation and performance.

Green marketing by banks or green initiatives forms a favorable eco-friendly image that satisfies the customer’s green needs and green desires (Chang & Fong, 2010 ) and contributes towards sustainable development (Portney, 2008 ). Several banks are already implementing green banking, green strategies and building their green image to handle existing confrontation. Such green actions can help banks to procure environmental reputation and inculcate their environmental concern (Evangelinos et al., 2009 ; Lymperopoulos et al., 2012 ; Portney, 2008 ).

Green marketing in banks should address green methods and process (Kärnä et al., 2003 ) that suggests green communication also be a part of green initiatives. Evangelinos et al. ( 2009 ) suggest three aspects of green bank marketing in banking literature: lending decisions of banks should be based on environmental criteria; bank environmental management strategies; and developing environmental financial products. He suggested that “green” marketing refers to development of new green financial products that improves banks reputation and performance.

Lymperopoulos et al. ( 2012 ) empirically validated that green bank marketing which comprises of green product development (GPD), green corporate social responsibility (GCSR) and green internal processing (GIP) is a complex concept, is crucial for the bank’s green image (Hartmann et al., 2005 ) and critically contributes in developing customer loyalty and satisfaction (Chang & Fong, 2010 ).

Role of CSR in banks in creating Green brand image has not been explored much (Lymperopoulos et al., 2012 ). CSR is decision making in business, and it has ethical values, compliance with law and regards for environment, communities and people, communities attached to it. Banking relates to CSR with reference to cause-related marketing, ethical issues concerning minority and environment and quality of life (Donaldson & Dunfee, 2002 ). GCSR in banking has been emphasized by Scholtens ( 2009 ), as a socially responsible bank that safeguard savings that are financing environmental projects.

In the contemporary circumstances in market, financial service sector has been reshaped, demanding fresh marketing insight with an aim to provide instructions for successful practice. Going ecological has become a massive trend in the banking industry worldwide. The idea of green banking has encouraged banks to familiarize with paperless, technology driven goods and services while curtailing ecological impacts and performing their role as a corporate citizen on country’s development. The need of the hour is to understand the demand for green initiatives because the eventual success or even failures of these investments are influenced by apparent satisfaction of green consumers. They also assist banks to develop environmental reputation and concern, which is has become imperative today.

Several issues of green marketing like green corporate social responsibility, green product development and green internal processing are addressed by previous studies (Scholtens, 2009 ; Evangelinos et al., 2009 ; Lymperopoulos et al., 2012 ; Herath & Herath, 2019 ) and are long established by several experts, as measurements of Green banking initiatives. Additionally, the outcomes of several qualitative research underline the major contribution of GCSR as an accomplishment for green banks, thereby backing up several former studies (Grove et al., 1996 ; Kärnä et al., 2003 ). Green communications also form an important part of green initiatives as the success of implementation depends upon how well they are communicated to the masses. Lymperopoulos et al. ( 2012 ) also pointed out that environmental awareness can be included in green banking.

India lags other market economies that are in emerging stage in terms of distinctive sustainability policy for their banking practices. Ministry of Finance and RBI together are focusing on developing a policy framework specifically for Indian green banking sector (Roy, 2017 ; Kumar & Prakash, 2018 ). The present study has clubbed the Green banking initiatives of leading Indian private and public sector banks in Indian banking into three categories, viz. green product development, green corporate social responsibility and green internal process (Scholtens, 2009 ; Evangelinos et al., 2009 ; Lymperopoulos et al., 2012 ) as presented in Table ​ Table1. 1 . Table ​ Table1 1 explains the three categories of Green banking initiatives, viz. GPD, GCSR and GIP, and different products introduced by different banks under each category.

Green banking initiatives

Green product development

Green product development has actually become the major strategic consideration for several firms throughout the globe because of the ecological regulations and public awareness of eco-friendly practices (Nuryakin & Maryati, 2020 ; Paramesswari, 2018 ). Green product development can be defined as development of business loans for green logistics and waste management, renewable energy sources, loans granted to produce organic products, green mutual funds, stimulating purchase of hybrid cars and other green products, installing photovoltaic systems and investing in production of eco-friendly products (Lymperopoulos et al., 2012 ), green mortgages and green bonds (Campiglio, 2016 ; Kumar & Prakash, 2018 ) and climate fund (Jeucken, 2001 ; Scholtens, 2009 ; Islam et al., 2016 ; GRI G4-FSS1,8, EN6). GPD emphasizes on “end of pipe technology” where organizations are well aware of environmental issues via procedure of production and product design. As per Chen (2001), the product designed to minimize the use of non-renewable resource and avoid toxic materials and renewable resource during its whole life-cycle would be the most effective to display green technological development (Driessen et al., 2013 ; Fraccascia et al., 2018 ; Gopalakrishnan & Priya, 2020 ; Nuryakin & Maryati, 2020 ; Prasanth et al., 2018 ; Yan & Yazdanifard, 2014 ).

Green corporate social responsibility

Green corporate social responsibility (GCSR) can be described as the environmental aspect of CSR—the duty to cover the environmental implications of the company’s operations and the minimization of practices that might adversely affect the enjoyment of the country’s resources by future generations (Laskowska, 2018 ; Nuryakin & Maryati, 2020 ). It can be defined as development of community involvement program (GRI G4-26; Mitra & Schmidpeter, 2017 ; Hossain & Reaz2 007), charity and sponsoring (Jeucken, 2001 ; Scholtens, 2009 ; GRI G4-EC1; Islam et al., 2016 ; Shukla & Donovan, 2014 ) and health care and sanitation program (Hossain & Reaz, 2007 ; Narwal, 2007 ). Access points for financial services in low populated or remote areas of the country (GRI FSS 13; Kumar et al., 2015 ) improve access to financial services for disadvantaged people (GRI FSS 14; Hossain & Reaz, 2007 ; Sarma & Pais, 2011 ). GCSR can decrease business risk, rally reputation as well as afford opportunities for cost savings .  Thus, GCSR is no longer a luxury but a requirement . While much of the drive for sustainability has come from regulatory directives, research has shown that if implemented constructively, GCSR can drive business performance improvements in many areas ( Allen & Craig, 2016 ; Nuryakin & Maryati, 2020 ) .

Green internal process

Green internal process can be defined as relevant strategies for maximizing the utilization of bank’s resources and preserving energy such as saving paper and water, recycling and providing eco-friendly equipment; appropriate curriculum for personnel training to safeguard environment; and upgraded internal functions in to insulate the environment.

Challenges of implementing Green banking initiatives

Implementing Green banking initiatives in India involves a lot of problems. There is a lack of awareness amongst the customers and the bank employees about the concept of “green banking” and even if they are aware, the information they have is inaccurate (The Boston Consulting Group, 2009 ; Jayadatta & Nitin, 2017 ; Sharma et al., 2014 ; Maheshwari, 2014 ; Rastogi & Khan, 2015 ; Sindhu, 2015 ). A huge gap has been found in what banks want or try to spread and what people think of banks to be doing regarding green banking (Jayadatta & Nitin, 2017 ; The Boston Consulting Group, 2009 ). Green washing has led consumers to doubt towards environmental advertising and has led to increase in skepticism that has negative influence on green brand equity (Alniacik & Yilmaz, 2012 ; Shrum et al., 1995 ). It was found that almost three-fourth of people using online facilities provided by their banks were unaware of the term green banking or misunderstood it with digital banking (Sharma et al., 2014 ; Maheshwari, 2014 ; Rastogi & Khan, 2015 ; Sindhu, 2015 ). Awareness of green banking is especially less within middle and senior age groups (Sahoo et al., 2016 ). Henceforth, significant gap in terms of studying the impact of demographic exists.

Inclusive growth of economy requires a robust and healthy banking practices (Kumar & Prakash, 2018 ) Most of the activities of a green bank in India are focused on ATMs, internet banking, paperless banking, etc. (Biswas, 2011 ). It is also researched that Indian banks are not so well equipped to implement Green banking initiatives (Rajput et al., 2013 ), and they still have a long way to go (Kumar & Prakash, 2018 ). Reserve Bank of India is a major contributor in facilitating environmental policies. A developing country like India requires more thrust on the social dimension of banking and couples it with economic growth (UNEP FI, 2017 ). Limited Indian banks have advocated the green banking principles as per international standard. There is a need to improve regulatory framework (UNEP FI, 2011 ).

Outcomes of Green banking initiatives

Green brand image.

Chang and Fong ( 2010 ) defined green corporate image as “the perceptions developed from the interaction among the institute, personnel, customers and the community that are linked to environmental commitments and environmental concerns”. If the green products of a company are reliable and stable, they converge with the environmental needs of consumer, enjoy excellent environmental performance and have green reputation that company will relish green image. According to Chen ( 2010 ), Green brand image is when a product is perceived by the customers as having green commitment and green concerns. It is accepted via its competence in green reputation, success in sustainable achievement and trustworthiness of environmental promises. Chen ( 2010 ) also endorsed that green marketing positively influences a company to obtain competitive advantages, enhance corporate image and product value and hunt for innovative opportunities in market and augment the product value with reference to information technology products. Hartmann et al. ( 2005 ) posit that an efficiently chalked out green positioning strategy can provide direction towards more appreciative brand perceptions.

In the banking studies, green bank image is related to bank superiority substantially and reputation in their environmental endeavor vis-a-vis competition (Lewis & Soureli, 2006 ). This clubbed with the impression of the customers plays an important role in describing Green brand image (Nguyen & LeBlanc, 2001 ). Further, green bank image can help in retaining the customers, winning back the lost and attracting new ones, thus leading to banks’ prosperity and future sustainability. Thus, it can be presumed that corporate image has a substantial impact on customer loyalty and achieving the fundamentals of green marketing (Chaudhuri, 1997 ; Chen & Chang, 2013 ; Lewis & Weigert, 1985 ; Mitchell et al., 1997 ).

Green trust

Rotter ( 1971 ) defined trust as the extent to which a party can entrust on another party’s word, statement or promise. Hart and Saunders ( 1997 ) believe that trust is the assurance that others would behave as is conventional based on integrity, ability and benevolence (Schurr & Ozanne, 1985 ), a degree of willingness to believe another party based on ability, reliability and benevolence (Ganesan, 1994 ). Green trust is a willingness to rely on a product, brand or service or expectation arising out of its ability and credibility because of its environmental performance (Chen, 2010 ). Prior research has shown a positive relationship between trust and long-term consumer behavior (Lee et al., 2011 ) and purchase intentions (Harris & Goode, 2010 ; Schlosser et al., 2006 ) and is an antecedent of the same (Van der Heijden et al., 2003 ). Chen and Chang ( 2013 ) endorse that green initiatives can enhance customer trust and their willingness to purchase a product or service (Gefen & Straub, 2004 ).

Henceforth, it can be concluded that Green banking initiatives will have positive influence on Green trust and customers’ green expectations. However, exaggerating the green performance can also lead to reluctance of customers to trust (Kalafatis et al., 1999 ). For a bank to gain Green trust of its customer, its environmental performance, expectations and promises should be reliable, dependable and trustworthy (Chen, 2010 ); more information about the “greenness” of product should be shared with stakeholders (Chen & Chang, 2013 ); else it can give rise to mistrust (Jain & Kaur, 2004 ). Table ​ Table2 2 summarizes the various items of the major constructs of the study, viz. Green banking initiatives, Green brand image and Green trust.

Summary of constructs

Proposed framework

This research develops a conceptual framework (Fig.  1 ) that illustrates the impact of Green banking initiatives on Green brand image and Green trust. Green banking initiatives consist of three items, viz. green product development, green corporate social responsibility and green internal process (Lymperopoulos et al., 2012 ). The outcomes of Green banking initiatives are Green brand image measured by four items in the scale by Chen ( 2010 ) and Green trust measured by five items in the scale given by (Chen & Chang, 2013 ) (Table ​ (Table2 2 ).

Conceptual model of Green banking initiatives

Green banking initiatives positively influence Green brand image (Lymperopoulos et al., 2012 ), and Green banking initiatives enhance customer trust and their willingness to purchase a product or service (Gefen & Straub, 2004 ).

Methodology and case study

As mentioned before, there is dearth of extensive study on green banking in India. Henceforth, the need for exploratory research is realized and chosen for the present study. Qualitative research provides a deep-seated understanding of the experience or case under observation and study by illuminating uncovering loosely connected insights and taking forward the casual relationship. Use of qualitative research is more apt for formulization and theory dissemination in the background when not much is public about the elemental variance. According to Eisenhardt ( 1989 ), developing a case study method which is based on theory is the favored investigation technique which assist not only in testing but also provoke innovative policy in new arenas.

The present analysis is based on multiple case study where the same phenomenon is investigated in multiple situations. However, the multiple cases shall be selected in such a careful manner so that it either anticipates analogous outcome or anticipates contradictory outcome for anticipated inference (Yin, 2003 ). The above-mentioned twin conditions are addressed in the present study by taking into consideration more than one branch of the same bank and branches from different banks. Henceforth, the findings obtained from analysis of each case from contrasting groups (between State bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BOB), Canara Bank, ICICI Bank Ltd, HDFC Bank Ltd, Axis Bank Ltd, Kotak Mahindra Bank, IndusInd Bank, YES Bank, IDFC Group, IDBI) were regarded as object of comparison and the results from each case from similar group (amongst three branches of SBI or three branches of PNB) are findings which further exaggerate the understanding of Green banking initiatives of Indian banks.

In comparison to a single case study, multiple case study provides more sturdy, persuasive and conclusive results. Furthermore, the findings from multiple case study can be hypothesized to a larger extent and collaborate in theory building. Henceforth, a study based on multiple case study is more accurate, logical, and sound (Ray & Sharma, 2019 ). The findings accomplished from multiple case study method are more robust and trustworthy (Baxter & Jack, 2008 ). They allow for a comprehensive development of research questions and academic transformation. The results validate the described complementary and comparative findings to enrich the knowledge base of green banking.

Exploratory interviews

As the study is exploratory in nature, the research questions focused on what (do you […], e.g., believe?), how (do you […], e.g., feel?), why (do you […], e.g., believe?), in contrast to how much and how many and other quantifiable question. Exploratory interviews were found to be more fruitful technique of providing relevant information deemed necessary for developing a new theory (Amaratunga et al., 2002 ; De Ruyter & Scholl, 1998 ). Several probing questions like “what are the Green banking initiatives used by your bank?”, “what are the problems faced in communicating Green banking initiatives?” …….” Were asked to reveal as much information as possible. The benefit of asking such practical questions was that they provided a structure for reference and conceded the researcher to explore deeper and get analytical. Laddering and funneling techniques were used (Eisenhardt & Graebner, 2007 ; Kvale & Brinkmann, 2009 ) to discover the hidden meaning. The questions were semistructured so had flexibility of words and sequence guided by interviewee’s response. Divergent themes and subthemes were explored dictated by interviewee’s interest and expertise. The focus of the conversation was on green initiatives, their impact on Green brand image and Green trust. This directed the study to conduct interviews in the form of conversation, which were deemed apt for the study’s exploratory nature. It was also considered relevant to conduct detailed analysis (Flick, 2009 ).

Data collection

Exploratory research design has been used in the present study, and data have been collected by interviewing 36 middle to senior level bank employees from 12 public and private sector banks. Twelve banks that were targeted were State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BOB), Canara Bank, ICICI Bank Ltd, HDFC Bank Ltd, Axis Bank Ltd, Kotak Mahindra Bank, IndusInd Bank, YES Bank, IDFC Group, IDBI from Delhi NCR region. From each bank three middle-level managers were selected using purposive sampling and were interviewed using semistructured questionnaire method. The chosen respondents with their knowledge and expertise answered the semistructured questionnaire, and this helped in gathering critical points and in-depth knowledge of different aspects of green banking. The theoretical insights that emerged increased the likelihood to expand based on emergent theories (Baker, 2002 ; Eisenhardt & Graebner, 2007 ). As not much research has been done in green banking in India, if analysis had considered a sample up to twelve for conducting in-depth interviews it was considered sufficient (Carson et al., 2001 ). However, this investigation conducted in-depth semistructured interviews with 36 banking sector employees. The detailed profile of the respondents is provided in Table ​ Table3 3 .

Respondents profile

The details of the interview were duly recorded and were written on paper. The interview lasted for 50 min on an average, varying from 30 to 90 min (total number of hours exceeding 30 h). Interviews were conducted face to face, and each interview was classified into tables encompassing the most relevant headings under research (as explained earlier), to organize the data. This phenomenon focused attention on distinctive opinions and segregated those from customary perspective shared. Repetitive and interpreted logic produced strong hypothesis development. With the help of in-text, entwined with germane literature, the liaison between factual documentation and emerging theory was established (Amaratunga et al., 2002 ; Eisenhardt & Graebner, 2007 ).

Data analysis

After reaching the point of exhaustion when no contribution was done by new interviews, data analysis was done. The data were analyzed based on conceptual framework (Fig.  1 ) once interview material was transcripted. Thereafter, process of data analysis was initiated wherein for each item in the interview detailed content analysis was performed (Flick, 2009 ) to remove the crucial facets. It was followed by an interesting exercise of highlighting the cut-outs and freezing the nucleus statements in association with the conceptual framework in Fig.  1 (Saldaña, 2012 ). Characterization was performed for each interview, cut-outs found intriguing were underlined, and further important statements were frozen in association with the conceptual framework (Saldaña, 2012 ). A characterization emerged out of each interview. Then intensity analysis was performed wherein excellent responses were analyzed further to compare the phenomenon under study.

This step involved following robust quality criteria. Every phase was documented, memos were critically written, and motivation for each interpretation was worked upon. Coding of the interview took place in two cycles, and the crucial facets of the findings were assigned to the major categories of Green banking initiatives, Green brand image and Green trust. Next, the extensive interview material was immersed as it was private investigation of an exclusive interview. The objective of such technique was to point at the trends emerging and to reinforce them all with fitting justifications. In summation, demonstration was for the main constructs explained at the time of interviews in a pattern (i.e., putting together coding cycles) (Fig.  1 ). Consequently, the indicators were categorized. Content analysis and topic-based analysis together justified and verified the authenticity of the analysis.

The qualitative data for the study were collected with the help of in-depth personal interviews conducted with the bank employees. The data developed thereafter provided relevant insight. Numerous green marketing issues, such as GPD and GIP already addressed before by previous research (Evangelinos et al., 2009 ; Lymperopoulos et al., 2012 ), were confirmed as components of green marketing by the practitioners. The findings of qualitative analysis conducted in the study highlighted the role of GCSR as a crucial factor for success of green bank marketing (Grove et al., 1996 ; Kärnä et al., 2003 ; Lymperopoulos et al., 2012 ).

Findings and discussion

The present study aims to provide answer to the following research questions:

The process adopted in the paper is depicted with the help of flowchart in Fig.  2 . The study begins with the introduction and now has moved to the findings and discussions by answering the research questions identified in the beginning of the study.

Workflow of the research paper

The Green banking initiatives in the paper are divided into three major categories: green products development, green corporate social responsibility and green internal process. They are further summarized in detail in Table ​ Table1 1 along with different products introduced under different heads by different banks under consideration. All the 36 respondents agreed that the twelve public sector and private sector banks are using these Green banking initiatives.

One branch manager of a leading public sector bank stated: The bank has come up with several green products and services like green loans/green financing of energy efficient projects, promote renewable energy, green vehicle finance, loans for constructing green buildings etc .

Another branch manager stated: My bank is involved in several green corporate social responsibility activities as a part of green initiatives like tree plantation campaigns, maintenance of parks, promoting environmental literacy etc .

One of the regional managers commented: Bank is implementing responsible waste management disposal systems, rainwater harvesting, use of more daylight, using emails and internal network communication instead of paper-based documentation.

Another AGM said: Implementing green banking has always been a major issue but it plays an important role in the development of a developing nation like India .

Majority of the bank employees agreed that now both public and private sector banks are taking steps to implement Green banking initiatives. They also commented about the reputation risks involved from financing environmentally objectionable projects (Sahi & Pahuja, 2020 ; Zhixia et al., 2018 ).

In a country like India with literacy rate of 70% on an average, green banking is still at a nascent stage and desired results have not been achieved (Kumar & Prakash, 2018 ). The analysis revealed that there were multifold reasons attributed to it. The bank employees provided very valuable and honest insight during the semistructured interviews.

One of the regional managers commented: People have trust issue with green goods and services. Most of the customers are uncomfortable adopting new tools and technologies.

Branch manager said: Many customers are not aware of several green tools and technologies resulting in no use or less use of them .

Another commented: Elderly and uneducated people are less adaptable towards green products and services.

There were several other comments as mentioned below:

• Staff training is a major task as few older staff are reluctant towards the change.
• Green goods and services increase bank’s cost at least initially though reduces administrative cost in the long run.
• The major problem bank faces in this process is of customers not accepting the online transactions happily.
• Customers are skeptical towards safety in transactions undertaken online; however, educated people easily adopt green technologies.

Majority of the bank employees agreed that a proactive way of future sustainability is Green banking, but banks in India are running far behind their counterparts from developed nations because of lack of education, lack of awareness and lack of preparedness of Indian banks to implement green initiatives (Jayadatta & Nitin, 2017 ; The Boston Consulting Group, 2009 ). However, there was a consensus that a lot needs be done till green banking percolate to grassroots level and this was not possible till all stakeholders, i.e., government, bankers and customers work in union to achieve it (Kumar & Prakash, 2018 ).

Green trust is a willingness to rely on a product, brand or service or expectation arising out of its environmental performance. The Green banking initiatives if successfully explained and implemented will enhance customer’s trust in bank and will positively influence their purchasing decisions.

One of the bank managers stated: Bank’s priority must be to make customers do everything themselves digitally without being dependent on bank. This will increase their confidence and enhance their trust on the bank.

Another bank employee stated: My bank undertakes several green corporate social responsibility activities like tree plantation, maintenance of parks etc . They enhance our reputation and reliability.

Regional manager said: One of our customers told me that he participated in the marathon sponsored by our bank. He very proudly told other participants that he has account in our bank, and we are very committed to the environmental cause.

Another employee stated: One customer came to me and said that he read in the newspaper that our bank is a signatory to UNEP F1 and adhere to UN Global Compact Principles. He said that he was very much impressed that our bank keeps promises and commitments for environmental protection.

Hence, based on comments received it can be affirmatively concluded that Green banking initiatives in the form of green products and services, green corporate social responsibility and green internal process can go a long way in creating Green trust of all stakeholders (Chen, 2010 ).

Researchers studied the relation amid green banking and Green brand image resulting to the conclusion that a positive relation actually exists amid the banks undertaking Green banking initiatives and the development that takes place in terms of improving the banks brand image (Chang & Fong, 2010 ; Hartmann et al., 2005 ; Lymperopoulos et al., 2012 ).

One manager stated: Green initiatives have influenced all our eco-friendly and environmentally concerned consumers and they through positive word of mouth have augmented bank’s green image within the society.

Regional manager Commented: Steps taken to create environmental awareness has created Green brand image amongst our ecofriendly customers. This in future will be a driver of satisfaction and loyalty. Bank green corporate social responsibility initiatives like sponsorship for protection of wildlife, development of school fees collection modules etc . augment the banks green image.

One bank employee said: One of the customers told me that he saw two ambulances donated by this bank outside an eye hospital. A slogan on environmental protection was painted on the ambulance. He was very touched. His impression of our bank’s reputation got enhanced.

The above reviews guide the researchers to conclude that Green banking initiatives in the form of green products and services, green corporate social responsibility and green internal process contribute towards creation of Green brand image of the bank (Chaudhuri, 1997 ; Chen & Chang, 2013 ; Lewis & Weigert, 1985 ; Mitchell et al., 1997 ).

On the basis of content analysis in Table ​ Table4, 4 , it can be concluded that 63% of the total respondents were of view that their bank indulges in development of several green banking products and services; 53% of the bankers said that their bank incorporates green internal processes in their daily activities; 78% respondents said that their bank undertakes several GCSR actions like marathon for promoting sustainability, reduction of carbon footprints, green loans, green mortgages etc.; and 22% of respondents were of view that their bank still has a long way to go for fulfilling its green corporate social responsibilities. Though 84% of bankers believe that their bank is concerned as a benchmark for ecological commitment, 16% bankers said that their bank is far away from setting a standard for Green banking initiatives. Majority, i.e., 70%, of bankers feel that their bank is very professional when it comes to environmental protection, but 30% said that their bank is still an amateur in undertaking green initiatives and thereby fails to embark on environmental protection. Though when it comes to fulfillment of ecological performance and success in the same, half of the respondents agree and half disagree to this fact. Majority of respondents, i.e., 63%, said that their bank undertakes many actions to build its establishment towards environmental concern and approximately same, i.e., 65% bankers also said that their bank seems to be trustworthy when it comes to environmental argument that it puts amongst its customers. A widely held belief observed amongst bankers was regarding reliability of bank’s environmental commitments, to which 84% agreed and, merely 16% denied. Same results were attained when it came to dependability on the bank’s environmental performance. Even though bankers feel that their banks try and perform as much as possible towards ecological concerns, and even 63% felt that their bank keeps its promises for environmental performance, yet majority of them feel that expectations are yet not fulfilled and almost all the bankers were of view that banks face a lot of challenges like difficulty in gaining trust, lack of ease with digital forms, cybercrimes, hacking risks, etc., while implementing green initiatives. Results of content analysis are also depicted using bar graphs in Fig.  3 .

Results of the content analysis (to be inserted here)

Results of the content analysis using bar graphs

Conclusions

To facilitate the market transformation demanded in Paris agreement, green banks play a critical role to meet the goal of restricting global warming (Ihlen, 2009 ; Kolk & Pinkse, 2005 ; Miah et al., 2020 ). Banks needs to apply morality of sustainability and responsibility to their business model. By adopting the environmental factors in their lending activities, banks can gain public trust and also fulfill their responsibility towards the society. Green banking, if implemented sincerely, will act as an effective measure for attaining people’s trust and building bank’s brand image (Chen, 2010 ).

Countries like USA, UK, Australia, Japan and Malaysia have embedded Green banking initiatives, guidelines and principles in their banking system (Meng et al., 2019 ; Thompson & Cowton, 2004 ); however, India has a long way to go vis-a-vis their developed counterparts (Scholtens, 2009 ; Bank of Ceylon, 2015 ; Herath & Herath, 2019 ) and require strong motivation and reinforcement to do so. In such a backdrop, the present study has relevant theoretical, social and managerial implications.

The present study proposed conceptual model of Green banking initiatives in Fig.  1 with three antecedents of Green banking initiatives, viz. green products development, green corporate social responsibility and green internal process with two green banking outcomes: Green brand image and Green trust with themes and dimensions as described in Table ​ Table2. 2 . Based on the findings of semistructured interviews and discussions; thereafter, the proposed relationship in the conceptual model was appropriately concluded. This investigation highlights the role of Green banking initiatives in restoring customer trust through enhanced green image. The study has successfully answered all the four research questions posed in the beginning of the study.

In response to RQ1, the study suggests that majority of public and private sector banks are implementing Green banking initiatives in the form of Green product development like Green loans, green financing, green mortgages, loans for green construction, etc.; Green corporate social responsibility like green credit cards, internet banking, green savings account, payment of school fees through ATM, solar ATM, green CDs, green awareness programs; and green internal process like use of more daylight, employee training on green initiatives, conducting energy audits, using internal network communication (Herath & Herath, 2019 ; Lymperopoulos et al., 2012 ; Sudhalaksmi & Chinnadorai, 2014 ).Quantitative analysis revealed that 63% of the total respondents were of view that their bank indulges in development of several green banking products and services; 53% of the bankers said that their bank incorporates green internal processes in their daily activities; and 78% respondents said that their bank undertakes several GCSR.

The study revealed very valid information regarding the major challenges for Indian banks towards “going green”. It was found that there are lack of awareness, lack of education and presence of green washing (The Boston Consulting Group, 2009 ; Jayadatta & Nitin, 2017 ; Shrum et al., 1995 ; Alniacik & Yilmaz, 2012 ; Sharma et al., 2014 ; Maheshwari, 2014 ; Rastogi & Khan, 2015 ; Sindhu, 2015 ) because of which Indian banks were not able to meet international standard. Need for improved regulatory framework and collaborated efforts of all stakeholders was also found imperative in achieving the required goals (Miah et al., 2020 ). Previous studies clearly point out towards multi-stakeholder involvement in facilitating green building adoption (Bukhari et al., 2020 ).

Bank employees revealed that engaging in green corporate social responsibility activities like tree plantation, organizing marathons, undertaking green internal processes like reducing paper usage, using digital banking safely, launching green counters and green credit cards all enhance consumer’s trust in green activities of banks and create Green trust (Chen, 2010 ; Lymperopoulos et al., 2012 ; Hossain et al., 2020 ).

The study revealed a positive relationship between Green banking initiatives and Green brand image. The bank employees confirmed that eco-friendly consumers were very proud of Green banking initiatives and also created positive word of mouth that helped in creation of Green brand image that helps in achieving customer loyalty and the fundamentals of green marketing (Chaudhuri, 1997 ; Chen & Chang, 2013 ; Lewis & Weigert, 1985 ; Mitchell et al., 1997 ).

On the basis of in-depth interviews, the study further concludes that 63% of the total respondents were of view that their bank indulges in development of several green banking products and services; 53% of the bankers said that their bank incorporates green internal processes in their daily activities; and 78% respondents said that their bank undertakes several green corporate social responsibility initiatives. This investigation further highlights that more than 60% respondents believed that Green banking initiatives have positive role in restoring customer trust through enhanced green image.

Suggestions and implications of the study

The theoretical implication of the present research is to validate using qualitative research the positive relationship between Green banking initiatives, Green trust and Green brand image of the Indian banks. The semistructured interview of thirty-six middle- to senior-level bank managers of twelve banks has very lucidly thrown light on the challenges and the proposed conceptual framework comprising of three constructs, viz. Green banking initiatives, Green trust and Green brand image. With dearth of studies on green banking in India, the present qualitative study makes valuable contribution to the body of knowledge and paves way for future research in green banking for sustainable development.

The present study’s managerial implications are wide ranging. The investigation clearly states that if Green banking initiatives are implemented effectively, augmenting environmental reputation and reinforcing environmental concern will no longer be a utopia. So, through efficient resource planning of green activities, new and interesting opportunities can be created by the bank which can boost their prominence and help to win trust of current and prospective customers. The study will motivate the banking sector to be engaged in green corporate social responsibility as “social banking” is an important aspect of “green banking” and use green internal process to create awareness amongst the divergent stakeholders. The study has great relevance for environmentalist, policy makers and all stakeholders in developing effective and efficient green banking strategies.

The limitations and directions for future studies

The proposed relationship in this qualitative study can be further validated quantitatively, and the impact of demographics on it can also be investigated. The study has been conducted in Delhi NCR region in India, and an exhaustive study in different countries at different stages of development can provide valuable insight. The proposed framework can also be studied from the point of view of other stakeholders apart from bank employees.

The study has very placidly explained how use of green initiatives by banks can enhance Green brand image and solidify trust with stakeholders. The research results provide relevant and divergent insights into government, strategist and academician to chalk out effective green banking strategies for “green economy”. The State of Green Bank Report ( 2020 ) also declares that for a sustainable economic recovery during the global COVID 19 crises as well as for reducing emission before 2050 “climate-resilient green banks” are the need of the hour.

Acknowledgement

The authors acknowledge the supports provided by Indian Council of Social Science Research (ICSSR) India for funding this research.

Declaration

The study has no conflict of interest.

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Contributor Information

Meenakshi Sharma, Email: ni.ca.arsemtib@ihskaneem .

Akanksha Choubey, Email: moc.liamg@88yebuohcahsknaka .

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Embracing green banking as a mean of expressing green behavior in a developing economy: exploring the mediating role of green culture

• Economic Uncertainty, (Geo)Political Risk, and Sustainable Development Goals
• Published: 25 January 2023

Cite this article

• Fakhr e Alam Afridi 1 ,
• Sajjad Ahmad Afridi 2 ,
• R. M. Ammar Zahid   ORCID: orcid.org/0000-0002-4627-0917 3 ,
• Wajid Khan 4 &
• Waseem Anwar 5  

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3 Citations

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According to a plethora of research and publications, the volume and amount of pollution are largely attributable to human-made emissions. Even during the recently ended Covid-19 outbreak, there was a notable decrease in global pollution, particularly in Pakistan’s heavily populated cities. Due to the current situation, it is strategically important to safeguard the environment, and there are many criteria and predictors that should be used to encourage green behavior. This study examines green banking as a means of demonstrating ecologically responsible conduct in a developing nation. A survey questionnaire was used to collect information from 280 respondents via human contact and an internet platform. Software called SmartPLS3.0 was used to analyze the structural relationships between the study’s variables. The results show that customers’ adoption of green banking practices is statistically significantly influenced by their level of environmental consciousness and attitude. Similarly, green culture exhibits a substantial mediating influence between the independent variables and green behavior as well as a positive significant effect on green behavior. However, it is established that the consumer’s apparent behavioral control is negligible. Particularly, the cognitive connection between behavior and culture is weak and insufficient to forecast behavior. For policymakers, especially those working in the field of green education, this study has many real-world applications.

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Introduction

With each passing decade, the environmental concerns and the challenges countries present have doubled (Li et al. 2019 ). The globalization process has been found to have an increasing growth in the last two decades across the world, but it has caused many leading problems that affect the environment negatively (Khilji 2012 ). The environment is not simply a matter of debate among academics, but it is also a concern for governments at all levels, with a corresponding plan to solve the issues (Rehman et al. 2021 ). As people become more environmentally conscious and politicians are promoting ‘green behavior,’ which is a behavior that might potentially lessen environmental consequences such as trash reduction and behaving correctly or avoiding wrongdoing (Khan et al. 2020 ).

On the other hand, green consumers are individuals who are committed to protecting the environment by adopting green banking such as online shopping, paying online bills, and others, and they differ in their environmental behaviors (Papadas et al. 2017 ; Reddy 2018 ; Vilkaite-Vaitone and Skackauskiene 2019 ). Consumers have now awareness of the environment, and they prefer a product that is marketed and manufactured through green processes and poses any environmental threat. Due to this attitude of consumers, companies have started operational and marketing strategies that appeal to the awareness of consumers’ environment friendliness (Rehman et al. 2021 ; Khilji 2012 ). The consumers’ attitude toward green behavior has forced companies to initiate green processing (Efficient energy and renewable energy) and green marketing for their product promotion and distribution activities (Khilji 2012 ). Consumers in emerging markets are in the transformation to adopt sustainable behavior regarding environmental protection issues, reduction of energy consumption through nonrenewable options, and the production of goods using renewable energy as input (Dabija et al. 2018 ). Consumers are guided by such distinctions while making purchasing decisions (Sujith 2017 ). Environmental issues have become a global concern, with consumer choices and policymaking influenced by them (Dabija et al. 2018 ; Gilal et al. 2020 ; Porter and Kramer 2019 ). Some customers are enthusiastic about going green, while others are hesitant (Sima 2014 ). The development of green behavior is considered a fundamental component of environmental education in Pakistan (Rehman et al. 2021 ).

Environmental knowledge (facts and concepts belong to environmental issues) is the key to achieving environmental milestones, but unfortunately in the majority of countries across the globe, especially in the developing world the understanding of environmental knowledge is lacking due to which individuals cannot perform well responsible to the environment (Afridi et al. 2021 ), and environmental knowledge helps in the recognition of full ecosystem and also make individuals more responsive to an environment that helps in achieving sustainable development (Khan et al. 2020 ). A pro-environment behavior is developed due to environmental knowledge, and an increased level of environmental knowledge impacts significantly the dual intention toward purchasing green goods (Kaufmann et al. 2012 ). Environmental knowledge is the main factor that stimulates consumer green behavior (Khan et al. 2020 ). The behavioral literature exhibits a positive nexus between knowledge and green behavior behavior. In the environment-based study (Gilal et al. 2020 ), it has been validated that environmental knowledge contributes to green behavior (Khan et al. 2020 ). In the pursuance of promoting environmental knowledge and developing green behavior, environmental education is one of the dominant and foremost important elements (Uddin and Khan 2018 ). Some empirical studies examine green awareness and supportive environmental behavior (Boztepe 2012 ; Reddy 2018 ; Sujith 2017 ), while consumer intention profiling was the subject of certain studies in developing nations (Dabija et al. 2018 ; Norton et al. 2014 ; Papadas et al. 2017 ). However, some researchers claim that environmental awareness is necessary to encourage green behavior (Cai et al. 2019 ; Truelove and Gillis 2018 ), while another school of thought disagrees (Li et al. 2019 ; Pratiwi et al. 2019 ). Green behavior, on the other hand, has a wide range of consequences, i.e., a journey to economic and environmental sustainability (Farrow et al. 2017 ; Truelove and Gillis 2018 ). Developing green culture is the outcome of green knowledge and environmental education. Green culture is defined as a collective activity conducted in a public manner to address climate challenges (Cai et al. 2019 ).

Pakistan is the sixth most populous nation in the world; however, it lacks sufficient environmental protection measures. This is brought on by a lack of awareness and apprehension about implementing green behavior, as well as choosing products and services with the fewest environmental concerns (Farrow et al. 2017 ; Li et al. 2019 ). It has been acknowledged by Afridi et al. ( 2021 ) and Rehman et al. ( 2021 ) that environmental awareness has a significant influence on green behavior (Li et al. 2019 ). Furher, recent studies show that green conduct and green culture both contribute to better dealing with environmental challenges. Unfortunately, despite their ability to aid in the reduction of environmental hazards, these behaviors have gotten little attention particularly in developing conturies like Pakistan (Rehman et al. 2021 ). Moreover, there is no known study available particularly in the context of Pakistan. Therefore this study will provide a solid base for the upcoming research studies in the relevant area and provide useful information for policy makers in developing environmental friendly startegies to address the issue effectively.

Theoretical background and hypotheses of the study

• Green culture

Experts in the environment studies classified both green culture and green behavior as among the key elements that contribute to environmental sustainability (Gadenne et al. 2011 ; Gilal et al. 2020 ; Porter and Kramer 2019 ). Numerous researchers such as Anderson and Hansen ( 2004 ), Knight ( 1999 ), and Tanner and Wölfing Kast ( 2003 ) are among the pioneers to describe consumer values and beliefs through behavior. Environmental activism behavior encourages people and makes them devoted to society to accept policies that reduce environmental challenges (Biswas and Roy 2016 ). At the same time, this behavior has an indirect friendly impact on the community’s eco-public policies . Green behavior, on the other hand, is a habitual pattern of behavior that has a direct impact on consumer purchases and the use of natural resources.

Organizations with a corporate culture that encourages employees to support green practices, such as green culture, green innovation, and sustainability, are in line with these statements (Khan et al. 2020 ). Firms with green culture have a competitive edge based on natural resources, compared to others lacking green culture exhibitions (Corraliza and Berenguer 2000 ). For environmental sake a cost-effective alternative to traditional business practices, Green culture is a new way of thinking for businesses that are concerned with environmental management. At the personal and business level, there has been a growing awareness of the impact of daily activities on the environment, as well as the promotion of green practices (Gadenne et al. 2011 ). This has been accomplished through a business strategy of environmental culture (Porter and Kramer 2019 ).

Perceived behavioral control

The ability to influence how easy or difficult it is to carry out a behavior is referred to as perceived behavioral control (PBC) (Tate et al. 2014 ). However, internal PBC has more control over internal elements in individuals to accomplish a certain task, whereas people with external PBC have the sense of being able to overcome external limitations/barriers such as time or convenience level (Gadenne et al. 2011 ). PBC is a criterion for gauging environmental attitudes and has a separate relationship with control. PBC, according to experts (Uddin and Khan 2018 ), is a predisposition for assessing one’s attitude. Although a prior study in India indicated a favorable result (Sujith 2017 ), the study analyzed customer intention; this relationship has not been completely investigated in Pakistan.

High purchasing power is one of the key reasons why consumers do not embrace green behavior. There will be an increase in purchasing behavior if it is not rare and of appropriate environmental quality. Product control is critical for forecasting customer green behavior (Tate et al. 2014 ). Consumer green behavior may be influenced by control over availability or pricing, according to previous research. People must overcome these obstacles to achieve long-term sustainability in consumption patterns (Musgrove et al. 2018 ).

Green banking, on the other hand, refers to items that are less hazardous to the environment and have less negative consequences on human health, such as products created from recycled materials. The consumer does not acquire green behavior since it is a high-cost item for high-income people. PBC is stimulated, according to Ajzen ( 1991 ), if people can freely use a unique product from a given cultural background and its use is favored by green culture. This means the environment and consumer interaction in a way that satisfies their desire for sustainability (Porter and Kramer 2019 ). Consumer motivation is influenced by green culture, which plays a role in Environmental Impact Assessment (EIA) (Gilal et al. 2020 ). Product reuse is crucial for the customer who examines moral ethics and standards, and it is scarcely a concern. This demonstrates how PBC is repurposing important societal brands. As a result, the following is proposed:

Perceived attitude

People’s acceptance or rejection of a product is determined by their perceived attitude (Sima 2014 ), which is an emotional channel. Moravcikova et al. ( 2017 ) argues that the more positive one’s attitude toward a particular behavior, the more likely people are to engage in that behavior. Tanner and Wölfing Kast ( 2003 ) found a contradictory step and gap in some empirical research. The potential of consumer attitudes to predict green behavior has remained a prominent topic of debate in recent scientific studies on green marketing (Bamberg 2003 ). Much empirical research has suggested that Ajzen’s framework be tweaked in some way (Dabija et al. 2018 ; Musgrove et al. 2018 ; Vilkaite-Vaitone and Skackauskiene 2019 ).

Consumer attitudes toward environmental issues are an excellent element to compare to awareness (Musgrove et al. 2018 ). The assessment of attitude and awareness helps gain funding for behavioral science investigations (Grob 1995 ). It comprises looking at people’s attitudes, values, and beliefs about the environment (Corraliza and Berenguer 2000 ). An investigation of these factors is in demand and more evident. Increasing public awareness requires vigorous communication from opinion leaders or people with the power to influence public opinion (such as business executives or educators). People’s attitudes about making willful choices are considered influenced by their awareness (Said et al. 2003 ). It is vital to teach citizens about the benefits of sustainable green products in Pakistan, where there is a lack of understanding.

Consumers participate in specific behaviors (Esa 2010 ), according to Ajzen ( 1991 ), when the attitude toward performing the behavior is judged to be positive. This link has been proven in numerous investigations. Consumers will embrace the green culture to identify the proper attitudes about green products. According to Feinberg and Willer ( 2013 ), there is a considerable association and support for the impact of attitudes on a variety of contextual elements. As a result, customers who act sustainably are more likely to have a favorable attitude toward the environment (Cherdymova et al. 2018 ). These customers are more willing to share scarce resources with others and acquire attitudes that will benefit society as a whole (Li et al. 2019 ). Several studies that looked at the impact of culture on green behavior concluded that green culture predicts attitude (Cai et al. 2019 ; Farrow et al. 2017 ; Truelove and Gillis 2018 ).

Green knowledge is described as an understanding of concepts related to the environment and ecosystems (Esa 2010 ). It also entails individuals comprehending how their actions affect the entire environment (Sima 2014 ). It can be separated into two types: first, consumer comprehension, and second, consumer knowledge developed as a by-product of their consumption (Ramsey and Rickson 1976 ). As a result, a lack of green awareness is considered a barrier to consumer sustainable green behavior (Axelrod and Lehman 1993 ). Increased Green knowledge, on the other hand, leads to increased awareness and a positive attitude toward green behavior (Tate et al. 2014 ).

Previous research shows that consumers that hold the greater environmental matter information, the greater they are likely to adopt green environment behavior (Gadenne et al. 2011 ; Gifford and Sussman 2012 ; Sima 2014 ). Green purchasing behavior is heavily influenced by Green knowledge (Frick et al. 2004 ). Green knowledge is defined as an understanding of concepts, facts, and relationships between the ecosystem and its surroundings (Corraliza and Berenguer 2000 ). It is also the awareness of the use of ecologically friendly items that can decrease Green effects (Bradley et al. 1999 ). Consumers with a better level of green knowledge are more interested in or react positively to Green issues (Tate et al. 2014 ). Many researchers have found that theoretical model knowledge is one of the most important predictors of customer attitude and behavior (Frick et al. 2004 ; Gadenne et al. 2011 ; Gilal et al. 2020 ; Sujith 2017 ).

A predictable response to stimuli is referred to as an attitude (Esa 2010 ), or to respond predictably. Several studies have emphasized the impact of an individual’s attitude on their actions (Feinberg and Willer 2013 ; Gadenne et al. 2011 ; Gifford and Sussman 2012 ). Because people’s views change based on their experiences (McCarty and Shrum 2001 ), attitudes are subject to change. Several researchers have proposed various interpretations of attitudes, but the positive and negative spectrum remains. An attitude can be positive or negative, regardless of how broad or rigorous the definitions are (Corraliza and Berenguer 2000 ); however, the term “attitude” describes a person’s feelings toward something or someone (Arcury 1990 ; Bradley et al. 1999 ). People who have a solid awareness of health and green issues, for example, are more likely to be satisfied with Greenly friendly items (Truelove and Gillis 2018 ; Arcury 1990 ).

A green attitude is a taught behavior that can be either beneficial or negative to the environment (Corraliza and Berenguer 2000 ). Customer attitudes, on the other hand, aid the organization in determining how consumers think about and interpret green phenomena, as well as their readiness to acquire that product (Boztepe 2012 ; Chamorro et al. 2009 ). However, an individual’s mindset is influenced by the knowledge they have gained as a result of social, cultural, or other globalization-related variables (Duerden and Witt 2010 ).

Green awareness

Simply, green consciousness or awareness can be defined as the extent to which people are willing to solve environmental issues (Ramsey and Rickson 1976 ). Green awareness is a significant component that is used as a metric for expressing environmentally conscious behavior. Environmental awareness, according to experts, is a symbol of protection (Cherdymova et al. 2018 ) and may increase environmental care. In previous research, there was no proof in certain studies that examined the characteristics of environmental issues nor discovered a substantial link (Tate et al. 2014 ). According to some researchers (Groening et al. 2018 ; Sima 2014 ; Sujith 2017 ), awareness does not always equate to long-term action. The investigation yielded no empirical findings. However, green behavior will be embraced by a consumer who has a high level of awareness (Sreen et al. 2018 ). Promoting environmental awareness is viewed as important (Cronin et al. 2011 ; Porter and Kramer 2006 ; Singh and Pandey 2012 ). If customers have a basic understanding of environmental challenges, they may be able to fix them. Some internal or external impediments may influence consumer willingness to participate in sustainable practices (Gadenne et al. 2011 ). This could include societal and cultural hurdles such as a lack of understanding or disparities in income. People may, for example, elect not to use a public vehicle owing to pollution and discomfort.

Previous research shows the more environmental information a consumer has, the more likely they are to embrace green environmental behavior. Consumer social concerns and interests, on the other hand, differ from country to country (Fan and Dong 2018 ). Similarly, different variations might be discovered in various purchasing situations (Uddin and Khan 2018 ). Consumer preferences for green automobiles were sensitive to fuel change, pollution levels, and efficiency, according to one study by Gordon-Wilson and Modi ( 2015 ). However, with the advent of information communication technology and the availability of environmentally friendly knowledge, more consumers are reconsidering their purchase patterns and opting for environmentally friendly practices (Khan et al. 2020 ).

Consumer dedication, understanding, and awareness of environmentally friendly products are influenced by a variety of factors (Hines et al. 1987 ). In regard to green solutions, customers, on the other hand, tend to assess the economic and environmental benefits (Truelove and Gillis 2018 ). Environmental knowledge is defined as an understanding of concepts, facts, and relationships between the ecosystem and its surroundings (Gadenne et al. 2011 ). It is also the awareness of the use of ecologically friendly items that can decrease environmental effects, according to the author. Consumers with a better level of environmental knowledge are more interested in or react positively to environmental issues (Sujith 2017 ). Many research have found that knowledge is one of the most important predictors of customer attitude and behavior (Boztepe 2012 ; Cherdymova et al. 2018 ; Gilal et al. 2020 ; Musgrove et al. 2018 ). Many scholars agree that establishing the role of attitudes in influencing behavior is important (Fig.  1 ).

Hypothesized model

Based on the above discussions, the following hypothesis has been derived:

H (1): Green culture has a positive impact on green behavior.

H2 (a): Perceived behavior control will have a positive effect on green behavior.

H2 (b): Perceived behavior control will have a positive impact on green awareness.

H2(c): PBC will have a positive impact on green culture.

H3 (a): Perceived attitudes will have a positive impact on green behavior.

H3 (b): Green awareness positively affects consumers’ green attitudes.

H3(c): Green culture positively affects green attitudes.

H4: Green attitude is positively related to green behavior.

H4 (b): Green awareness will have a positive impact on green culture

Sampling method, size and technique, measurements of the variables, and analysis technique

While this study also used a quantitative method and convenience sampling technique to collect data, similar studies have also used a similar methodological landscape (Rehman et al. 2021 (Samaraweera et al. 2021 ; Zhang et al. 2020 ). We focused on consumers who prefer internet banking and polled them for information. The respondents were questioned using questionnaires, and replies were obtained using well-structured questionnaires.

We used numerous variables. The construct of green culture was measured with six items using the work of Wang ( 2019 ), and the green awareness construct has been measured with 5 items using the footprints of Alamsyah et al. ( 2020 ). Similarly, the perceived attitude was assessed through 6 items adopted from the footprints in the body of knowledge (Balram and Dragićević, 2005 ). Perceived behavior control and green behavior were measured using a questionnaire that has been previously used in the literature (Ajzen 2006 ). A 5-point Likert scale was used for all variables with 1 indicating strong disagreement and 5 indicating strong agreement. The target audience of the study is urban green consumers (18 plus years old) who are aware of their responsibilities concerning the environment by performing green banking/services selectively. The data were collected with the help of research students who ensured their presence in front of different banks in big cities and got the details of consumers who mainly use internet banking and have awareness about the environment. The students also approached consumers using media platforms. Finally, a total of 280 questionnaire responses were collected until the closing date we specified for our study. As validated in previous research for Structural Equation Modelling (SEM), a sample size of 150–400 is recommended (Ringle et al. 2015 ). We analyzed the data to conduct structural relationships among the variables as similar interdependent variables have also been analyzed in previous studies using SEM.

Demographic analysis

The majority of the survey respondents ( n  = 280), 150 (53.6%), are male, and 130 (46.4%) are female, with 21 (7.5%) having 18 years of schooling, 108 (38.6%) having 16 years of schooling, 90 (32.1%) having 14 years of schooling, and 61 (21.86%) having 12 years of schooling. The majority of the respondents are employed. The overall profile of the survey respondents indicated that the majority are working-educated adults (Table 1 ).

Measurement model assessment

The measurement model was analyzed using the structural equation modeling (SEM) approach (Ringle et al. 2015 ). SEM is a comprehensive statistical approach to testing hypotheses about relations among observed and latent variables (Hoyle 1995 ). Figure  2 describes the study measurement model, and the results of the measurement model are shown in Table 2 . Internal consistency of the items measuring each construct is assessed by a well-known internal consistency criterion Cronbach’s alpha in the footprints in literature (Tenenhaus et al. 2004 ). The obtained values exceed the minimum recommended value of 0.7 or greater. Moreover, some researchers recommend assessing Composite Reliability (CR) also due to the restrictions of Cronbach’s alpha (Ab Hamid et al. 2017 ). For advanced stages of a research study, a CR value of 0.70 to 0.94 is appropriate. In this study, we used both criteria as shown in Table 2 . Cronbach’s alpha and CR values both were according to the guidelines provided, which is the value of minimum 0.7 and 0.5 respectively (Wong 2013 ). In our case, the values obtained (see Table 1 ) for all constructs were above the recommended values (Alarcón et al. 2015 ).

Measurement model

Discriminant validity

The Fornell–Larcker Criterion is considered a traditional approach to assessing the discriminant validity of the measurement model (Alarcón et al. 2015 ). Table 3 shows the value for each row or column of the study construct is less than the diagonal value (Henseler 2017 ). Furthermore, in this context, Table 4 shows the Heterotrait-Monotrait ratio (HTMT) value is below the threshold value of 0.85 or 0.9 (Henseler et al. 2015 ). Therefore, it can be said that the study measurement model validates the discriminant validity and the same has been successfully achieved (Table 5 ).

Multicollinearity tests were conducted before hypothesis testing, and the obtained values for the variance inflation factor (VIF) reported are less than the critical value (5). To examine the assessment of the structure model, Bootstrapping (Singh and Xie 2008 ) with 2000 samples is used. This study, on the other hand, concentrates on prediction, which is the main reason why PLS-SEM is generally cited as the preferable statistical technique for research purposes (Fig.  3 ).

Structure model of the study

Structural model assessment

Before analyzing the structural model, the researchers ensure that there are no issues with collinearity. According to Hair et al. ( 2012 ), lateral collinearity can sometimes cause the results to be misled even if the discriminant validity is met (Henseler et al. 2014 ). The study model explanatory power is assessed by the R -square values as shown in Table 6 (Hair et al. 2014 ). The effect size (R 2 ) is calculated and describes the impact of independent variables on the dependent variable construct variance (Kline 1998 ).

Hypotheses testing

SEM’s guideline evaluates the links Hypothesis 1 GA—> GB ( t value = 6.126, p value 0.000), indicating that green awareness has a positive significant effect on green behavior. GC—> GB ( t value = 2.969, p value 0.003) also supported the positive significant effect of green culture on green behavior, PBC—> GC ( t value = 18.623, p value 0.000), indicating that perceived behavior control has positive significant impact on green behavior as the probability value is statistically significant at 1% level. PBC—> PGA ( t value = 11.448, p value 0.000) demonstrates that perceived behavior control also exhibits a statistically positive effect on perceived green awareness at 1% probability level on green awareness, and PGA—> GA ( t value = 11.030, p value 0.000) also indicates that perceived green awareness also affects green awareness positively. However, the hypotheses GA—> GC, PBC—> GB, PGA—> GB, and PGA—> GC show insignificant effect; hence, these hypotheses are not supported as the obtained p values are statistically insignificant (Table 7 ).

Previous studies show green culture and mindset are major indicators of environmentally conscious behavior (Kang et al. 2012 ; Ramayah et al. 2010 ; Yu et al. 2014 ). Because our conclusions are based on Pakistani data, it is easier to generate more accurate predictions about green behavior. The more people who think about investing in green banks, the more likely they are to adopt green habits. The results of our study show a high impact of a green attitude on individuals’ green behavior, and this creates a green culture that is consistent with prior studies (Raberto et al. 2019 ). Green behavior, on the other hand, is not dependent on the industrial economy, according to a prior study by Zeeshan et al. ( 2021 ). Perceived behavior control does not affect the consumer, confirming the findings of a previous study conducted among consumers in developed countries (Wang 2019 ), where, people conduct more independently in the Western World, and perceived behavior control influences their independent viewpoint (Biswas and Roy 2016 ).

Consumers in Pakistan, on the other hand, are more interdependent. Furthermore, the findings are in line with the current studies on green culture behavior. Despite a lack of factual understanding of environmental impacts, consumers are more anxious to adopt a green culture in Pakistan (Rehman et al. 2021 ). Green behavior has got a lot of attention, while green culture has got less. The performance reflects consumer environmental commitment, which is critical for enacting green legislation. The importance of ESB should be emphasized by green marketers. These policies should encourage green banking and a positive societal image. Our results confirm the positive significant effect of green awareness (green knowledge) and green attitude on green behavior, which is in line with previous footprints in the body of knowledge (Khan et al. 2020 ). Many experts have said that promoting environmental education is awareness (Porter and Kramer 2019 ), which can be cultivated through educational techniques. Pro-environmental activism in Pakistan is lacking in motivation (Rehman et al. 2021 ), and individuals are unaware of how specific behaviors might hurt the environment. Rebuilding evaluative pedagogies to address this will involve action in response to poor environmental conditions. As a result, environmental awareness and the results of various ESBS should be presented in a framework that aims to produce green customers. The findings imply that Pakistani residents benefit from consistent environmental education that places a heavy emphasis on green behavior.

It is important to note that Pakistani residents rarely engage in environmental action, and as a result, environmental awareness remains low and below average (Rehman et al. 2021 ). This could be attributed to a lack of dedicated eco-activism among Pakistanis. The ideal way for policymakers is to raise society’s awareness about the need of embracing and adopting green behavior. Environmental awareness is beneficial not only in terms of fostering environmental citizenship but also in terms of opening up new avenues for expressing green behavior.

This study uses a single framework that is composed of numerous important variables that contribute to green behavior. The framework is developed from the literature to better predict green behavior. The variables that contribute to the framework are, namely, perceived behavior control, perceived green awareness, green attitude, green culture, and green behavior. Environmental knowledge that represents facts and concepts helps in achieving environmental milestones, but unfortunately in the majority of countries across the globe, especially in the developing world, the understanding of environmental knowledge is lacking due to which individuals cannot perform well, be responsible for the environment, and environmental knowledge helps in the recognition of the full ecosystem and makes individuals more responsible to the environment that helps in achieving sustainable development (Khan and Kirmani 2015 ; Wei et al. 2018 ). Environmental knowledge facilitates and helps consumers toward green knowledge, green attitudes, and intentions which resultantly create green culture. Our study also reports a positive effect of green culture on green behavior, which is in line with previous footprints. Furthermore, the study finds that while there is a stronger green culture, there is a lower knowledge of (M) and (SD) values. However, this may be due to customers mistaking industrialization for green behavior. While most urban Pakistanis may not be concerned about environmental activity, their perspectives should not be ignored; rather, they should be investigated for the systematic gaps they expose.

Theoretical, practical, and managerial implications

This study extends previous research and replicates current research by providing empirical results for the relationship between green behavior, green awareness, and green culture. This study further has numerous practical contributions by providing objective-oriented scientific evidence for marketers. For policymakers, it helps in a better understanding of the green culture impact on green behavior. Based on the findings of the study, bank should display precautionary measures that could be vital to develop green behavior on the part of banking consumers such as putting the receipts received after the transaction from ATMs in dustbins provided by banks; if not available, wastage dustbins must be provided which would contribute to the banking consumers green behavior. Likewise, banners from each branch must be displayed in the ATM cabin area, showing environmental responsibility for banking consumers. This practice will encourage them toward observing somehow green behavior. Moreover, the government should focus on green corporate laws in all public and private sector firms as a driving move toward green behavior.

Future studies can use an extended sample covering general consumers in various retail destinations not only focusing banking industry of Pakistan. Moreover, the future study can be meaningful by using robust predictors of green behavior taken in both developing and developed markets to predict the magnitude of difference in these parts of the world.

Data availability

The datasets used and/or analyzed during the current study are available from authors on a reasonable request.

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Fakhr e Alam Afridi

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Sajjad Ahmad Afridi

School of Accounting, Yunnan Technology and Business University, Kunming, Yunnan, China

R. M. Ammar Zahid

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FAA, SAA, and RMAZ: conceptualization, formula analysis, investigation, writing the original draft, data collection, methodology, and formal analysis. WK and WA: investigation, software, investigation, data correction, formula analysis, methodology, and editing.

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Afridi, F.e., Afridi, S.A., Zahid, R.M.A. et al. Embracing green banking as a mean of expressing green behavior in a developing economy: exploring the mediating role of green culture. Environ Sci Pollut Res (2023). https://doi.org/10.1007/s11356-023-25449-z

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Received : 13 December 2022

Accepted : 17 January 2023

Published : 25 January 2023

DOI : https://doi.org/10.1007/s11356-023-25449-z

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