Green Banking Practices, Sustainable Environmental Performance and Profitability of Commercial Banks

Abstract

The growing focus on environmental sustainability has prompted financial institutions to promote environmentally friendly practices in their operations. Green banking in this regard has become a significant strategy by which commercial banks can help in protecting the environment and still be viable financially. This research paper has found that there is association amongst green banking practices, sustainable environmental performance and profitability of commercial banks. In addition, the main purpose of the study to examine the effects of green banking practices on the environmental performance of commercial banks and whether the practices lead to higher rate of profitability. The research design is quantitative and the primary data used in the research is a structured questionnaire. Moreover, the survey involved 300 respondents who were members of commercial banking institutions. Partial Least Squares Structural Equation Modeling (PLS-SEM) is used to analyze the relationships between the study variables. The green banking practices are measured using a number of indicators such as green banking policies, daily operations that are environmentally responsible, and green investment initiatives. The most important study outcome variables are the environmental performance and profitability that are employed in assessing the success of green banking programs in commercial banks. Furthermore, the research results indicate that green banking activities have a strong positive impact on sustainable environmental performance and profitability of commercial banks. Besides, the findings indicate that banks with environmentally friendly policies and practices in their operations do not only help in ensuring environmental sustainability, but also enhance their financial performance and corporate image. These results have significant implications on banking institutions, policymakers, and regulatory bodies in ensuring sustainable banking practices in the financial sector. Moreover, the research paper adds to the body of literature on the subject of green finance by highlighting the importance of commercial banks in promoting sustainable economic growth.