Green Banking: A Shared Responsibility Between Financial Regulators And Banking Institutions

As the impact of the global financial economic crisis of 2007/2008 diminished and the world economy began to recover, policymakers started to look towards new ways of attaining prosperity through sustainable, equitable and robust economic growth. To achieve this desiderate, the financial system (as the main provider of financial capital) had to fully embrace sustainability practices and integrate them in all its internal processes. Within the financial system, the banking sector is undoubtedly the main player. As such, banks also had to join the sustainable development wave. Hence, ‘green banking’ is becoming a central focus point for many researchers and practitioners as they provide various interpretations of the concept and highlight the best practices. The aim of this paper is twofold: to identify the role of financial regulation and regulators (mostly, Central Banks) in harnessing Green Banking and to determine the involvement of banking institutions in fostering Green Banking. It begins with unpacking the ‘Green Banking’ concept by revealing the most relevant (from a theoretical standpoint) and practical (considering its applicability in the real economy) approaches to date, in order to better grasp and fine-tune its meaning. After analysing qualitatively and critically the most important research papers and institutional reports to date, the paper provides the reader with the essential toolkit for moving forward with a more in-depth investigation on Green Banking.