Traditionally, the only "green" that the financial powerhouses cared about was the currency approved by government. One may ask - how can banks contribute for a greener environment? Banks do not release deadly pollutants into the air or use loads of water to operate and printing of currency does not have a large carbon footprint. Of course, banks can be more paper and energy-efficient, but it won't save the world. However, with changing times, the scenario is changing, and fast.
Today, more and more U.S banks are climbing aboard the "green" bandwagon. Most are doing it altruistically, but some are also doing it for better public relations. Nonetheless, the financial industry can play a major role in global environment and climate change; by the way it finances new projects. Many investment houses and major banks have started to recognize that investing in green projects and sustainable infrastructure is becoming a need in the United States. Green investments can maximize the returns and lower the risk of failure. A recent study showed that during the 2008-2009 recession, the companies that were focused on sustainability and were listed on Goldman Sachs SUSTAIN list or Dow Jones Sustainability Index, performed better than their counterparts by 10% to more than 25%.
The U.S banking sector is also apprehensive about the growing climatic changes. In recent years, we have seen how global warming has affected manmade structures. Hurricanes, floods, melting glaciers have all resulted in billions of dollars' damage and Hurricane Katrina is the biggest example of it. Taking cue from the scientific society, banks have now understood that climate change is real and with it, risks and liability. United Nations Environment Program has predicted that by 2040, a total of $1 trillion value of structures and buildings could be lost every year, due to climate changes. This is making investment houses and insurance companies to invest in projects that are less vulnerable to floods, storms, etc. and/or companies taking positive steps towards climate change mitigation.
Banks have also started realizing that companies with potential environmental problems signify a huge risk of repayment. The BP oil spill of 2010 led many investors to be cautious of investing in such projects. Banks have realized that while BP was profuse with cash, most others wouldn't have had paid back the investors and declared bankruptcy. Investment institutions have started calculating the environmental risks before investing in such companies.
Going green is not just a corporate social responsibility (CSR) program, but it is an approach through which banks can blend environmental awareness into financial services. Banks can go a long way in environment conservation if they refrain to finance companies with poor environmental records. Investing in environmentally responsible plans, sustainable enterprises and innovative green projects would certainly be profitable for banks. A recent report states that if policies of clean energy are strengthened in upcoming years, a whopping $2.3 trillion investment can be made in environment friendly projects, over the next decade.
Green financing not only offers banks and investing firms across United States to facilitate sustainable socio-economic growth and tap renewable energy sources; but also offers solutions to challenges of rising energy demand in the U.S.
