Abstract:
Over the past few decades, technological advancements have caused
various environmental issues. To contend with them, the concept of
Green Finance was introduced which envisages that both public and
private sectors should establish linkages between technological
development, innovation, and the greening of the economy to explore
untapped opportunities for economic growth. Subsequently, every
country has focused on establishing green finance policies. However,
the processes associated with following the new methods of financing
in developed countries are easier to follow when compared with
developing countries. The State Bank of Pakistan has recently
introduced green banking policies with an aim to reduce the
vulnerability of banks from risks arising from the environment, fulfill
their responsibility for protecting the environment, and to provide
financing to transform the economy. This article analyses the green
finance mechanism for sustainable development in Pakistan by
exploring the supply side of the green banking approach, which
includes various issues faced by banks/DFIs, and the demand side,
which refers to the compliance of green banking practices by the
borrowers. It also reviews the policies that developing countries have
implemented to initiate Green Finance and report that China and
India are far better at formulating and implementing green banking
practices. However, Pakistan is in the early stages of developing and
formulating its Green Banking Strategy and this study provides
suggestions for the implementation of such practices.
