THE STRATEGIC ROLE OF GREEN BANKING IN PROMOTING GLOBAL ENVIRONMENTAL SUSTAINABILITY

Abstract Green banking represents a transformative approach in the financial sector, integrating environmental sustainability into core banking operations to combat climate change and promote long-term economic resilience. This paper delves into the theoretical underpinnings of green banking, tracing its evolution from regulatory mandates like those issued by the Reserve Bank of India (RBI) to voluntary initiatives driven by global frameworks such as the Paris Agreement and UN Sustainable Development Goals. At its core, green banking emphasizes eco-friendly products and services, including green loans for renewable energy projects, energy-efficient mortgages, and sustainable supply chain financing. These instruments channel capital toward low-carbon initiatives, such as solar power installations and waste management systems, while discouraging funding for high- emission industries like fossil fuels. By prioritizing environmental risk assessments in lending decisions, banks mitigate climate-related financial risks, enhancing portfolio stability. A pivotal shift involves operational reforms: moving from paper-intensive processes to digital platforms like mobile banking, blockchain-based transactions, and paperless documentation. This transition slashes resource consumption—reducing paper usage by up to 90% in adopting institutions—and lowers energy demands through green-certified data centers powered by renewables. Consequently, banks achieve substantial carbon footprint reductions; for instance, leading Indian private banks have reported 20-30% emissions cuts post-digitization. Moreover, green banking fosters stakeholder engagement, educating customers on sustainable practices via green credit cards and awareness campaigns. Challenges persist, including higher initial costs and regulatory gaps, yet benefits like enhanced brand reputation and compliance with ESG (Environmental, Social, Governance) criteria outweigh them. Ultimately, green banking not only aligns finance with planetary boundaries but also drives inclusive growth, positioning the sector as a catalyst for a low-carbon economy.