Financail Management

8/7/2019 Financail Management

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FINANCIAL MANAGEMENT

ASSIGMENT TOPIC:

ISSUES IN GREEN FINANCIAL SERVICE IN BANK

GROUP MEMBRES:

Shashikala

Roohi jaiswal

Kriti

Hina shaikh

Pragya dhakar

Shruti

Arpita ghosh


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The sudden surge of interest in environmental issues from consumers follows exponential

growth in environmental awareness on a global scale, owing to the massive media

coverage surrounding global warming, oil prices and the exploitation of workers in low-

wage, "sweatshop" environments.

Carbon footprint reduction can be facilitated through adopting a carbon neutral approach

to business practice. Carbon neutrality means reducing carbon dioxide emissions to net

zero, which represents a point of environmental equilibrium wherein carbon emissions

are counterbalanced by carbon savings.

A variety of "green" financial products currently exist in the market, away from the direct

investment side, which has manifested itself via the creation of ethical fund offerings.

The emergence of "green" credit cards, as well as "green" banking institutions and

insurance companies relate to ethical credentials and reputation.

over 90% of institutional investors want green investments in their portfolio, according to

a new study.

Research commissioned by the New Energy World Network (NEWN) found more than

nine in ten private equity, pension, insurance and venture capital funds would like to have

some exposure to renewable energy, clean technology, and sustainability-related

investments.

Two thirds (69%) said they have already made green investments or are planning to do so

in the next three years.

The main motive for investing in green funds is the potential to generate high financial

returns.

However, 64% also cited environmental responsibility as a reason for making eco-

friendly investments.

A mere 6% said they do not want any exposure to the green sector.


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There is strong expectation in the private equity industry that the performance of green

investments will improve over the next few years, NEWN said in a statement.

The challenge for green private equity and venture capital managers is to accelerate the

current levels of interest and future expectations into actual commitments into their funds

sooner rather than later.

The study was conducted by AltAssets, who surveyed 110 institutional investors.

What is a Green Product or Service?

In order to qualify as a green product or service, the item must offer the customer a

transparent option to reduce the indirect impacts of their banking activities, reduce negative

environmental impacts or provide environmental benefits.


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Retail banking covers personal and business banking products and services designed for

individuals, households and SMEs, rather than large corporate or institutional clients and

services in the retail space include loans and mortgages, debit and credit card services, and

insurance, among others.

We will see two of the most popular green products in banking sector.

Energy-Efficient Mortgages

One of the most popular forms of a green banking product is a green home mortgage.

Green home mortgages, or Energy-Efficient Mortgages (EEMs) as they are commonly known,

offer a remarkably lower interest rate for customers who purchase new energy efficient houses

or invest in green power. In order for a financial institution to make this option more attractive

to customers, it should promote green mortgages by covering the cost of switching a house

from conventional to green power.

Green Credit Cards

Green credit cards are another new initiative. The incentives of having a green credit

card are hard to measure, even infinite. Many banks in Europe offer emissions offset

programs, provide discounts and grant low borrowing rates to customers who purchase

green products and services. Some banks offer to donate card-member rewards to

organizations that are dedicated to improving the environment or allowing cardholders to

redeem these rewards for green products.

Project Finance

Comprised of a mix of equity and debt, project finance refers to loans offered in

wholesale banking to fund large infrastructure projects. These targeted projects are

typically found in sectors such as telecommunications, petrochemicals and natural

resources. Specialized service divisions are dedicated to long-term financing of clean
http://fsckorea.files.wordpress.com/2010/04/greencard.jpg


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energy projects. Some banks also specialize in one (or several) renewable technology

where regulatory framework and government policy encourages the early adoption of

clean technologies. These targeted projects obtain loans that are repaid to the bank, or a

banking syndicate, through the project revenue generated.

"Eco-friendly business activities and energy efficient industries will be given preference in

financing by banks. Environmental infrastructure such as renewable energy projects, clean

water supply projects, wastewater treatment plants, solid and hazardous waste disposal

plants, bio-gas plants, bio-fertilizer plants should be encouraged and financed by banks,'' it

added.

The banks should determine a set of achievable targets and strategies, and disclose these in

their annual reports and websites for green financing and in-house environment management

as well.

The Opportunity: Include green funds as featured offerings for customers, promoting

them on the basis of contributing to environmental stewardship as well as a way of

profiting from the multi-billion dollar green marketplace. Financial institutions

themselves may profit by providing capital to emerging green businesses, or helping

customers invest in these enterprises. Another area to consider is securitizing the green

credit and offering these assets to green investors.

Tapping the Green Market Requires a Targeted Strategy. While most consumers are

receptive to green issues, the greatest opportunity is among a handful of segments whose

members possess a combination of environmental zeal and innovative tendencies. We

know from our research that consumers can be divided into six segments with different

beliefs and behaviors in the green space (see below).


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Based on this market segmentation, it is clear that a misguided strategy would waste

resources on reaching out to consumers with limited potential because (a) they respond to

environmental issues by avoiding consumption and shunning technology, (b) are eking by

a living and lack the time and resources for green services, or (c) are among the minority

of the public that views the green movement as hype. Three types of consumers

represent the greatest opportunity for a green strategy:


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Conclusion

Many green financial products and services, reviewed above, either remain in the

nascent stage of development/implementation or data related to their success/failure has

not yet been generated or reported. Easing customers into the world of green financial

products and services requires a financial institution to become more aware of any

obstacles, such as insufficient product information, that could stand in their way of

appealing to customers. As environmental understanding and awareness grows in Rep. of

Korea, so too will the demand for products and services aimed at facilitating the

advancement of environmentally sustainable lives, livelihoods and communities. At the

same time, this demand will also expose new business opportunities, while leading to an

increased diversification of products and services found in multiple sectors.

Consequently, organizations that have the foresight and capacity to tap into this desire by

consumers to affect positive environmental change will likely experience widespread

benefits; from improved corporate image to increased growth and competitiveness in the

marketplace.

Financail Management

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