The Effectiveness of Green Banking in Saudi Arabia
Summary: 1. Introduction – 1.1 The concept and definition of green banking. – 1.2 The concept of an eco-friendly bank. – 1.3. The importance of green banking. – 1.4. The main features of green banking. – 1.5. Advantages and disadvantages of green banking. – 1.5.1 Benefits of green banking. – 1.5.2 Limitations of green banking. – 2. Policy and Regulatory Framework of Green Banking System. – 2.1 Green banking guide. – 2.2 The role of regulators in promoting green banking. – 2.3 The rise of sustainable finance regulations. – 2.4 Countries with sustainable finance regulations. – 2.5 Issues and cases on the green banking system. – 3. Conclusion and Recommendations.
Methods: The paper utilises legal frames and documents to conduct a legal analysis of green banking as a new concept in Saudi Arabia. The secondary data is also used to support the analysis, and the qualitative approach is employed to discuss the significance and features of green banking.
Results and Conclusions: Saudi Arabia continues to face substantial obstacles in adopting green banking. These difficulties include the absence of explicit regulations and recommendations from the regulatory bodies and the high cost of implementing green banking practices in a market that is primarily dependent on oil-based sectors. It is, therefore, important the regulatory bodies shed more focus on green banking and must enact a regulatory framework to encourage financial institutions to support projects that uphold sustainability.
Abstract
Background: Saudi Arabia is one of the countries in the world to launch ESG and Sustainable finance with the aim of not only contributing to global SDGs but also toward the achievement of the Kingdom’s Vision 2030. The need for sustainable financial practices has appeared as green finance and funding renewable energy projects as well as implementing sustainable practices in operations and services. This paper analyses the concept of green banking, its importance, and advantages and disadvantages to achieve sustainability for the financial sector in Saudi Arabia.
Methods: The paper utilises legal frames and documents to conduct a legal analysis of green banking as a new concept in Saudi Arabia. The secondary data is also used to support the analysis, and the qualitative approach is employed to discuss the significance and features of green banking.
Results and Conclusions: Saudi Arabia continues to face substantial obstacles in adopting green banking. These difficulties include the absence of explicit regulations and recommendations from the regulatory bodies and the high cost of implementing green banking practices in a market that is primarily dependent on oil-based sectors. It is, therefore, important the regulatory bodies shed more focus on green banking and must enact a regulatory framework to encourage financial institutions to support projects that uphold sustainability.
About Authors
Razan Alamri
Commercial Law Master Student, Prince Sultan University, Riyadh, Saudi Arabia
RazanAlj@outlook.sa
Author, solely responsible for research and writing. Competing interests: The author declares no conflict of interest. Disclaimer: The findings and conclusions reported in this publication are purely based on the authors’ research. The authoraccept no liability for any potential mistakes or inaccuracies that may exist. The material supplied is intended solely for academic purposes and should not be construed as professional advice or guidance.
Managing editor – Mag Polina Siedova. English Editor – Dr. Sarah White.
Guest Editors of the Special Issue: Dr Mohammed Albakjaji, Prince Sultan University, and Dr Maya Khater, Al Yamamah University, Saudi Arabia.
Copyright: © 2023 Razan Alamri. This is an open access article distributed under the terms of the Creative Commons Attribution License, (CC BY 4.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
References
Alam A, Almotairi M and Gaadar K, ‘Green Marketing in Saudi Arabia Rising Challenges and Opportunities, for Better Future’ (2012) 8 (11) Journal of American Science 144.
Alexander K, Greening Banking Policy: In support of the G20 Green Finance Study Group (GFSG 2016).
Alshebami AS, ‘Evaluating the Relevance of Green Banking Practices on Saudi Banks’ Green Image: The Mediating Effect of Employees’ Green Behaviour’ (2021) 22 (4) Journal of Banking Regulation 275, doi: 10.1057/s41261-021-00150-8.
Alsughayir AA, ‘Does Green Product Innovation Affect Performance of Saudi Chemical Industrial Firms?’ (2017) 11 (2) Journal of Social Science Research 2355, doi: 10.24297/jssr.v11i2.6057.
Annadurai A, ‘Effectiveness of Green Banking Technology of the Commercial Banks in India’ (2014) 5 (12) International Journal of Research in Commerce & Management 98.
Assous HF, ‘Saudi Green Banks and Stock Return Volatility: Gle Algorithm and Neural Network Models’ (2022) 10 (10) Economies 242, doi: 10.3390/economies10100242.
Aubhi RUH, ‘The Evaluation of Green Banking Practices in Bangladesh’ (2016) 7 (7) Research Journal of Finance and Accounting 93.
Barua S, Principles of Green Banking (De Gruyter 2020) doi: 10.1515/9783110664317.
Bhardwaj BR and Malhotra A, ‘Green Banking Strategies: Sustainability through Corporate Entrepreneurship’ (2013) 3 (4) Greener Journal of Business and Management Studies 180, doi: 10.15580/GJBMS.2013.4.122412343.
Bishop N, ‘Green Bond Governance and the Paris Agreement’ (2019) 27 (3) NYU Environmental Law Journal 377.
Biswas N, ‘Sustainable Green Banking Approach: The Need of the Hour’ (2011) 1 (1) Business Spectrum 32.
Bradford H, ‘Sustainable Finance Regulation Grew Around the World in 2022 — Report’ (Pensions & Investments, 3 October 2022) <https://www.pionline.com/regulation/sustainable-finance-regulation-grew-around-world-2022-report> accessed 25 April 2023.
Climent F, ‘Ethical Versus Conventional Banking: A Case Study’ (2018) 10 (7) Sustainability 2152, doi: 10.3390/su10072152.
Colaert V, ‘The Changing Nature of Financial Regulation: Sustainable Finance as a New EU Policy Objective’ (2022) 59 (6) Common Market Law Review 1633.
Delmas MA and Burbano VC, ‘The Drivers of Greenwashing’ (2011) 54 (1) California Management Review 64, doi: 10.1525/cmr.2011.54.1.64.
Dickinson H, ‘From New Public Management to New Public Governance: The implications for a “new public service”’ in JR Butcher and DJ Gilchrist (eds), The Three Sector Solution: Delivering public policy in collaboration with not-for-profits and business (ANU Press 2016) 41, doi: 10.22459/TSS.07.2016.03.
Dikau S and Ryan-Collins J, Green Central Banking in Emerging Market and Developing Country Economies (New Economics Foundation 2017).
Ferlie E, ‘The New Public Management and Public Management Studies’ (Business and Management, 29 March 2017) <https://doi.org/10.1093/acrefore/9780190224851.013.129> accessed 25 April 2023.
Gavrilko T and Pobochenko L, Green Banking as a Tool for Implementing the Model of a Socially Responsible Banking Institution (Baltija Publishing 2021).
Habib SMA, Green Recovery Approach of Islamic Banks in COVID-19 Regime (Greentech Foundation 2020).
Ibe-enwo G et al, ‘Assessing the Relevance of Green Banking Practice on Bank Loyalty: The Mediating Effect of Green Image and Bank Trust’ (2019) 11 (17) Sustainability 4651, doi: 10.3390/su11174651.
Jose AP, ‘A Study on Issues and Challenges of Green Banking Services in Kerala’ (The COVID-19: Business Trends, Challenges and Opportunities: Virtual National Conference, Kristu Jayanti College, Bengaluru, 23 October 2020) 134.
Julia T and Kassim S, ‘Green Banking’ in Haron R, Md Husin M and Murg M (eds), Banking and Finance(IntechOpen 2020) ch 6, doi: 10.5772/intechopen.93294.
Khairunnessa F, Vazquez-Brust DA and Yakovleva N, ‘A Review of the Recent Developments of Green Banking in Bangladesh’ (2021) 13 (4) Sustainability 1904, doi: 10.3390/su13041904.
Lalon RM, ‘Green Banking: Going Green’ (2015) 3 (1) International Journal of Economics, Finance and Management Sciences 34, doi: 10.11648/j.ijefm.20150301.15.
Lim DJ, Youn N and Eom HJ, ‘Green Advertising for the Sustainable Luxury Market’ (2021) 29 (4) Australasian Marketing Journal 288, doi: 10.1177/1839334921999488.
Lin H et al, ‘An Indicator System for Evaluating Megaproject Social Responsibility’ (2017) 35 (7) International Journal of Project Management 1415, doi: 10.1016/j.ijproman.2017.04.009.
Linh DH and Anh TV, ‘Impact of Stakeholders on the Performance of Green Banking Products and Services: The Case of Vietnamese Banks’ (2017) 165 (5-6) Economic Annals-XXI 143, doi: 10.21003/ea.V165-29.
Liu J, ‘China Raises the Bar on Investor Regulations to Promote Green Finance’ (PRI Blog, 19 October 2022) <https://www.unpri.org/pri-blog/china-raises-the-bar-on-investor-regulations-to-promote-green-finance/10659.article> accessed 25 April 2023.
Meena R, ‘Green Banking: As Initiative for Sustainable Development’ (2013) 3 (10) Global Journal of Management and Business Studies 1181.
Miah MD, Rahman SM and Mamoon M, ‘Green Banking: The Case of Commercial Banking Sector in Oman’ (2021) 23 (2) Environment, Development and Sustainability 2681, doi: 10.1007/s10668-020-00695-0.
Mitra P et al, ‘The Rise of Hybrids: A Note for Social Entrepreneurship Educators’ (2019) 17 (2) International Review of Entrepreneurship 107.
Monnin P, Central Banks and the Transition to a Low-Carbon Economy: Discussion Note 2018/1 (Council on Economic Policies 2018) doi: 10.2139/ssrn.3350913.
Nicholls A, Policies, Initiatives, and Regulations Related to Sustainable Finance (Asian Development Bank 2021).
Oyegunle A and Weber O, Development of Sustainability and Green Banking Regulations: Existing Codes and Practices (Papers Series no 65, CIGI 2015).
Park H and Kim JD, ‘Transition Towards Green Banking: Role of Financial regulators and financial institutions’ (2020) 5 (1) Asian Journal of Sustainability and Social Responsibility 1, doi: 10.1186/s41180-020-00034-3.
Richardson E, ‘Standardising Responsible Islamic Finance: A Review of Green, Social and Sustainability Sukuk’ (2020) 8 (8) Kilaw Journal 189.
Sachs JD et al, ‘Importance of Green Finance for Achieving Sustainable Development Goals and Energy Security’ in JD Sachs et al (eds), Handbook of Green Finance (Springer 2019) 3. doi: 10.1007/978-981-13-0227-5_13.
Slot AM and Kelly E, ‘The Sustainable Finance Law Review: United Kingdom’ (The Law Reviews, 6 January 2023) <https://thelawreviews.co.uk/title/the-sustainable-finance-law-review/united-kingdom> accessed 25 April 2023.
Sterling T and Meijer BH, ‘Dutch bank ING fined $900 million for failing to spot money laundering’ (Reuters, 4 September 2018) <https://www.reuters.com/article/us-ing-groep-settlement-money-laundering-idUSKCN1LK0PE> accessed 25 April 2023.
Streimikiene D and Kaftan V, ‘Green Finance and the Economic Threats During COVID-19 Pandemic’ (2021) 19 (2) Terra Economicus 105, doi: 10.18522/2073-6606-2021-19-2-105-113.
Sun H and others, ‘CSR, Co-Creation and Green Consumer Loyalty: Are Green Banking Initiatives Important? A Moderated Mediation Approach from an Emerging Economy’ (2020) 12 (24) Sustainability 10688, doi: 10.3390/su122410688.
Tara K, Singh S and Kumar R, ‘Green Banking for Environmental Management: A Paradigm Shift’ (2015) 10 (3) Current World Environment 1029, doi: 10.12944/CWE.10.3.36.
Volz U, On the Role of Central Banks in Enhancing Green Finance (INQUIRY working paper 17/01, UN Environment Inquiry, CIGI February 2017).
von Cotzhausen Modin S and Linde V, ‘Green Banking: A Qualitative Study on how Nordea Bank Avoids Greenwashing’ (Master’s thesis, Uppsala University 2023).
Wang EK, ‘Financing Green: Reforming Green Bond Regulation in the United States’ (2017) 12 (2) Brooklyn Journal of Corporate, Financial & Commercial Law 467.
Reviews for article
Add a Review
Разан Аламрі
АНОТАЦІЯ
Передумови. Саудівська Аравія є однією з країн світу, яка запустила ESG та
стійке фінансування з метою не лише сприяння Цілям сталого розвитку, а й
досягненню «Бачення 2030» в Королівстві. Потреба у сталих фінансових
практиках з’явилася як «зелене» фінансування та фінансування проєктів з
відновлюваної енергетики, а також запровадження стійких практик в
операціях та послугах. У цій роботі проаналізовано концепцію зеленого
банкінгу, його значення, переваги й недоліки для досягнення сталості
фінансового сектору в Саудівській Аравії. Екологічний банкінг стає дедалі
більш важливим у Саудівській Аравії та інших країнах світу завдяки
глобальним зусиллям зменшити викиди парникових газів і зберегти
навколишнє середовище. Як значний гравець у світовому нафтовому бізнесі
Саудівська Аравія докладає зусиль, щоб зробити банківську діяльність більш
екологічною.
Методи. У статті застосовано законодавчі рамки та документи для
проведення юридичного аналізу зеленого банкінгу як нової концепції в
Саудівській Аравії. Вторинні дані також використано для підтримки аналізу, а
якісний підхід застосовано для обговорення значення та особливостей
зеленого банкінгу.
Результати та висновки. Саудівська Аравія продовжує стикатися з істотними
перешкодами на шляху до впровадження зеленого банкінгу. Ці труднощі
включають відсутність чітких правил і рекомендацій від регулювальних
органів, а також високу вартість упровадження практик зеленого банкінгу на
ринку, який передусім залежить від нафтових секторів. Тому важливо, щоб
регулювальні органи приділяли більше уваги зеленому банкінгу, вони мають
запровадити нормативну базу, яка б заохочувала фінансові установи
підтримувати проєкти, які сприяють сталому розвитку. Регулятори відіграють
значну роль у просуванні зеленого банкінгу. Було зазначено, що державний
сектор, зокрема центральні банки, а також фінансові регулятори повинні
взяти на себе інструментальну роль в інтеграції зеленого банкінгу та
забезпеченні належного визначення, вивчення та звітування щодо загроз,
пов’язаних зі зміною клімату, навіть незважаючи на те, що такі системи та
галузеві зусилля є важливими рушіями креативності та зменшення ризиків.
Publication history
-
Submitted on 11 Apr 2023 / Revised 1st 29 Apr 2023 / Revised 2nd 05 May 2023 / Approved 22 May 2023 / Published online: 01 Jun 2023 / Last published: 16 Jun 2023
How to cite it?
-
R Alamri, ‘The Effectiveness of Green Banking in Saudi Arabia’ 2023 Special Issue Access to Justice in Eastern Europe 196-221. https://doi.org/10.33327/AJEE-18-6S014
