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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.

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  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.

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.

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 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.

Keywords

  • Green banking, sustainability, eco-friendly bank, Saudi Arabia

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