NET ZERO carbon emissions by 2050, following the temperature goal of the Paris Agreement in 2015, is an undoubted imperative in the 21st century. It is a must-attainable concept to be adopted from all aspects to achieve sustainable global economic growth. All sectors, especially manufacturing concerns, are highly associated with the challenge since approximately 51 billion tonnes of CO2 equivalent emissions are being released into the atmosphere each year due to the use of fossil fuels, mostly used in industrial production. Bangladesh, being one of the most vulnerable countries to climate change due to hydro-geological and socio-economic factors, must have a strong role-playing propensity towards the mission of net zero carbon emissions.
Globally, surrounding economic deeds are entangled with financial institutions, especially banks and non-bank financial institutions. Hence, these institutions can exercise significant influence in tackling different factors responsible for intensive climate change. Under the umbrella of the United Nations, a group of leading global banks representing about 41 per cent of global banking assets founded the Net Zero Banking Alliance in 2021, aligning their lending, investment and capital market activities with net-zero greenhouse gas emissions by 2050. In the last couple of years, two banks and one NBFI in Bangladesh have joined the Net Zero Banking Alliance, aligning with global targets set through the Paris Agreement.
The apparel industry, worth approximately $1.79 trillion, transmits a substantial carbon footprint, posing a significant threat to the planet鈥檚 future if left unsolved. According to a statistic from the Ellen MacArthur Foundation, the apparel industry is responsible for 2鈥�8 per cent of GHG emissions and generating 20 per cent of global waste water. Further, a statistic anticipated that global garment production is expected to surge by 63 per cent within 2030 to capture the demand of a growing population, which may lead to a drastic 50 per cent increase in GHG emissions.
The global fashion industry is going through a generational transformation, mostly linked with ethical consumption among Gen Z (born between mid-1990s and early 2010s). A study conducted by Bain and Co revealed that about 64 per cent of global consumers express deep concerns about environmental sustainability. To cope with the changes, major global apparel brands like H&M, Zara, Levi鈥檚, Primark, C&A, M&S, etc, have undergone a transformative shift, incorporating sustainability, innovation, diversity and social responsibility as integral components in recent years. Thus, the related RMGs in Bangladesh had to undertake several substantial changes towards better waste and water management, renewable energy sources, innovation and efficiency in technologies, etc, complying with the terms and conditions of global buyers. Furthermore, despite being one of the least CO2 emitter countries, RMGs of Bangladesh are highly connected with the highest CO2 emitter countries like China, USA, India, EU and Russia (which were responsible for about 60 per cent of GHG emissions in 2021, as stated at UNEP Emissions Gap Report 2023) in terms of both raw materials and machinery suppliers and renowned apparel buyer brands.
Bangladesh, the second-largest global apparel exporter, plays a pivotal role in the global garment industry. The readymade garments sector contributes about 10.35 per cent to Bangladesh鈥檚 total GDP, thanks to its about 84 per cent contribution to total export. Based on a report of the Bangladesh Garment Manufacturers and Exporters Association, there are over 4,000 RMG factories in Bangladesh, among which 229 are LEED (Leadership in Environmental and Energy in Design) certified factories. It is worth mentioning that nine of the top 10 green garment factories and 61 of the top 100 factories are located in Bangladesh. Mentionable that another 500 factories are waiting to obtain LEED certification, which is known as the most widely used green building rating system.
As per the Financial Stability Report 2023 of the Bangladesh Bank, total loans outstanding in RMGs were Tk 1,635.99 billion, which is the single largest loan outstanding in a particular sector. Since RMGs in Bangladesh are exclusively interconnected with global brands, singly recognised as the highest contributory sub-sector to GDP and intensively financed by banks and NBFIs aligning with separate guidance of the Bangladesh Bank, special attention is to be catered for ensuring renewable energy, waste management, energy efficient technology, green building, etc, in this sector. To facilitate sustainable and green finance, the central bank has announced several policies and refinance/pre-finance schemes in association with different international bodies like ADB, JICA, EU, etc, in the last few years.
A few initiatives of the central bank are: the green transformation fund, guidelines on environmental and social risk management, programme to support safety retrofits and environmental upgrades in the Bangladeshi RMG sector, sustainable finance policy and sustainability rating for banks and financial institutions, technology development/up-gradation fund, policy on green bond financing for banks and financial institutions and refinancing scheme for green products/initiatives/projects. The initiatives are opportunities for RMGs and other backward linkage industries towards sustainable development, which may result in zero carbon emissions. Complying the guidelines and circulars, banks have been successfully conducting financing operations as participating financial institutions. As per the 鈥楺uarterly Review Report on Sustainable Finance of Banks & Finance Companies鈥� by the Bangladesh Bank, green finance by banks increased from Tk 59,676.53 million in Q1-2024 to Tk 69,789.00 million in Q2-2024, and sustainable finance by banks increased from Tk 853,373.76 million in Q1-2024 to Tk 11,38,078.29 million in Q2-2024. This statistic shows that both green finance and sustainable finance by banks are increasing. Now, it is high time that the banks took initiatives to develop green governance within themselves and RMG clients and to align their financing with the target of net-zero carbon emissions by 2050.
Lastly, the government prioritises achieving SDGs, which are integrated with the targets of the Intended Nationally Determined Contribution of Bangladesh towards significantly reducing GHG emissions in the energy, transport and industrial sectors by 2030. As a part of independent efforts towards transitioning financing activities to align with pathways to net-zero carbon emissions by 2050, few banks have formed separate RMG business units and monitoring cells to prioritise, monitor and nurture RMGs. All the initiatives towards net-zero carbon emissions by 2050 will be effective if the banks and the related stakeholders can establish green governance within themselves.听
听
HM Neeaz Morshed is an associate relationship manager, commercial banking division, Prime Bank PLC.
