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Eduvest - Journal of Universal Studies Volume 4 Number 06, June, 2024 p-
ISSN 2775-3735- e-ISSN 2775-3727 |
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The Influence of Green Banking Activities on Environmental Performance of Listed Banks on the Indonesia Stock Exchange |
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Shofia Ainunnisa1*, Sri Hasnawati2
, Ernie Hendrawaty3 1,2,3 University of Lampung, Bandar Lampung, Indonesia Email: [email protected] |
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ABSTRACT |
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This study investigates the effect of green banking and green financing
on the environmental performance of banks in Indonesia. Green Banking is a
banking approach that integrates environmental factors in policies and
operations, while green financing is related to environmentally friendly
lending. The purpose of this study is to provide an understanding of the
concept of Green Banking and its impact on the environmental performance of
banks in Indonesia. Similar research has been
conducted in several countries, but research in Indonesia is still limited.
The results of this study are expected to serve as a basis for banks in
implementing better Green Banking practices to achieve sustainable
development. |
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KEYWORDS |
Green Banking, Green Financing, Bank Environmental
Performance |
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This work is
licensed under a Creative Commons Attribution-ShareAlike 4.0 International |
����������������������������������������������� INTRODUCTION
The issue of climate change is one that is familiar
to people today. The warming temperature of the earth has made people aware of
the environmental changes of the planet we inhabit. Research conducted by the
UK Meteorological Agency found the possibility of an increase in the earth's
average annual temperature of more than 1.5 degrees Celsius in the next five
years. It is even predicted that the hottest temperature record will occur
between 2022 and 2026.
The increasing temperature of the earth is caused
by increasing carbon emissions. The world's increasing carbon emissions can
cause environmental damage. Based on data from the International Energy Agency
(IEA), carbon dioxide (CO2) emissions from energy combustion and global
industrial activities reached 36.8 gigatons in 2022. These emissions increased
by about 0.5 gigatons compared to 2021, as well as being a new record high in
history as shown in the graph, responding to this, all parties need to make efforts
to overcome this environmental problem.
Figure
1. Graph of GHG emission sources by sector
(Source: Climate Watch)
According to Climte Watch
data, the electricity sector is the world's largest emitter of carbon dioxide
(CO2). The reason is that 40% of the total CO2 emissions in the world come from
this sector, so to reduce the increase in carbon emissions, the government is
currently introducing the term Carbon Pricing. Carbon Pricing is an explicit
price for the externality of carbon emissions that is applied by the government
and paid by the polluter.
The concepts of sustainability and social
responsibility are increasingly becoming a global focus, including in economic
growth and the financial system. Banks as institutions that have a major
influence in people's lives have an important role to play in addressing these
environmental issues through the concept of sustainability. The Indonesian
government is currently introducing 'green' policies, so all financial
institutions must implement a long-term plan to monitor the environmental
impact of their customers to ensure sustainability. One of the things that
banks can do to minimize environmental pollution due to their business
activities is to implement the concept of green banking.
Green banking is a concept to support
environmentally friendly practices and reduce the carbon footprint of banking
activities. According to (Chen et al., 2022), Green Banking is a banking activity where banks
take the initiative to carry out their daily operations by considering
environmental sustainability both internally and externally (Banks that carry
out these activities are referred to as socially responsible and sustainable
banks). Banks that implement Green Banking, in addition to maintaining the
company's internal environmentally friendly activities, also help make the
environment green and viable through environmentally friendly financing.
The concept of green banking includes
environmentally friendly lending (Green Financing), the use of energy-efficient
equipment, environment-based policies, saving the use of paper, and so on. When
banks want to minimize the use of paper or paperless, then banks need to
transform their business activities into digital. Green Financing is the latest
breakthrough for the financial industry to channel and allocate funds to
businesses that are oriented towards environmental sustainability. According to
Zhang (2022), Green financing is a phenomenon that combines the
world of finance and business with environmentally friendly behavior.
According to Hoque (2019), "Green financing is a broad term that can
refer to financial investments that flow into sustainable development projects
and initiatives, environmental products, and policies that promote sustainable
economic development".
Green banking and green financing are closely
related in improving banks' environmental performance. The synergy between
green banking and green financing encourages banks to reduce environmental
risks in their operations and portfolios. By implementing green banking
practices, such as reducing greenhouse gas emissions, managing waste
efficiently, or using renewable energy, banks can reduce negative impacts on
the environment and mitigate risks related to climate change or environmental
policies.
Indonesia as one of the world's most influential
economic growth countries is characterized by its considerable economic,
investment and development potential to become a major market, but Indonesia is
experiencing the challenges of climate change and its impact on the
environment. By 2023, Indonesia is considered to be one of the countries most
affected by climate change due to rising global temperatures resulting in
economic instability. Indonesia is faced with challenges that hinder the
development of Green Banking, thus hindering sustainable economic growth, this
is in line with research conducted by Akter (2021) High operating costs, diversification issues, and
credit risk are the main challenges to the development of Green Banking in
Indonesia, this is in line with research conducted by (Ngwenya & Simatele, 2020). Research conducted Sarker (2020) states that banks must take a significant role
related to climate change through green banking.
In 2021, 4 major banks such as PT Bank Mandiri, PT Bank Negara Indonesia, PT Bank Rakyat
Indonesia, and PT Bank Central Asia provided funding for coal projects. The
total funding provided is Bank Mandiri of 36
trillion, Bank BNI of 27 trillion, Bank BRI of 26 trillion, and Bank BCA of 12
trillion (CNI Indonesia, 2022). As the driving force of the country's economy,
banks are required to make an optimal contribution by transforming their behavior and activities (Rehman et al., 2021). Therefore, it is expected that banks can increase
attention to project financing that is oriented towards improving the quality
of the environment, such as making disclosures related to accountability for
environmental-related issues considering that there are still few banks that
care about sustainability issues.
Research related to Green Banking Activity, green
financing, and banking environmental performance is still very rare, especially
in Indonesia because the Green Banking issue is a recently discussed issue and
some parties have not seen Green Banking as a priority. Research related to
Green Banking has only been conducted in several countries such as Bangladesh Zhang (2022), Rehman, (2021), Africa Ngwenya (2020), and China (Zhou et al., 2020). However, most
research related to Green Banking and banking environmental performance is
quite a lot in Bangladesh and China. Based on research Zhang (2022), Bangladesh Bank is considered the first bank in
the world central bank to promote Green Banking activities through the issuance
of Green Banking guidelines.
Green Banking research in Indonesia is still very
limited, which is due to Awareness of environmental issues and sustainable
banking practices may still be limited in Indonesia compared to more developed
countries in this regard and Most research in Indonesia may be more focused on
more pressing economic issues, such as poverty, unemployment, and other social
problems, this could be the reason why Green Banking has not been the center of significant research attention. This this study
will fill the research gap that will examine "The Effect of Green Banking
Activities on the Environmental Performance of Banks Listed on the Indonesia
Stock Exchange (Green Financing as a Mediating Variable)".
RESEARCH
METHOD
This research is quantitative research with a descriptive format. The
data used in this study are primary data obtained from questionnaires
distributed to respondents. The data collection method used is to use a
questionnaire distributed to bankers or banking employees. The questionnaire
distributed contained 3 parts of questions sourced from research. The three
parts of the questionnaire are questions related to Green Banking Activities,
Green Financing Sources, and Banking Environmental Performance. The
questionnaire questions used a Likert scale of 1 to 5. The population in this
study were banking employees who worked at commercial banks listed on the SRI
KEHATI Index. In this study, the issuers used were only 5 banking issuers
consisting of BBCA, BBRI, BMRI, BBNI, and BBTN. This research uses the
Structural Equation Model (SEM) with the PLS program.
RESULT AND DISCUSSION
This chapter will discuss the results of research
conducted by researchers including respondent demographics with descriptive
statistical analysis, measurement model analysis, structural model analysis, as
well as discussion of hypothesis testing results and mediation test results.
Table
1. Respondent Profile
|
Variables |
Description |
Number of Respondents |
Percentage (%) |
|
Gender |
Female |
61 |
39.1 |
|
Male |
95 |
60.9 |
|
|
Age |
18-25 Years |
6 |
3.8 |
|
26-35 Years |
55 |
35.3 |
|
|
36-45 Years |
38 |
24.4 |
|
|
Over 46 Years |
57 |
36.5 |
|
|
Education Level |
Bachelor (S1) |
142 |
91.0 |
|
Master (S2) |
14 |
9.0 |
|
|
Doctor (S3) |
0 |
0 |
|
|
Working Institution |
BRI Bank |
31 |
19.9 |
|
BCA Bank |
31 |
19.9 |
|
|
BNI Bank |
30 |
19.2 |
|
|
BTN Bank |
34 |
21.8 |
|
|
Bank Mandiri |
30 |
19.2 |
|
|
Work Experience |
Less than 2 years |
3 |
1.9 |
|
3-5 Years |
29 |
29.0 |
|
|
More than 5 years |
124 |
7.0 |
Source: (Data Processed SPSS, 2024)
Table 1. provides information related to the
demographics of respondents collected in this study totaling 156 respondents.
The characteristics of respondents based on gender in table 1. show that
respondents in this study were mostly dominated by male respondents, namely
60.1% of respondents. The characteristics of respondents based on age show that
most of the respondents were dominated by respondents aged more than 46 years,
namely 36.5% of respondents. Furthermore, the characteristics of respondents based
on education level, most of the respondents who answered had an undergraduate
education level of 91% while employees with a Masters education level were 9%.
In this study, all respondents were employees of 5
banks listed on the SRI KEHATI issuer and each bank was sampled with a minimum
of 30 employees including Bank BRI and BCA each by 19.9%, Bank BNI and Mandiri
19.2%, and Bank BTN by 21.8%. Finally, in the characteristics of respondents
based on the length of work experience, most of them were answered by
respondents who had worked above 5 years by 79%, 3-5 years by 18.6%, and less
than 2 years only 1.9% of respondents.
Data
Analysis Test Results
Outer Model Output
Figure
2. Outer Model Results
Source:
SmartPLS 3.2.9 Output
a.
Convergent Validity
Based on the
picture above, it can be seen that all indicators are greater than the 0.7
criterion, meaning that all indicators of this research variable pass the
convergent validity test.
b. Discriminant
Validity, CR, and Cronbach's Alpha
The
following are the results of the Discriminant Validity, CR, and Cronbach's
Alpha tests which will be explained in table 2:
Table
2. Discriminant Validity, CR, and Cronbach's Alpha Test Results
|
|
Cronbach's Alpha |
rho_A |
Composite Reliability |
Average Variance Extracted (AVE) |
|
Green Banking (X) |
0.935 |
0.937 |
0.948 |
0.721 |
|
Green Financing (Z) |
0.912 |
0.912 |
0.938 |
0.791 |
|
Bank Environmental Performance (Y) |
0.909 |
0.910 |
0.943 |
0.846 |
Source: SmartPLS
3.2.9 Output Data Processed, 2024)
Based on table 2, all
variables have an Average Variance Extracted (AVE) value> 0.5 so that it can
be stated that all variables meet the Average Variance Extracted (AVE)
requirements and passed the discriminant validity test. The composite
reliability value is> 0.7 so that it can be stated that all variables meet
the requirements of the composite reliability test. Cronbach alpha value>
0.7 so it can be concluded that all statements are reliable, meaning that they
can consistently be trusted to be used in research.
Hypothesis
Test Results
In this study,
there are direct effects and indirect effects which are explained in the
explanation below.
a. Direct
Influence
|
|
Original Sample (O) |
Sample Mean (M) |
Standard Deviation (STDEV) |
T Statistics (|O/STDEV|) |
P Values |
Result |
|
Green Banking (X) -> Bank Environmental Performance (Y) |
0.378 |
0.379 |
0.093 |
4.071 |
0.000 |
Supported |
|
Green Banking (X) -> Green Financing (Z) |
0.754 |
0.758 |
0.040 |
18.723 |
0.000 |
Supported |
|
Green Financing (Z) -> Bank Environmental Performance (Y) |
0.533 |
0.532 |
0.113 |
4.714 |
0.000 |
Supported |
Source:
SmartPLS 3.2.9 output processed, 2024
Hypothesis 1: The test results show a
t-statistic value of 4.071 and a P-value of 0.000. From these results, it is
stated that the t-statistic is significant because the t-statistic is greater
than the t-table> 1.96 with a p-value <0.05 so that the first hypothesis
is supported.
Hypothesis 2: The test results show a
t-statistic value of 18.723 and a P-value of 0.000. From these results, it is
stated that the t-statistic is significant because the t-statistic is greater
than the t-table> 1.96 with a p-value <0.05 so that the second hypothesis
is supported.
Hypothesis 3: The test results show a
t-statistic value of 4.714 and a P-value of 0.000. From these results, it is stated
that the t-statistic is significant because the t-statistic is greater than the
t-table> 1.96 with a p-value <0.05 so that the third hypothesis is
supported.
b.
Mediation Test Results
The
results of the Mediation Test in this study are as follows:
Table
4. Mediation Test Results
|
|
Original Sample (O) |
Sample Mean (M) |
Standard Deviation (STDEV) |
T Statistics (|O/STDEV|) |
P Values |
Result |
|
Green Banking (X) ->
Green Financing (Z) -> Bank Environmental Performance (Y) |
0.402 |
0.402 |
0.087 |
4.642 |
0.000 |
Supported |
Source:
SmartPLS 3.2.9 Output Data processed, 2024
Hypothesis
4: Based on the analysis results, the P-value <0.05. So it can be concluded
that green financing is able to mediate the effect of green banking on
environmental performance and the fourth hypothesis is supported.
The results of
data testing on the first hypothesis which states that Green Banking Activities
affect the environmental performance of banks listed on the Indonesia Stock
Exchange are supported. This is in line with research
The second
hypothesis which states that Green Banking Activities affect Green
Financing in banks listed on the Indonesia Stock Exchange is supported,
this is proven after the data test results are carried out. This is in line
with research conducted by
The results of the
data analysis test show that the third hypothesis in this study is supported
where Green Financing is able to influence the environmental performance of
banks listed on the Indonesia Stock Exchange. This is in line with previous
research that has been researched by�
The results of the
data test on the fourth hypothesis of this study which states that green
financing is able to mediate the effect of green banking on the environmental
performance of banks listed on the Indonesia Stock Exchange are supported.
Green financing can be a mechanism that connects Green Banking commitment with
real implementation through financing green projects (Khairunnessa et al., 2021). The results of
this study are in line with the research of
CONCLUSION
This study investigates the
effect of Green Banking activities on the environmental performance of banks
listed on the Indonesia Stock Exchange, with Green Financing as a mediating
variable. The results of this study provide strong evidence of the positive
effect of Green Banking activities on the environmental performance of banks
listed on the Indonesia Stock Exchange. The concept of Green Banking, which
involves the integration of environmental factors in banking policies and
operations, as well as Green Financing as a mediating variable, plays an
important role in achieving sustainable development. The implementation of
green practices, such as the reduction of greenhouse gas emissions, efficient
waste management, and the use of renewable energy, can help banks reduce
negative environmental impacts and manage risks related to climate change or
environmental policies.
The research also emphasizes
the importance of synergies between green banking and green financing. Greater
financial support for sustainable development projects and environmental
initiatives through Green Financing can strengthen green practices within the
banking sector. In the context of Indonesia, with its influential economic
growth rate, this research provides a basis for banks to implement better Green
Banking practices and contribute positively to environmental protection.
Although research in Indonesia is still limited, the results of this study
provide a better understanding of the importance of Green Banking in achieving
sustainable development. The implications of this research are important for
banks in adopting more extensive green practices and realizing their social and
environmental responsibilities.
Based on the above
conclusions, the findings of this study provide several implications for
researchers, managers, bankers, government authorities, banking institutions,
and investors in Indonesia to stimulate green banking through green project
financing to improve banks' environmental performance. Therefore, banking
authorities should focus more on developing Green Banking activities in daily
operations by providing online banking facilities, online bill payment
facilities, remote deposit, mobile banking, environmentally friendly debit and
credit cards, etc., to improve banking performance, environmental performance,
as well as profitability.
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