Green Finance in Banks: Addressing Climate Risks and Enhancing Economic Resilience

Abstract

Green finance has emerged as the cornerstone of modern banking, in which financial operations are aligned with the imperatives of climate risk mitigation and sustainable economic development. This paper investigates the various roles that banks play in the transition to green finance, emphasizing the integration of environmental considerations into financial practices to address systemic climate risks and bolster economic resilience. Employing a mixed-methods approach, including quantitative data analysis and case study reviews, this study explores the effectiveness of green financial instruments such as green bonds and sustainable loans in mitigating environmental risks. The findings also reveal that the adoption of green finance not only brings about a reduction in the negative, sudden effects of climate disruptions but also contributes to more stability in the long-term sustainability of banking institutions. The paper further emphasizes regulatory frameworks and policy actions as the main drivers that accelerate the movement toward greener financial practices. Despite the progress so far, a number of challenges remain, including an inconsistent regulatory landscape, limited expertise, and huge investment required for capacity building. This research therefore highlights the need for the inclusion of green finance approaches within the operational frameworks of banks and provides recommendations that are actionable to enhance their resilience against climate-induced vulnerabilities. The study contributes to the ongoing discourse on sustainable banking, presenting evidence-based insights that serve as a guide for policymakers, banking institutions, and stakeholders committed to achieving global sustainability objectives.