International Journal of Sustainable Development and

Planning
Vol. 19, No. 5, May, 2024, pp. 1989-1997
Journal homepage: http://iieta.org/journals/ijsdp

Green Finance Practices by Nepalese Commercial Banks: Fostering Sustainable

Development in Nepal
Mohan Bhandari1* , Ghanashyam Tiwari2 , Maheshwor Dhakal1 , Surya Bahadur G. C.2
1
Gupteshwor Mahadev Multiple Campus, Faculty of Management Studies, Tribhuvan University, Pokhara 33700, Nepal
2
School of Business, Faculty of Management Studies, Pokhara University, Pokhara 33700, Nepal
*
Corresponding Author Email: [email protected]

Copyright: ©2024 The authors. This article is published by IIETA and is licensed under the CC BY 4.0 license
(http://creativecommons.org/licenses/by/4.0/).

https://doi.org/10.18280/ijsdp.190538 ABSTRACT

Received: 25 January 2024 Intending to integrate environmental, social, and governance (ESG) issues into financial
Revised: 30 March 2024 choices, the global financial landscape has changed its growing pressure for sustainable
Accepted: 12 April 2024 development. Recently, green finance practices are gaining popularity as a key strategy in
Available online: 29 May 2024 many countries in the world. However, Nepal, which is renowned for its natural beauty, suffers
from several environmental issues. For instance, international initiatives, of the sustainable
development goals (SDGs) of the United Nations (UN), emphasize the alignment of financial
Keywords: flows with sustainable development. The study has adopted a qualitative research method to
environmental issues, green finance, investigate the practices and barriers preventing Nepalese commercial banks from
commercial banks, sustainable implementing green finance practices. This study reveals the complex issues specific to Nepal
development goals through in-depth interviews with senior executives, risk managers, and sustainability officers.
The findings of the study demonstrate several obstacles such as the implementation of
regulatory framework, few green investment opportunities, perceived financial risks, a lack of
knowledge and experience among banking professionals, and the requirement for strong
institutional support and leadership commitment. To get rid of these barriers, it is
recommended that Nepal’s commercial banks embrace green finance practices widely, fit into
the nation's sustainable development objectives and support global environmental efforts.

1. INTRODUCTION of environmental, social, and governance (ESG) standards in

credit assessments to advance sustainable growth and mitigate
Green finance practices by Nepalese commercial banks are ecological footprints. Among financial institutions, there is a
crucial in advancing sustainable development in Nepal. new idea known as "green banking", which emphasizes both
Through the incorporation of environmental, social, and environmental preservation and sustainable development.
governance (ESG) factors in their investment choices, banks Although it is still in its early stages in many parts of the world,
can direct capital towards environmentally friendly initiatives several researchers [5, 6] have acknowledged its significance.
such as renewable energy, waste management, and sustainable Prior researcher [7] propose that green banking acts as a bridge
agriculture. The global financial landscape has undergone a between economic progress and environmental preservation
significant transformation towards the incorporation of [6]. Prior study [8] state that sustainable services can further
environmental, social, and governance aspects into financial support the advancement of green banking. As a result, banks
decision-making in the face of mounting environmental are now viewing green banking as a means to address
concerns and the growing urgency for sustainable emerging environmental challenges and fulfill their corporate
development [1]. The adoption of green finance practices has social responsibility [6]. Green finance not only helps to
drawn attention as a key strategy as countries strive to balance alleviate environmental harm but also stimulates economic
economic growth and environmental preservation [2]. The progress and societal welfare. Furthermore, the promotion of
term "green finance" refers to a variety of financial tools, green finance strengthens banks' ability to withstand climate-
approaches, and services that direct funding to businesses and related risks while appealing to ethically conscious investors.
projects that are good for the environment, while also On a broader scale, this approach not only contributes to the
considering their long-term sustainability and societal benefits safeguarding of the planet but also aligns with the goals of
[3]. Nepalese financial institutions conceptualize green sustainable development [9]. However, the adoption of green
finance as the facilitation of monetary instruments and finance practices remains intricate, often encountering barriers
services that bolster ecologically viable initiatives. Such that impede their effective implementation. Ultimately, these
initiatives encompass funding directed towards renewable endeavors play a significant role in Nepal's shift towards a
energy, sustainable farming, and energy-efficient innovations more environmentally conscious and sustainable future, in line
[4]. Furthermore, this concept encompasses the incorporation with international endeavors to address climate change and

1989
realize the sustainable development goals. banks from implementing green finance practices.
According to the UNDP, sustainable green finance aims to Policymakers, stakeholders, and banking institutions can
boost the flow of financial investments into projects and develop focused initiatives to hasten the adoption of green
initiatives for sustainable development, environmental goods finance concepts in the Nepalese financial sector by being
and services, and policies that support the growth of a more aware of these challenges [3, 16].
circular economy, green economy, and sustainable economy This qualitative study tries to answer the following research
[3]. The green finance industry has recently grown in both questions as:
public and commercial sectors [10]. This can be ascribed to • What is the current status of implementation of regulatory
several events, such as the 2015 passage of the Paris framework on green finance in Nepal?
Agreement and a strong investor push for sustainable green • What are the prioritized areas of green investment of
investments, all of which have strengthened the business case Nepal Rastra Bank that align with sustainable
for green finance. Investments in environmentally friendly development goals and how such areas are considered by
industries such as renewable energy, are becoming Nepalese commercial banks as green finance
increasingly competitive, and it is now well understood that opportunities?
they also contribute to sustainable development. • How do Nepalese commercial banks mitigate the
This recent development in eco-friendly finance can be financial risk regarding the green finance?
credited to institutions and rich nations that have developed • How commercial banks are aware about challenges of
financial systems [11]. China was a pioneer in greening its green finance?
economic and financial system among emerging markets and
has since grown to be one of the largest global markets for
green finance, as evidenced by its part of the green bond 2. LITERATURE REVIEW
market and the potential of the enormous carbon emission
trading market, which is anticipated by the UNDP [3], to be The United Nations' sustainable development goals (SDGs)
the largest emission trading system (ETS) in the world. South are difficult for developing nations to meet. They frequently
Asian nations, such as Bangladesh and India, have made lack the institutional support, funding, and technological
progress on a regional level, and markets in the ASEAN region means necessary to strike a balance between environmental
are also expanding. According to this theory, financiers, preservation and economic progress. Investments in
governments, and investors worldwide are realizing the renewable energy, energy efficiency, clean technology,
enormous potential of opening up green and climate-resilient sustainable agriculture, and infrastructure are the main goals
investment opportunities in emerging economies [10]. Nations of green financing. By assisting these industries, green finance
have the opportunity to remove obstacles and draw funding for contributes to the SDGs' achievement in developing nations by
initiatives with social and environmental safeguards at their establishing a link with a sustainable, profitable future. The
core. adoption of green banking practices in the banking sector has
Nepal, a nation characterized by its rich natural heritage and become a significant topic of interest worldwide, driven by
biodiversity, is no exception to these global sustainability growing recognition of the importance of sustainable
imperatives [12]. Numerous environmental issues, including development and environmental responsibility [17]. Prior
deforestation, pollution, and vulnerability to climate change, research [12], state that comparing the banking sectors with
exist in the nation. Global initiatives, such as the Sustainable the non-banking sectors, the former plays a considerably larger
Development Goals (SDGs), emphasize the importance of role and is responsible for the Nepali Financial System. The
matching financial flows with sustainable development banking industry is governed by the Nepal Rastra Bank, the
trajectories while acknowledging the crucial role that financial country's central bank, which also grants limited banking
institutions play in promoting sustainable growth. Commercial privileges to co-operatives and non-governmental
banks, as the main players in the financial sector, have a organizations (NGOs) [18]. In Nepal, banks and financial
crucial obligation to adopt and promote green finance institutions are categorized into four classes commercial
practices to speed up the shift to a more sustainable economy banks, development banks, finance business companies, and
[13]. micro financial institutions of classes A, B, C, and D,
Despite the need for green finance adoption, Nepalese respectively. However, cooperative organizations and NGOs
commercial banks have only recently begun to switch. no longer receive operational licenses from the NRB. The
Institutional, legislative, cultural, and economic hurdles Insurance Board is responsible for overseeing the insurance
combine to produce an environment that makes it difficult for industry and only one of the securities regulators, the Security
certain practices to be adopted [6]. A comprehensive Board of Nepal (SEBON), is responsible for regulating all of
exploration of these barriers and their underlying causes is the listed companies in Nepal. Other major financial
paramount for facilitating a smoother integration of green organizations, such as the Employees Provident Fund, Citizen
finance practices into the banking sector. Investment Trust, and Postal Saving Banks also exist in Nepal
The banking industry is increasingly focusing on green under their specific acts in Nepal [19]. The Nepalese
finance practices because of the worldwide trend towards government has authorized several frameworks and
sustainable development. Green finance refers to investments regulations to aid in this transition because it understands the
and financial services that support ecologically and socially significance of addressing climate change, sustainable
responsible projects, thereby assisting in the reduction of development, and the green economy. The Nepal National
greenhouse gas emissions and the promotion of sustainable Planning Commission, National Climate Policy [20].
development [14]. Despite the growing recognition of the Sustainable development goals status and roadmap 2016-2030
importance of green finance, its adoption in developing are also encouraging green investment projects, and
economies such as Nepal has been relatively slow [15]. This committed to the protection of environmental issues [3]. Some
study also examines the obstacles preventing commercial of Nepal’s sustainable development goals such as food

1990
security and sustainable agriculture (SDG2), water embrace green banking technologies. Green financing policies
management (SDG6), access to clean energy (SDG7), are required to promote a cleaner environment and maintain
sustainable economic growth (SDG8), resilient infrastructure macroeconomic stability it has positive effects on pollution
(SDG9), sustainable cities and forests (SDG11), and climate reduction and GDP [30].
change (SDG15), are closely related to sustainable banking Green policy and environmental training for the employees
through the green finance and investment [16]. Nepal is have a notable influence on a bank's environmental
exceptional because investing in green projects is a common performance. There is a statistically significant positive
practice in the energy sector. This is because of the increasing relationship between green banking practices, green
number of green industries, hydropower, renewable energy, investment and the bank's environmental performance [31].
etc. However, it is still essential to seize the opportunity to Banks' investment decisions in green projects have a positive
create an integrated sustainable green financing system so that effect of environmental performance [32]. Factors like
all economic sectors can progress along green lines while environmental interest and policy guidelines influence green
considering sustainable development goals. This is crucial banking adoption. Stakeholder pressure is associated with
because Nepal's existing green finance development is modest green banking adoption [33]. Sustainable banking practices
and falls short of meeting its investment needs and taking improve brand value, image, and competitiveness. Reduced
advantage of green investment opportunities. transaction costs and higher profitability also reduce
The best way to understand the obstacles to green finance corruption and encourage economic opportunities in at-risk
promotion in Nepal is to take a two-specific approach that groups [34]. Consumer awareness about green banking in
includes general financial obstacles and green finance-specific India is lacking in India it need to enhance green banking
obstacles. Regulators must address both obstacles in their initiatives for sustainability [35]. Indian banks exhibit sluggish
policies and practices and promote investment behaviors. reaction to environmental programs due to the absence of
Banks and financial institutions play a crucial role in regulations and fear of financial loss [36]. Banks are motivated
promoting such investment behaviors maximizing optional by environmental and social demands to adopt sustainable
capital flows in priority areas, and contributing to national and practices. Prominent banks must acknowledge their
international markets in green financing [11]. Previous studies worldwide corporate duties.
have highlighted several key challenges in the adoption of The literature on green finance barriers primarily focuses on
green finance practices in various contexts. Regulatory developed economies, there is a lack of comprehensive
constraints and the absence of a supportive policy framework research in developing countries, particularly Nepal. This
have been identified as significant obstacles [21]. In the study aims to fill this gap by investigating the specific barriers
Nepalese context, the lack of implementation of guidelines and commercial banks face in adopting green finance practices.
incentives for green finance could inhibit its adoption in the
banking sector [6, 13].
The availability of green investment opportunities is 3. MATERIALS AND METHODS
another crucial factor in adopting green finance practices.
Several studies have emphasized that the limited availability This research endeavor utilizes a qualitative research
of viable green projects can hinder banks' willingness to methodology in order to investigate deeply and
engage in green financing [7, 22]. In Nepal, the renewable comprehensively into the various obstacles hindering the
energy sector offers promising avenues for green investments uptake of environmentally-friendly financial practices by
[19]. However, it is essential to explore whether commercial commercial banking institutions. The primary objective of this
banks can leverage these opportunities effectively. The study is to precisely pinpoint the specific regulations,
financial risks associated with green investments have been a strategies, and their coherence with the overarching goal of
recurring concern [18]. Commercial banks may perceive green sustainable development, a relatively emerging idea in the
projects as riskier because of unfamiliarity with these ventures dominion of financial sustainability in the context of Nepal.
and uncertainties in the regulatory environment [23]. Qualitative research is particularly suited for exploring
Addressing these risk perceptions is crucial for fostering green complex and context-specific issues, such as the challenges
finance practices in Nepalese banks. faced by banks in developing countries, such as Nepal [37].
Moreover, the level of awareness and understanding of Semi-structured interviews were conducted with key
green finance among banking professionals can influence its stakeholders from commercial banks in Nepal. The population
adoption. Studies have shown that a lack of awareness and comprises senior executives and risk managers from Nepalese
inadequate training can impede the integration of commercial banks. In order to ensure a diverse range of
environmental considerations into banking practices [24-26]. experiences and perspectives on green finance practices,
Exploring Nepalese banking professionals’ knowledge and purposive sampling was utilized. In Nepal, commercial banks
perceptions regarding green finance will provide valuable are classified based on their ownership structure, including
insights into this aspect. A sustainable finance model has a government-owned, joint-venture, and private commercial
positive effect on social, environmental, and economic banks. Six participants, two from each category of commercial
sustainability. It is closely connected to the attainment of banks in Nepal, were equally represented. These participants
SDGs in European Union nations [27]. The public sector's included a senior executive and a risk manager from each of
significant involvement in funding sustainable development the sampled banks, who are directly involved in financial risk
therefore collaboration between public and market financial management and sustainable practices within the commercial
systems is essential for sustainability. Mandatory regulations banking sector. Pseudonyms were assigned to the participants
are effective for promoting sustainable finance investments in the results section.
[28]. Green banking initiatives improve customer trust and The interview protocol was designed to cover a wide range
brand image. Indian banks encounter obstacles in adopting of topics related to green finance, including regulatory
green practices [29]. Highly educated individuals tend to frameworks, green finance practices and availability of green

1991
investment opportunities, financial risk perceptions while mandatory compliance with green finance in Nepal. The bank
adopting green finance, awareness levels and challenges of does not incorporate green finance priorities into its core
green finance in Nepal. The questions were open-ended, business strategies. Harikrishna stated, “There is proper
allowing the participants to provide detailed insights and implementation of specific policies and regulatory support for
elaborate on their views. In the beginning, the researcher green finance as per the demand of rules and regulations. But
explained the purpose, procedure, confidentiality, risks and only limited financial institutions are motivated to increase
benefits, withdrawal, and contact information to the their investment voluntarily."
participants. Sufficient time was given to the participant to The voluntary initiation for green finance in Nepal has been
read and understand the information. When the participants cited as a significant hindrance. Participants emphasized the
agreed and signed in consent form a copy of the form was importance of the voluntary initiations and incentives to
provided to them for their records. Finally, the participants encourage and implement the adoption of green financial
were voluntarily involved in the interview. practices. This finding align with researchs [28, 29, 36]. Nepal
Thematic analysis was used to analyze the interview data. Rastra Bank circulated by its monetary policy to manage their
The transcripts were carefully reviewed to identify recurring investment portfolio with the target of 15 per cent of total
themes and patterns regarding barriers to green finance credit to their agriculture sector, 10 percent in energy, and 15
adoption by commercial banks. This iterative process involves percent in small, micro and medium enterprises [38].
coding data, categorizing codes into themes, and refining the
thematic framework. To enhance the validity of the findings, 4.2 Green finance practices and availability of green
triangulation was employed by cross-verifying the data from investment opportunities
multiple participants and comparing their perspectives. To
ensure reliability, the research process was thoroughly Participants also emphasized that the scarcity of viable
documented, and the researchers engaged in regular green projects hindered their ability to engage in green
discussions to enhance consistency and minimize bias. This financing. While Nepal's renewable energy sector showed
study adhered to the ethical guidelines for collecting opinions potential, participants felt that there were limited opportunities
by ensuring the privacy and confidentiality of the participants. to meet the criteria for green investments. Ganesh,
Informed consent was obtained from all participants before Ramchandra, and Ramesh mentioned, "We want to invest in
conducting the interviews, and they were assured of the green projects, but there are not enough well-structured
voluntary nature of their participation. The research was opportunities. We need more projects that align with our
conducted with utmost respect for the ethical principles of sustainability goals”.
research involving human subjects. The financial risks associated with green investments were
a concern for the participants. Unfamiliarity with these
projects, combined with uncertainties in the regulatory
4. RESULTS environment, led some banks to perceive green financing as
riskier than conventional financing. Sakuntala and Ramesh
The aim of this research centers on examining the green explained, "There is a perception that green projects might be
finance framework that aligns with the sustainable riskier, especially if we're not familiar with the technology or
development goals as adopted by Nepalese commercial banks. the long-term viability of these initiatives." Unfamiliarity with
The objectives of the qualitative analysis include gaining green projects coupled with uncertainties in the regulatory
insights into the current state of implementation of regulatory environment leads some banks to perceive green financing as
frameworks for green finance in Nepal, exploring the priority riskier than conventional financing. This perception affected
areas for green investments outlined by Nepal Rastra Bank in their willingness to embrace green finance. This finding is
line with sustainable development goals, determining the supported by prior researches [31, 32, 34, 39].
financial risk perceptions held by Nepalese commercial banks
regarding green finance, and assessing the challenges 4.3 Financial risk perceptions on green finance
perceived in the realm of green finance. Through in-depth
interviews with key stakeholders, including senior executives, In response to perceived risks, participants expressed the
risk managers, several prominent themes emerged, shedding need for strategies to mitigate these risks in green investments.
light on the challenges faced by these banks in integrating Ramesh and Harikrishna suggested that “We need
green finance into their operations. The result section is collaborative efforts with other financial institutions, share
classified based on implementation of regulatory frameworks, best practices, and explore partnerships with experienced
green finance practices and availability of green investment green finance organizations to reduce risks associated with
opportunities, alignment with sustainable development goals green projects”. The participants suggested various strategies
(SGDs), awareness levels and challenges of green finance in to mitigate the risks associated with green investments.
Nepal. Collaborative efforts with other financial institutions, sharing
best practices, and forming partnerships with experienced
4.1 Regulatory frameworks implementation green finance organizations are recommended to reduce
uncertainties associated with green projects. This finding is
Green finance practices in Nepal are currently in the supported by the result of studies [34, 39] in several countries.
evolution phase. The participants argue that green finance
policies are circulated by Nepal Rastra Bank consisting of the 4.4 Align with sustainable development goals (SGDs)
mandatory provision of corporate social responsibility (CSR)
and investing in clean and renewable energy. A significant In response to the sustainable development goals,
barrier identified by the participants was the absence of a participants expressed that banks are knowing or unknowingly
voluntary implementation regulatory framework rather than prioritizing the lending policies towards clean energy,

1992
sustainable agriculture, and environmental screening before finance. Some respondents felt that a clear commitment from
lending, especially in infrastructure development. The top management was essential for driving green finance
sustainable officers of the commercial state that “Banks are in initiatives. Both Ganesh and Sakuntala stated, "We need
compliance status of green investment," similarly managers leadership that's fully committed to green finance. Without the
argue that before investing in projects or managing their backing of top management, it is challenging to make
portfolio, they strictly adhere to the regulators' substantial changes.” The importance of strong institutional
recommendations. Banks are maintaining their investment support and a culture that prioritizes green finance have
portfolios in areas such as agriculture, health, society, and emerged as barriers. Participants stressed the significance of
hydropower projects. A modest amount of credit is supplied to committed leadership at the management level to drive green
the target demographic through corporate social responsibility finance initiatives within banks. A clear commitment from top
(CSR) and microfinance. All banks and financial management is essential to bring about substantial changes.
organizations must set aside a particular percentage of net Several important topics emerged from a qualitative inquiry
earnings for their CSR funds, according to the instructions into the impediments to the adoption of green finance practices
from Nepal Rastra Bank. The participants also argue that green by commercial banks in Nepal.
finance practices strive to attain the broader objectives of
sustainable development in the nations and position the
roadmap of sustainable development goals. This findings is 5. DISCUSSION
aligned with the findings in studies [27, 30, 39, 40] in
developing and developed countries. Financial risk perceptions were a recurring concern in the
literature review, and the participants in this study shared
4.5 Awareness levels and challenges of green finance in similar sentiments. Unfamiliarity with green projects and
Nepal uncertainties in the regulatory environment contribute to
banks' perceptions of the increased risks in green financing.
Sumina adds that “the lack of expertise and insufficient This aligns with previous studies emphasizing the need to
efforts to improve the capabilities of financial institutions and address these risk perceptions to promote green finance [23].
stakeholders in the field of green finance has been a significant The results also highlight the necessity for awareness and
challenge.” This has resulted in commercial banks being expertise among banking professionals, which was identified
unable to effectively maintain a green finance portfolio. as a significant barrier in the literature review. The participants
Sajan states that “there is no proper outlined environmental expressed the need for better training and education on green
standards further compounds this issue, it becomes difficult for finance principles and practices. This underscores the critical
financial institutions to assess and implement sustainable role of capacity-building initiatives in facilitating the
practices.” The current system lacks adequate rewards and integration of environmental considerations into banking
infrastructure in financing sites for beneficial impacts and fails operations [24, 26]. Institutional support and a culture that
to impose sufficient penalties for negative consequences. This prioritized green finance were highlighted by the participants,
creates a disincentive for financial institutions to actively echoing the need for leadership commitment identified in the
engage in green finance practices and hinders the growth of literature review. Top management's dedication is considered
environmentally friendly initiatives. Consequently, there is a essential for driving green finance initiatives, emphasizing the
pressing need to address these shortcomings and enhance the role of organizational culture in overcoming barriers (Ganesh
capacity of financial institutions and stakeholders in the realm and Sakuntala). In response to green banking to reduce risk,
of green finance through comprehensive training programs, enhance sustainable banking with long-term stability, and
knowledge-sharing platforms, and regulatory measures that align with sustainable development goals (SDGs) in the
promote responsible and sustainable financing practices. The nation. Commercial banks' development through an
finding from this qualitative investigation aligns with studies understanding of their stakeholders' needs, and provides some
[31, 36]. The scarcity of well-structured and viable green recommendations for the banks' future course, including
projects poses a challenge for banks seeking to engage in green enticing more sustainable talent to support banks' operations,
financing. While there is potential within Nepal's renewable providing a wider variety of sustainable financial products in
energy sector, limited opportunities to meet the criteria for numerous sectors, upgrading the credit system to engage more
green investments hinder banks' ability to actively participate SMEs and the general public, and continuing to strengthen
in sustainable initiatives. This study revealed that a lack of sustainable finance [41]. Banks and the financial sectors have
awareness and expertise in green finance among banking begun to take climate change risks into account and align
professionals was a significant barrier. Sakuntala, Ganesh, and themselves with sustainable development objectives [28].
Harikrishna mentioned that “The teams needed better training Therefore, adopting green banking goes beyond simply being
and education on green finance principles and practices. We more environmentally friendly, because it also has benefits for
need to enhance employees' understanding of green finance. the bank, such as a reduction in risk and cost, an improvement
Without a well-informed team, it is challenging to implement in the bank's reputation, and a contribution to the common
these practices effectively." A significant challenge is the lack good of the environment [33]. Green banking helps the bank's
of awareness and expertise in sustainable green finance among business goals, in addition to its corporate social in a complete
banking professionals. Participants highlighted the need for approach. To achieve the goals of sustainable development,
better training and education to enhance employees' green technology must be financed with green money. Current
understanding of green finance principles and practices, financial markets are anticipated to devote savings to
thereby enabling more effective implementation of sustainable programs utilizing leading-edge green technologies that will
financial initiatives. help limit the rate of environmental damage [30]. It can be seen
The participants highlighted the importance of strong that the pool of financing is still matched with projects that are
institutional support and a culture that prioritizes green ecologically destructive and worsen the current conditions

1993
despite the environment's rapid decline and numerous green environment by inspiring investment into
attempts. environmentally friendly projects [32], and promoting
Green banking emphasizes eco-friendly products and environmentally friendly technologies by banks. The
services that are responsible for social well-being and government is crucial for improving banks' standing and
environmental protection. It consists of green loans, finance, consumers' awareness [31]. Considering the prior study, the
CSR, Internet banking, and network communications [29]. current leadership and academic research in this field play
Participants responded that the Nepalese banking sector was important roles in motivating banking sectors, regulators, and
required to improve training, education, green finance investors to bolster green financing practices [40]. In the
principles, and practices for better adoption of green banking financial sector, such as commercial banks, improving the
practices. Further improvement of regulatory support for green green regulatory framework with the collaboration of all
finance is essential for improving green banking initiatives. stakeholders may contribute to achieving the required
The result supports the statement that a lack of awareness and sustainable goals [29].
education about green banking [29, 35] impacts its initiation. The findings also support various prior studies on the
To encourage banks and financial institutions to make promotion of sustainable development of green banking
compulsory investments while considering environmental practices. Previous researcher [39] argues that there are
issues, usage of relevant technologies, and management different levels of economic development and inequality
systems, banks and regulators should play a proactive role in across a range of economic, sociocultural, and institutional
incorporating social and ecological factors into their lending frameworks. The study suggests that sustainable banking can
principles. Banks subject to regulatory body mandates must be help overcome inequality traps that arise from market failures
aware of sustainability issues and adhere to international in the environmental, social, and governance (ESG) domains
standards and frameworks to improve green banking practices in societies with poor rule of law. Based on ESG principles,
[36]. Businesses and customers have no interest in green Sustainable banking encourages two-way trust between
banking, making it difficult for them to access the financing lenders and borrowers, which strengthens underperforming
offered by banks. Therefore, investment intermediaries should institutions, advances equitable opportunities, and creates
invest in technological innovation by promoting green jobs bidirectional trust between lenders and borrowers,
and developing competitive advantages, and governments supplementing weak institutions, promoting equal
should develop promoting and incentive policies such as tax opportunities, and fostering sustainable development. This
benefits soft loan schemes and so on [7]. study supports the findings [27], that the awareness and
The findings of this qualitative investigation align with and attitude of bank managers are positive in their banking system
provide further insights into the existing literature on the towards sustainable banking practices, green investment, and
barriers to the adoption of green finance practices in the sustainable development.
banking sector. The results confirm several key barriers Additionally, participants' suggestions for risk mitigation
identified in the literature review while shedding light on the strategies, such as collaboration with other financial
specific challenges faced by commercial banks in Nepal. The institutions and sharing best practices, are consistent with the
absence of a clear regulatory framework has emerged as a literature's emphasis on knowledge sharing and partnerships to
significant barrier to both the literature review and results. reduce perceived risks (Ganesh & Sakuntala). The results of
Regulatory constraints and a lack of supportive policies have this qualitative investigation provide valuable insights that
been recognized as obstacles in various contexts [42, 43]. The align with and expand upon the barriers highlighted in the
participants of this study echoed this concern, emphasizing the literature review. The findings of this study emphasize the
need for specific policies and guidelines to encourage green specific challenges faced by commercial banks, indicating the
financing. This suggests that regulatory support is crucial for need for targeted strategies to address these barriers and
overcoming barriers to green finance, regardless of the promote the adoption of green finance practices in Nepal's
country's developmental stage. The limited availability of banking sector, in line with the country's sustainable
green investment opportunities, another barrier identified in development goals.
the literature review, also resonates with these findings. While
the renewable energy sector in Nepal holds potential,
participants have highlighted the scarcity of well-structured 6. CONCLUSION
projects that align with sustainability goals. This highlights the
importance of creating a robust pipeline of viable green Commercial banks must include accountability and
projects to encourage banks' engagement in green financing, sustainability in their business practices. They can increase
which is consistent with the literature [22, 26]. In response to public trust and achieve social obligations by including
major challenges of green banking awareness, regulator environmental issues in their lending practices. The research
support, the backing of top-level management, and focuses on analyzing green finance practices by Nepalese
collaboration challenges of green projects. Prior research commercial banks aligned with sustainable development
claims that due to unquantified risks, inadequate knowledge goals. This qualitative analysis explores the understanding of
about the projected outcomes of green initiatives, and strict green investment opportunities, financial risk perception,
government regulations, the majority of banks are unwilling to awareness of green investment, regulatory implementation,
finance sustainable projects. The lack of a clear sustainable and green finance practices aligned with sustainable
green policy poses a challenge to the adoption of green development goals. Green finance practices in Nepal are in an
banking [34]. Banks must examine their frameworks and plans evolving stage. Participants discuss green finance policies by
to stay on top of their sustainability commitments in light of Nepal Rastra Bank, including mandatory CSR and investing
new challenges and objectives [44]. The literature explores in clean energy. Participants note the absence of a voluntary
how sound national policy and guidelines can influence the implementation regulatory framework rather than mandatory
financial sector to play a more productive role in building a compliance with green finance in Nepal, as a result bank does

1994
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