Sustainable finance has become a fancy term in the banking world — one that evokes both pride and purpose. From green bonds to climate-smart loans, it represents an important step in aligning capital with the global sustainability agenda.

But as our financial institutions make commendable progress in green and inclusive financing, there is a growing need to recognise a simple truth: sustainable finance alone does not make a bank sustainable.

Sustainable finance focuses on what a bank funds — renewable energy, SME development, women-led enterprises, or climate adaptation projects. These are vital contributions to the country's long-term resilience. However, the broader idea of sustainability in banking goes much deeper — it encompasses how a bank operates, who it empowers, and what kind of culture it sustains within.

A bank may finance environmentally sound projects but still lag in employee well-being, ethical governance, or operational efficiency. True sustainability, therefore, lies in balancing the external impact of financing with the internal integrity of conduct.

A truly sustainable bank must look inward. Its governance, human resource practices, digital readiness, and environmental footprint are as critical as the projects it funds. Sustainability is not a department or a report — it is a mindset that must influence credit decisions, risk assessments, procurement, and even branch operations.

For instance, if a bank finances green factories but still runs paper-intensive processes or consumes disproportionate energy, the story remains incomplete. Internal sustainability strengthens external impact; one cannot flourish without the other.

Governance remains the backbone of sustainable banking. Transparent decision-making, ethical lending practices, and responsible risk management create the trust on which all sustainable finance rests. Without that foundation, even the most ambitious green lending portfolios risk being viewed as short-term initiatives rather than long-term commitments.

Similarly, culture plays an often-overlooked role. When a bank cultivates inclusivity, gender balance, and employee empowerment, it builds the very social fabric that sustainable finance seeks to support externally. A sustainable culture inside the organisation enhances its credibility and consistency outside.

Embedding sustainability into core operations is not at odds with profitability - it is, in fact, a way to secure it. Financial institutions that integrate ESG principles across their business lines often experience stronger resilience, lower default risks, and higher investor confidence.

The real challenge lies in internalising this perspective. Sustainability should not be viewed as an expense or a regulatory expectation; it is an investment in long-term stability and brand value.

Bangladesh's banking sector has made commendable progress in green finance and SME inclusion, supported by the forward-thinking policies of Bangladesh Bank. The next phase, however, calls for institutional sustainability, where governance, climate risk management, operational efficiency, and stakeholder trust converge to define the bank's overall strength.

This requires better integration between sustainability teams and core banking divisions such as credit, risk, operations, HR, and procurement to ensure that every decision reflects environmental and social consciousness.

Moreover, building partnerships with global development agencies, fintech innovators, and research institutions can help local banks strengthen their capacity in climate finance, impact assessment, and sustainable operations.

Sustainable finance is an essential tool, the most visible part of the sustainability spectrum in banking. But it is not the whole picture. To achieve true sustainability, banks must evolve from financing sustainable projects to becoming sustainable institutions.

When governance, culture, and capital align, the impact multiplies. Only then can sustainability move from the periphery of annual reports to the core of organisational identity.

Because in the end, sustainable finance may fund progress, but sustainability ensures that progress endures.

Shafiq R Bhuiyan is a storyteller who examines the intersection of social progress, effective communication, cultural development, and corporate social responsibility while sharing insights to inspire change. 

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.

Sustainable / Finance / bank