Adoption of green banking practices and environmental performance in Pakistan: a demonstration of structural equation modelling

Banking industries are blamed to be among the major factors that affect global climate change both directly and indirectly. The green banking concept has emerged in the last decade to trigger the adverse impact the banks put on a healthy environment. However, research regarding the adoption of green banking practices in developing economies, especially in Pakistan, is scarce. While environment friendly businesses are promoted by the government including in the banking industry. Green banking practices not only adopted by the business operations but also to practice it at policy-making level. It also encourages green project financing to ascertain environmental efficiency. Based on SRI theory, this study investigates the relationship between green banking practices and their direct and indirect impact on environmental performance. Structural equation modelling approach has been adopted to test the relationships of variables of the study. The impact of the green practices has been recognized much greater and influential in promoting green environment regarding policy-making and investments in green projects. Results reveal that there is a significant influence of policy, daily operations, and investments on the adoption of green banking practices. Interested parties can adopt the study proposed framework to access and identify the factors which can promote justified level of green banking practices in the country. Moreover, this study may help in providing rich updated literature in green banking to speed up future research in the same area.