From finance bros to eco-pros: A saga of the Central Bank and financial supervisory authorities (Part 2)

Bangladesh Bank's Green Banking Policy requires banks to allocate 5% of their total loan portfolio to environmentally friendly projects. As of 2022, about 8% of all bank loans in Bangladesh were green, funding everything from solar power projects to sustainable agriculture.

In 2023, this target was not only met but exceeded, with 8% of total loans going to environmentally friendly initiatives. Not bad for a country where the GDP per capita is equivalent to the price of two iPhone 16 Pro Max. Sounds impressive, right? 

But let's not pop the champagne just yet. Critics argue that much of this green finance is concentrated in a few sectors, like renewable energy and energy efficiency, while other critical areas—such as sustainable agriculture and water management—get left out in the cold.

It's like 'going on a diet' ordering kacchi with extra aloo and ending with a 'diet cola'—sure, you are making progress, or so you think, but it's not enough to really make a difference.

If central banks are the new eco-warriors, then financial supervisory authorities (FSAs) are the vigilantes keeping the financial markets from going full-on evil corporate overlord.

These guys are like the Batman to the central banks' Superman—less powerful, perhaps, but crucial to ensuring that the financial world doesn't turn into a dystopian nightmare.

The Financial Conduct Authority (FCA) in the UK has been one of the most proactive FSAs when it comes to sustainable finance. In 2021, they rolled out the requirement that asset managers, life insurers, and FCA-regulated pension providers disclose their climate-related risks in line with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations.

Practically, FCA was telling the financial world, "We are not saying you have to be green, but if you are not, you better have a good excuse—and it better be in writing." These disclosures are no joke. Companies have to lay bare their exposure to climate risks, their strategies for managing those risks, and the metrics they're using to track progress.

The FCA's climate-related disclosure requirements are part of a broader push to integrate sustainability into the financial system. This includes not just disclosure rules but also stress tests to assess how banks would handle various climate scenarios.

According to the Bank of England, climate-related risks could reduce the value of UK assets by up to £283 billion by 2050 if not properly managed. These stress tests are like financial fire drills, ensuring that banks are prepared for the worst-case scenarios—like the economic equivalent of qualifiers before F1 races, but with less drama and more data.

In the United States, the Securities and Exchange Commission (SEC) has been cracking down on greenwashing. Where companies exaggerate their eco-friendly credentials like a Tinder date who claims they have 'wanderlust' but really means they have been outside a couple of times. In 2023, they introduced new rules requiring companies to back up their ESG claims with real data rather than just slapping a green label on their products and calling it a day.

Even the SEC they slapped fines on several big-name companies for misleading investors about their environmental practices, sending a clear message that greenwashing is out and genuine sustainability is in.

The penalties handed out to companies for greenwashing have served as a wake-up call for the industry, sustainability isn't just a buzzword—it's a commitment.

Then there's Bangladesh, where the Bangladesh Securities and Exchange Commission (BSEC) has been stepping up its game. In 2022, the BSEC introduced guidelines for green bonds, which require issuers to use the proceeds for projects that have clear environmental benefits.

The BSEC has also been working to build a regulatory framework that supports the growth of the green finance market. It recognises that in a country as vulnerable to climate change as Bangladesh, sustainable finance isn't just an option—it's a necessity.

By mid-2023, the Bangladesh green bond market was worth about $100 million—not huge by global standards, but a significant step for a developing country where the annual GDP is only $411 billion. 

There you have it, folks, the character development arc of central banks and FSA turning into your caped crusader of the climate crisis from their monotonous finance bro status.

In true Gen Z style, let's call it what it is, a glow-up in progress (like the 6'5" blue eyes stuff?). Central banks and FSAs are still sliding into their eco-friendly DMs, trying to figure out whether they are meant to be the goodie-two-shoes Superman of monetary policy or just the girl next door with a good heart but questionable choices (remember, Tony Stark's first suit wasn't exactly runway-ready).

Sure, they are no Avengers yet—they're more like Homelander from The Boys, a little awkward, arrogant, sometimes cringy, but growing stronger with every plot twist. So, as we swipe right into this new era of green finance, let's hope they can avoid the ghosting that has plagued other well-intentioned movements before.

After all, the climate doesn't care if you've got a killer LinkedIn profile—it's the ACTUAL progression that counts. And in this battle, every cent, every tree, and every policy could be the difference between a happy ending and a Black Mirror reboot no one asked for.

In the meantime, grab your popcorn because this is one saga that's far from over—and trust me, you don't want to miss the season finale.

(For Part 1, please click on this link)

(The writer is an engineer turned finance and ESG enthusiast, trying to drink gulps from the immensely stimulating ocean of finance/economics/ESG and move to greener pastures to shift from his tedious job in the capital market. Tell him how he can do that at galibnakibrahman@gmail.com)