Impact of green banking on banks’ environmental performance in India: The mediating role of green finance

Type of the article: Research ArticleAbstractThis study investigates how Green Banking Initiatives influence bank environmental performance in India and determines the mediating effect of Green Finance Initiatives. The study is relevant as there is an increased need for financial institutions such as banks to facilitate the transition to a low-carbon economy. The study is based on the Resource-Based View, whereby Green Banking Initiatives are viewed as internal strategic resources and Green Finance Initiatives as dynamic capabilities that direct these resources towards achieving measurable bank environmental performance. The study used a primary data collection method through purposive sampling of 200 employees of public sector banks, including clerical staff, bank officers, senior officers, and bank managers, chosen due to the reliability of their positions in providing information on green banking and green finance activities based on practice. The analysis was conducted using Partial Least Squares Structural Equation Modeling (PLS-SEM). The findings indicate that Green Banking Initiatives significantly and positively influence both Green Finance Initiatives and Bank Environmental Performance. Additionally, banks’ Green Finance Initiatives were found to significantly contribute to improving banks’ environmental performance and partially mediate the relationship between Green Banking Initiatives and banks’ environmental performance. The study’s results indicate that internal sustainability practices increase the value of environmental concerns where it is aligned with strategic green financing activities. The findings can help understand how banks can contribute to national sustainability objectives and provide viable insights for policy formulation, capacity building programs, and strategic expansion of green lending.