Green Finance and the Performance of Commercial Banks: Perspectives from Ghana
DOI:
https://doi.org/10.53819/81018102t4371Abstract
Commercial banks are key in modern economies by mobilizing savings, allocating credit, and supporting sustainable economic growth. In recent years, growing climate risks, regulatory pressures, and stakeholder expectations have expanded the definition of bank performance beyond traditional financial indicators to include sustainability considerations. Green finance has therefore emerged as a strategic mechanism through which banks can align profitability objectives with environmental responsibility. Despite increasing policy attention and voluntary sustainability frameworks, the extent to which green finance influences the performance of commercial banks in developing economies such as Ghana, remains insufficiently documented. This study sought to assess the effect of green finance on the performance of commercial banks in Ghana, focusing on profitability, asset quality, and long-term financial sustainability. The study adopted a desktop review research design guided by a positivist research philosophy. Relevant studies were identified using key search terms related to green finance, green banking practices, sustainable finance, commercial bank performance, and climate finance. The findings from the reviewed studies indicate that green finance generally have positive influence on the performance of commercial banks. Banks engaging in green lending, environmentally screened investments, and sustainable finance practices tend to record improvements in profitability, asset quality, and performance stability. These gains are largely associated with enhanced risk management, reduced exposure to environmentally risky assets, and alignment with emerging sustainable growth sectors. The study concludes that green finance represents a viable pathway for enhancing the performance of commercial banks in Ghana, provided it is embedded within core banking strategies and supported by strong institutional and regulatory frameworks. In view of these findings, the study recommends that policymakers should support enabling frameworks and incentives to support effective green finance integration among commercial banks in Ghana.
Keywords: Green finance; Commercial bank performance; Sustainable banking; Financial sustainability; Environmental risk management
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