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Top1. Introduction
Recently, global warming gets international consideration as it has been steered by rapid use of natural resources and brutal industrial competition due to globalization (see UNEPFI, 2007; Guillen, 2001). Among various factors, greenhouse gas (GHG) is the main culprit for changing the balance of the natural environment (World Bank, 2013). Although manufacturing institutions are blamed primarily for environmental change, greenhouse gas, service organizations, such as banks and other financial institutions, also contribute as they fund the major industry of any country (Hossain et al. 2016). So, stakeholders want to know about financial and non-financial information based on which they can take a proper investment decision. Theories suggest that profit maximization principle should be affected by accounting measures rather than sustainable development. But this issue is still on the debate as researchers found different results (Dobre et al., 2015).
Green banking, as a part of environmental accounting, ensures that banking activities do not encourage environmental pollution. Green banking activities include online banking, less paper, mobile banking, green credit cards, green mortgages, etc. Green banking promotes environmental friendly projects through lowering interest rates. In the green banking circular, Bangladesh Bank identifies Bangladesh as one of the vulnerable countries exist (Hossain et al., 2016). ISO (International Organization for Standardization) has outlined ISO 14000 including a sequence of standards covering various aspects of environmental management. These standards lead to increase institutions productivity as standards provide a direction toward environmental performance (Norhasimah et al., 2016).
Developing country such as Bangladesh, development depends on the manufacturing and financial sectors. As Bangladesh is moving towards the middle-income country, environmental issue has become very important to consider. But, Bangladesh is far behind than other countries regarding environmental accounting reporting practices. The study is based on Bangladesh as many development events have occurred here recently. Most of the preceding studies focused on two things: disclosure nature and the association between disclosure and determinants of information reporting (Sobhani et al., 2009). As banks are the major financial institution engaged in financing large industry, they have a direct and indirect influence on environmental issues. Moreover, Bangladeshi banks are following the GRI (Green Reporting Initiative) framework to prepare their sustainability reports. Considering the importance of environmental disclosures, Bangladesh Bank outlined green banking policy guideline (2012), which is the only compulsory framework for disclosing environmental issues. From 2013, Bangladesh Bank itself is also publishing green banking appraisal report considering all the financial institution in the banking sector (Masud et al., 2017). However, there are not enough studies on EAR practices of bank industry, and some studies are limited to green publication of banks’ activities excluding few studies, which are based on GRI (Khan et al., 2011; Islam et al., 2016) and Sustainability (Sobhani et al., 2012).
Focusing on the importance of financial performance, this study aims to show how environmental accounting reporting practices influence financial performance. This study reveals the primary implementation of EAR practices in the banking industry of Bangladesh. Especially, it measures 18 categories, which have been selected based on the green banking guideline framework. Moreover, it also aims to show EAR practices besides the lawful provision of the banking industry in Bangladesh (Masud et al., 2017). So, this study will be effective literature for assessing the environmental reporting effects on the financial performance of listed bank companies in Bangladesh. Moreover, it will also contribute to lessening the unending argument regarding the relationship between EAR practices and financial performance.