THE BANK-SIZE GAP IN GREEN BANKING ADOPTION: A NARRATIVE REVIEW
DOI:
https://doi.org/10.35631/AIJBES.829099Keywords:
Bank Size, Green Banking, Green Finance, Narrative Review, Sustainable BankingAbstract
Green banking is considered the main avenue for the financial sector to support the transition to a low-carbon economy, but varying degrees of adoption among financial institutions have been noted. This study aims to understand the differences in the adoption of green banking by large and small financial institutions. The literature studied shows that larger banks tend to have more advanced sustainability strategies, better governance, more advanced environmental risk management, and more green loans when compared to small banks. The reasons for this are less studied. The aim of this study is to synthesize 12 peer-reviewed studies published from 2018 to 2026, 11 articles and 1 book chapter, and organize the studies under the pillars of bank resources, governance and stakeholder pressure, regulation and compliance, and bankable projects. Two contributions are made. The first is a Capability, Pressure, Opportunity (CPO) framework. A bank adopts green banking when the pressure it faces, the opportunities for financeable green projects, and the bank's adoption capability are aligned. These dimensions are distinct and cannot be compensated for by others. This framework is grounded in resource-based theory, institutions, and legitimacy and resource dependence theory. The second is the separation of a transparency gap (the difference in the level of sustainability disclosures by large and small banks) from a performance gap (the difference in levels of green financing and the incorporation of environmental risks in credit decisions). Disclosure-based analysis further reinforces the perception of a performance gap in banking, because green banking practices are more evident than would otherwise be the case.
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