Banks are increasingly offering loans for the purchase of electric and hybrid vehicles, with expectations of heightened demand once the government decides to subsidize these vehicles, following the example of developed countries. Additionally, banks plan to enhance financing processes for small and medium-sized enterprises through Environmental, Social and Governance (ESG) strategies. As the global shift towards sustainable business models accelerates, banks are playing an essential role in supporting green investments and projects that reduce harmful gas emissions.
Bratislav Pejaković, the Secretary General of the Banking Association, highlights the growing importance of green and transition bonds. Green bonds are issued to fund large-scale, capital-intensive infrastructure projects with positive ecological outcomes, such as energy efficiency, transit, or renewable energy. These bonds help attract new investors and demonstrate the issuer’s commitment to sustainability. Transition bonds, on the other hand, provide financing for high-emission industries like mining, utilities, and heavy industry, helping them transition to greener operations.
Banks are also contributing to sustainability by offering products like credit cards made from recycled plastic, loans for installing solar panels, and financing for energy-efficient building improvements. The introduction of an energy passport as an investment guideline and the financing of the transition from solid fuels to green energy are anticipated in the near future. Banks are already providing loans for electric and hybrid vehicles, with expected increased demand once the government introduces subsidies for these vehicles. Banks are also working to enhance financing for the sustainability of small and medium-sized enterprises through ESG strategies. However, regulatory support would be beneficial to further stimulate green initiatives and provide incentives for both existing and new green enterprises.
The Banking Association has joined the United Nations Environment Programme Finance Initiative and signed the Principles for Responsible Banking, becoming the first Montenegrin bank to do so. This commitment involves integrating sustainability aspects into business strategies and meeting new criteria and guidelines for corporate governance. A Montenegrin bank has been recognized for its long-standing integration of sustainability, which includes creating green products, reducing its carbon footprint, supporting sports and culture, ensuring equal opportunities, and promoting good corporate governance.
Climate change and the need for decarbonization pose significant challenges and risks to the Western Balkans. The region must invest at least 37 billion US dollars in the next decade to protect citizens and property from the effects of climate change. Climate impacts are already severe, with floods, forest fires, droughts, and heatwaves affecting the region. The World Bank reports that inaction is not an option for the Western Balkans, as the region is experiencing more extreme weather events.
Decarbonizing the energy sector and improving energy efficiency in buildings requires substantial investments and long-term financing, with banks playing a crucial role. The goal is to increase the share of renewable sources in electricity consumption from 30 percent to 50 percent by 2030 and up to 75-85 percent by 2050. ESG banking is seen as a way to incorporate ecological, social, and corporate responsibility principles into banking activities, with several banks in the region already adopting these global initiatives.
The Banking Association, in collaboration with the Chamber of Commerce and the European Council for Regional Cooperation, co-organized a meeting on green energy principles and ESG strategy implementation. The association has also become a member of the Sustainable Banking and Finance Network (SBFN), supported by the International Finance Corporation (IFC), to build capacity and knowledge on sustainable financing. The association is working with the Central Bank of Montenegro (CBCG) on regulatory and green energy initiatives, including the “Green Award CBCG” for research on climate impacts on the financial system.
The association is also preparing a roadmap for the financial sector to transition to sustainable finance and is collecting feedback through a questionnaire for banks. This feedback will help establish a systematic and iterative adaptation planning process to improve resilience.
Despite these efforts, banks face obstacles in promoting and offering favorable loans for green projects, primarily due to the lack of supporting regulations that would encourage energy efficiency and decarbonization. Reducing operational costs for existing green enterprises and lowering barriers for new green businesses are critical steps for further progress.
