Impact of green finance on portfolio management among selected deposit money banks in Abuja

Abstract

The burgeoning development of green finance worldwide has attracted attention to the impact of green finance on the portfolio management in banking sector, especially on the emerging markets, where environmental and social risks can be significant threats to financial stability. This study focused on effect of green finance on portfolio management among selected Deposit Money Banks in Abuja with the general objective of determining the effect of green finance on portfolio diversification and of environmental and social risk management on portfolio risk management respectively. A cross-sectional research design was used for the study, which involved 320 employees of Guaranty Trust Bank and Zenith Bank, all of whose functions were related to credit administration, extension of credit, risk management, investment management, portfolio monitoring, corporate banking, sustainability reporting and operations in branches. Using Yamane's formula, with a 20% margin of error, a sample size of 214 was calculated, and stratified sampling was used to guarantee representation among job functions. Primary data were gathered using structured questionnaires and Cronbach's alpha reliability test was conducted to ensure the reliability of the questionnaires (alpha = 0.82 for green credit/lending, alpha = 0.85 for environmental and social risk management, alpha = 0.80 for portfolio diversification and alpha = 0.83 for portfolio risk management), while content validity was used to ensure that the instrument measured the variables of the study. The data were analysed using regression analysis in SPSS (v27). Results showed that green credit/lending had a significant positive effect on portfolio diversification and green risk management/social risk management had a positive effect on portfolio risk management. The findings showed that the introduction of green finance in banking will help improve the management of bank portfolios, and that it is necessary to increase the scope of green lending and to establish effective environmental and social risk management.