Bangladesh – Broader definitions and tailored processes to promote green projects
Bangladesh started developing a green project list in 2011 and published a detailed taxonomy in 2017, with 52 products in eight sectors/categories. After the issuance of the Green Banking Guidelines in 2011, Bangladesh Bank started working on this taxonomy because there were no standardized benchmarks, certifications, or accreditations in the country. Bangladesh Bank could not force banks to hire environmental specialists to create green project definitions and therefore has had to provide the knowledge in this area for green finance to progress. Bangladesh Bank created a taxonomy that details which sectors and what products within the sector qualify as green. These range from energy efficiency and renewable energy to waste management and environmentally friendly brick manufacturing.
Bangladesh Bank is slowly moving away from a more detailed taxonomy in favor of a broader green project definition. After developing the green project list, Bangladesh Bank created a product innovation/development methodology that aims to help banks and FIs evaluate the financial profitability and environmental and social feasibility, as well as the risk of innovative green finance products. These assessments include cash flow forecasting and looking at resource efficiency and land contamination prevention, for example. They are currently working to produce standards and benchmarks for a broader set of products to establish a more comprehensive and sustainable policy.
Based on its experience, Bangladesh Bank recommends that other countries looking to develop green project definitions engage widely and tailor the process to country specifics. This means consulting with banks and financial institutions to gauge their knowledge about green finance and use this data to create an appropriate strategy. For example, where there is less knowledge, starting with a detailed taxonomy enables banks and FIs to accustom themselves gradually to the idea of green finance and projects. Where banks and FIs are more advanced, the strategy is to develop a broader taxonomy and allow these institutions to adapt it to their needs. In addition, seeking guidance more broadly from SBN, peer countries, and other international organizations is recommended.