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Bangladesh giving top priority to sustainable finance: IFC

H.M. Queen Máxima of the Netherlands, the United Nations Secretary-General’s Special Advocate for Inclusive Finance for Development (UNSGSA), and IFC’s Managing Director, Makhtar Diop, during the opening of the 7th SBFN Global Meeting

Jun 23,2020

The International Finance Corporation Tuesday said that Bangladesh along with two other Asian countries had identified green finance as a top priority for developing their financial sectors in a sustainable manner.

It also said that Bangladesh had been giving the highest priority to tackle the challenges and to ensure sustainable finance.

The United States-based multinational lender came up with the observation in a report titled ‘Necessary Ambition: How Low-Income Countries are Adopting Sustainable Finance to Address Poverty, Climate Change, and Other Urgent Challenges’ published on Tuesday.

IFC facilitated the Sustainable Banking Network, a voluntary community of financial sector regulatory agencies and banking associations from emerging markets, to prepare the report.

Starting its journey towards sustainable banking in 2009, the report mentioned that Bangladesh published the green banking policy in 2011 and extended the policy for non-banking financial institutions in 2013.

In 2014, the Bangladesh Bank set a minimum annual target of 5 per cent of the total loan disbursements and investments by banks and FIs to go to green businesses, projects, and sectors.

In 2018, the Bangladesh Bank launched the Environmental and Social Due Diligence Risk Assessment Tool and the Green Banking Reporting template to help non-bank financial institutions effectively implement and report their sustainable finance activities.

Initially, the Bangladesh Bank’s challenge was a lack of understanding from the banks and a need for capacity building, the report mentioned, adding that numerous trainings were conducted to get middle and higher-level management excited about the benefits of sustainable banking.

Banks at the time also lacked environmental specialists, but training sessions were offered to overcome the problem, the report mentioned.

The report mentioned that Bangladesh along with Mongolia and Nepal faced immediate and significant impacts from climate change, pollution, biodiversity loss, and social inequality that required urgent responses.

In the wake of the challenges, the report said that in Asia, promoting green finance, such as green bonds and green loans, was particularly a focus in Bangladesh and Mongolia.

The two countries, along with Nepal, are also working on developing national sustainable finance roadmaps as part of efforts to reduce market risk and incentivise green finance flows, the report said.

‘At a time when low-income countries across Asia and the Pacific are being adversely impacted by COVID-19, it’s all the more vital for countries to embrace sustainable financial development to build resilience for the future,’ IFC vice-president for Asia and Pacific Nena Stoiljkovic in a statement on the day.

‘The report highlights these Asian countries are resolute in their commitment to promoting sustainable finance and going green in planning for the future,’ she said.

SBN IDA Task Force co-chair Naidalaa Badrakh, also a board member of the Mongolian Sustainable Finance Bankers Association, said, ‘There is positive evidence of changes in the way banks are managing environmental and social risks, compared to five years ago.’

In addition to green finance, the report showed that the three Asian countries were also exploring ways to expand sustainable finance to other areas such as financing for small and medium sized enterprises and agriculture.

‘In the context of a circular economy, resource efficiency is key. Thus, sustainable finance has a larger role to play in poverty reduction,’ said Bangladesh Bank’s Sustainable Finance Department joint director Asif Iqbal.

Last year, IFC’s green bond issuance in Asia-Pacific crossed $1 billion, addressing environmental and social challenges in some of the world’s most vulnerable and poorest countries.

Last month, Mongolia’s Financial Regulatory Commission and IFC signed a memorandum of understanding to further develop the market for green finance in Mongolia.

– New Age