SBFN’s  3rd Global Progress Report was launched on 29 October 2021

Mongolia – Leveraging a sustainable finance framework to unlock green finance opportunities


Sector-wide adoption of a sustainable finance framework accelerates green finance development

The sustainable finance framework including the ESRM toolkit was developed in 2014 by the Mongolian Bankers Association (MBA) with support from IFC and FMO and adopted by all banks, which account for almost 90% of the Mongolian financial market. Since 2015, the MBA has implemented comprehensive trainings tailored to specific roles in banks to support the implementation and reporting of ESRM, and it an accompanying online learning tool in 2018. The Central Bank of Mongolia issued an official directive in 2015 to include sustainable finance reporting in banks’ annual reports, and a specific ESRM report is submitted on a voluntary basis. Placing emphasis on advancing sustainable and green finance, Mongolian banks have established a special entity called the Mongolian Sustainable Finance Association (MSFA) with a mandate to expand the sustainability agenda into all relevant economic sectors and become a sustainable finance regional knowledge center. MSFA, with membership of all banks, is now looking to expand into non-banking and non-financial sectors. The most recent development is the approval of the national green taxonomy, as well as pilot projects to introduce sustainable finance principles into priority sectors, energy efficiency and textile production.


Successful implementation of sustainable finance has served as a fundamental step to attract climate financing.

Banks that have been leading their peers with a strong emphasis and commitment to the implementation of ESRMs have already started accessing green funding. The two Mongolian banks (Xac Bank and Trade and Development Bank) have been granted an accreditation from the Green Climate Fund (GCF). In addition, Mongolian banks together with the Government of Mongolia have submitted to GCF a project proposal to establish a green on-lending fund facility, called the Mongolia Green Finance Corporation, to increase accessibility and affordability of green funds for local banks and disseminate sector-wide green finance knowledge.


National Green Taxonomy development calls for technical and industrial capacity.

To further promote green finance, MSFA with the support from Tsinghua University and IFC developed a green taxonomy. In December 2019, the national Green Taxonomy identifying 58 green activities in 8 sectors was approved by the Financial Stability Council of Mongolia after completing several nationwide stakeholder consultations. Starting in Q1 2020, banks have started reporting the green share of their lending portfolio to the Central Bank in line with the taxonomy, which paves the way for tracking and reporting of the banking sector’s contribution to the realization of the Mongolian Nationally Determined Contributions under the Paris Agreement.
Developing a tailored national green taxonomy stresses the need for industry-specific guidelines, rating standards, labels, and local verification capacity.


Mongolia has realized growing needs for green pipelines and capacity development.

MSFA has identified construction and textile production as priority sectors to integrate sustainability principles and attract green funding. In line with this, MSFA has developed energy efficiency rating criteria, and is collaborating with the MBA and the German Corporation for International Cooperation (GIZ) to pilot the energy efficient affordable housing value chain by offering subsidized mortgage loans through nine participating banks. In the textile sector, MSFA has developed a sector-specific guideline and is now working to develop a green credit criterion. Through this work, MSFA will work to incubate 20 SMEs in line with sustainability principles and connect them with green funding offered by local banks.