Green finance key to develop sustainable financial sector in Bangladesh: IFC

The banking system in Bangladesh has faced difficulties in recent years, and this has led to sustainability taking a back seat to other issues, according to a report by the International Finance Corporation (IFC).

The report by the IFC-facilitated Sustainable Banking Network (SBN) has identified green finance as a top priority for developing the financial sector sustainably in Bangladesh.

The report titled "Necessary Ambition: How Low-Income Countries Are Adopting Sustainable Finance to Address Poverty, Climate Change, and Other Urgent Challenges" says some countries, including Bangladesh, Mongolia and Nepal, will face immediate and significant impacts from climate change, pollution, biodiversity loss and social inequality.

The report published on Tuesday also has emphasised urgent responses to these issues.

The report says promoting green finance, such as green bonds and green loans, is particularly a focus in Bangladesh and Mongolia.

Bangladesh with the support of IFC is looking into the potential, modalities and procedures for rolling out green bonds in Bangladesh, according to the report.

The report also says that the national green bond market will help the country realise its climate-smart investment potential of $172 billion by 2030.

"At a time when low-income countries across Asia and the Pacific are being adversely impacted by Covid-19, it is all the more vital for countries to embrace sustainable financial development to build resilience for the future," said Nena Stoiljkovic, IFC's vice president for Asia and the Pacific.

The report highlights that these Asian countries are resolute in their commitment to promoting sustainable finance and going green in planning for the future.

The report further says the Bangladesh Bank introduced policy guidelines for green banking in 2011 and those on Environmental and Social Risk Management for Banks and Financial Institutions in 2017.

In 2017, the Bangladesh Bank set a minimum annual target of five percent of total loan disbursements and investments by banks and financial institutions to move to green businesses, projects and sectors.

To assist allocations, the central bank of Bangladesh developed a list of green products and initiatives eligible for financing and also provided clear parameters for financing green innovations.

The result was a list of 52 products and initiatives across eight categories and a product innovation to assess green finance initiatives.