International Finance Corporation (IFC), a member of the World Bank Group, in partnership with Bangladesh Bank, identified steps to promote the domestic green bond market in Bangladesh as a way to mobilise capital for climate-related initiatives.
A joint study, funded by the Swedish government, assessed the potential for a domestic green bond market in Bangladesh.
"Enabling actions are required from government agencies and regulatory authorities as well as longer term strategies to deepen Bangladesh's green financial sector and to align it with both the country's nationally determined contributions (NDCs) and broader development strategies," said a statement.
"IFC is one of the first movers in the green bond market and as of today, IFC's green bonds issuance in Asia-Pacific has reached $1.0 billion. IFC is ready to work with both regulators and financial institutions in Bangladesh to move the green bond market forward. With our strong track record as an issuer and anchor investor, we are leveraging our experience and expertise to help the country develop its green bond market in line with international standards," said Wendy Werner, IFC Country Manager for Bangladesh, Bhutan and Nepal.
Bangladesh's fixed income market remains small and underdeveloped. In 2018, the bond market totaled $16 billion, or about 6.0 per cent of the GDP. Investors and issuers alike face a wide range of barriers when investing in and issuing bonds. Green bonds are an asset class that can help develop the bond market in Bangladesh and attract a new pool of international and institutional environmentally-aware investors.
The study confirms that Bangladesh Bank has an important and unique role in facilitating a rapid and meaningful green bond market development. The central bank and Bangladesh Securities and Exchange Commission (BSEC) can play a catalyzing role by developing national guidelines and standards on green bonds to define eligible green project activities to use the proceeds of green bonds.
"We hope that the first green bond in Bangladesh will be issued by a bank in line with international and domestic investors' expectations and facilitate a new path for green financing in the country where IFC can facilitate with their resources and experience," mentioned Khondkar Morshed Millat, General Manger, Bangladesh Bank in a seminar, arranged by IFC in the city on Sunday.
Nuzhat Anwar, IFC Senior Country Officer in Bangladesh addressed the event, attended by senior officials of BSEC and BB.
The Government of Bangladesh, along with the other signatories of the 2015 Paris Agreement, has recognized the risks and opportunities to transition to a low-carbon growth path. IFC estimates the total climate-smart investment potential in Bangladesh to be approximately $172 billion between 2018 and 2030, mainly in green buildings, transportation infrastructure, urban water, agriculture, waste management, and renewable energy, to meet the NDC targets.
IFC has been supporting the central bank efforts to develop and implement green finance related policies and guidelines that encourage banks and financial institutions to incorporate environmental and social risk management into their credit activities and promote green lending to achieve the Sustainable Development Goals.