Climate-smart investment potential stands at $172b: IFC
Climate-smart investment potential of Bangladesh will be about $172 billion between 2018 and 2030, according to an estimate of the International Finance Corporation (IFC).
The investment will be mainly in green buildings, transportation infrastructure, urban water, agriculture, waste management, and renewable energy, to meet the nationally determined contribution (NDC) targets, the member of the World Bank Group said in a statement yesterday.
The IFC, in partnership with the Bangladesh Bank, has 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 align it with both the country’s NDC and broader development strategies,” the IFC said.
The 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 billion, Wendy Werner, IFC country manager for Bangladesh, Bhutan, and Nepal, said in the statement.
“The IFC is ready to work with both regulators and financial institutions in Bangladesh to move the green bond market forward.”
Bangladesh’s fixed-income market remains small and underdeveloped. In 2018, the bond market totaled $16 billion, or about 6 percent of the gross domestic product (GDP), according to the IFC.
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 investors who are environmentally-aware.
The study confirms that the BB has an important and unique role in facilitating a rapid and meaningful green bond market development.
“The central bank and the Bangladesh Securities and Exchange Commission can play a catalysing role by developing national guidelines and standards on green bonds to define eligible green project activities to use the proceeds of green bonds,” the statement said.
In the statement, Khondkar Morshed Millat, general manager of the BB, said: “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 the IFC can facilitate with their resources and experience.”
Bangladesh along with other signatories of the 2015 Paris Agreement has recognised the risks and opportunities to transition to a low-carbon growth path.
The IFC is supporting the BB’s 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.