DHAKA INTERNATIONAL UNIVERSITY

Project Report On
Green Finance in Bangladesh

PREPARED BY
Md. Munna Chowdhury
RMBA Program (Major in Finance)
Batch: 44
Roll No: 09
Reg. No: BS-M1-44-A-17-107448
Session: 2017-2018
Department of Business Administration
Dhaka International University

SUPERVISED BY
Md. Siddique Alam Khan
Associate Professor
Department of Business Administration
Dhaka International University

1
 LETTER OF TRANSMITTAL

Date: 19/01/2019

To

Md. Siddique Alam Khan

Associate Professor

Department of Business Administration

Dhaka International University

Subject: Submission of project report on Green Finance in Bangladesh.

Dear Sir,

This is an informative paper containing brief explanation on “Green Finance in Bangladesh”

submitted by Md. Munna Chowdhury. According to your instructions, recommendations and
motivation I have prepared this paper with best of my knowledge.

I will be grateful if you accept and review these data provided here and give a review on it
regarding the factors you notice in all over the document.

Sincerely yours,

Md. Munna Chowdhury

RMBA Program (Major in Finance)
Batch: 44
Roll No: 09
Reg. No: BS-M1-44-A-17-107448
Session: 2017-2018
Department of Business Administration
Dhaka International University

2
 DECLARATION OF STUDENT

I hereby declare that all the information stated here are prepared by me and no contents
were copied from another person or group according to the best of my knowledge. This
document has not been taken from elsewhere like copyright protected source or anyone else
and has not been submitted before. I am the copyright holder of this whole document.

Md. Munna Chowdhury

RMBA Program (Major in Finance)
Batch: 44
Roll No: 09
Reg. No: BS-M1-44-A-17-107448
Session: 2017-2018
Department of Business Administration
Dhaka International University

3
 CERTIFICATE OF SUPERVISION

The term paper containing the title “Green Finance in Bangladesh” has been submitted by
Md. Munna Chowdhury, Roll No.: 09, Registration No.: BS-M1-44-A-17-107448, Batch: 44th,
Major in Finance, Program: RMBA

Md. Munna Chowdhury has successfully completed the thesis report on “Green Finance in
Bangladesh” according to my supervision and recommendation. He has tried his best
according to his knowledge and this report has not been copied from other copyright
protected source or submitted to anyone else.

Md. Siddique Alam Khan

Associate Professor
Department of Business Administration
Dhaka International University

4
 ACKNOWLEDGEMENT

I am thankful to my institute, supervisor and people who helped me to accomplish this project
within deadline successfully.

I hereby acknowledge that all information provided here has been researched and prepared
by me with lot of help from my honorable teacher Md. Siddique Alam Khan, Associate
Professor, Department of Business Administration, Dhaka International University. I am really
grateful to him for his supervision, co-operation and assistance. I believe this term paper
made my knowledge more clear about the topic I have been working on.

Md. Munna Chowdhury

RMBA Program (Major in Finance)
Batch: 44
Roll No: 09
Reg. No: BS-M1-44-A-17-107448
Session: 2017-2018
Department of Business Administration
Dhaka International University

5
 EXECUTIVE SUMMARY

Green finance is the financing of investment that encourage the development of a more
sustainable economy. Green finance also refers to financial support for green growth. It is
promoting economic growth and development while safeguarding the use of natural
resources in a sustainable manner. Throughout this term paper, I have included bulk
information about Green finance and its activity all over the world as Green financing
instruments have emerged as a new and popular asset class, especially in developed
countries. Whether called green finance, sustainability finance or the expanded scope of
environment, social and governance (ESG) finance, the provision of financing facilities tied to
environmental or broader social good activities is now common staple in Western Europe and
the US. Investors are even willing to accept lower yields on the investment instruments. The
purpose of the main document is to provide adequate researched knowledge on “Green
Finance in Bangladesh” which could be used for more data in future.

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 TABLE OF CONTENT

PARTICULARS PAGE NO.

Letter of transmittal 02

Declaration of student 03

Certificate of supervision 04

Acknowledgement 05

Executive summary 06

CHAPTER – ONE

PARTICULARS PAGE NO.

1.1 Introduction 09

1.2 Objective of the study 10

1.3 Methodology 10

1.4 Sources of data 10

CHAPTER - TWO

PARTICULARS PAGE NO.

2.1 What is Green finance 11

2.2 Why Green finance is important 13

2.3 SDGs and green financing 14

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 TABLE OF CONTENT

CHAPTER – THREE

PARTICULARS PAGE NO.

3.1 Green finance in developing countries 16

3.2 Green banking 18

3.3 Green bond annual issuance 19

3.4 GGFI ranks & ratings 20

CHAPTER – FOUR

PARTICULARS PAGE NO.

4.1 Green finance in Bangladesh 22

4.2 Green financing agents in Bangladesh 23

4.3 Annual report of BB on Green Finance 2016-17 31

4.4 Initiatives taken by Bangladesh bank on Green F. 37

4.5 Key guidelines regarding green financing in BD 38

PARTICULARS PAGE NO.

Findings 39

Recommendations 40

Conclusion 41

Bibliography 42

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 CHAPTER - ONE

1.1 INTRODUCTION

Green finance is a broad term that can refer to financial investments flowing into sustainable
development projects and initiatives, environmental products, and policies that encourage
the development of a more sustainable economy. Green finance includes climate finance but
is not limited to it. It also refers to a wider range of „other environmental objectives, for
example industrial pollution control, water sanitation, or biodiversity protection. Mitigation
and adaptation finance are specifically related to climate change related activities: mitigation
financial flows refer to investments in projects and programs that contribute to reducing or
avoiding greenhouse gas emissions (GHGs) whereas adaptation financial flows refer to
investments that contribute to reducing the vulnerability of goods and persons to the effects
of climate change.

For the banking sector, green finance is defined as financial products and services, under the
consideration of environmental factors throughout the lending decision making, ex-post
monitoring and risk management processes, provided to promote environmentally
responsible investments and stimulate low-carbon technologies, projects, industries and
businesses

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 1.2 OBJECTIVE OF THE STUDY

Here are some key objectives of the study listed below:

➢ Why green financing is important and how it works.

➢ Economical and natural effect of green finance.
➢ Present position of green finance in Bangladesh.

1.3 METHODOLOGY

The term paper has been prepared based multiple sources and from United Nations
Environment Programme (UNEP). All data has been collected from authentic source. Since
the main objectives of this term paper is to demonstrate Green Financing activity all over the
world and its progress, this term paper also contains detailed conditional statements,
information about Green Finance in Bangladesh, Green growth and also more relevant data.

1.4 SOURCES OF DATA

1. All data in this term paper has been collected from authentic source where these data
has been added by people who have been involved with UN Green financing activity.
2. United Nations Environment Programme (UNEP).
3. Bangladesh Bank annual report 2016-17.

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 CHAPTER – TWO

2.1 WHAT IS GREEN FINANCE

Green financing is to increase level of financial flows (from banking, micro-credit, insurance
and investment) from the public, private and not-for-profit sectors to sustainable
development priorities. A key part of this is to better manage environmental and social risks,
take up opportunities that bring both a decent rate of return and environmental benefit and
deliver greater accountability.

Green financing could be promoted through changes in countries’ regulatory frameworks,

harmonizing public financial incentives, increases in green financing from different sectors,
alignment of public sector financing decision-making with the environmental dimension of
the Sustainable Development Goals, increases in investment in clean and green technologies,
financing for sustainable natural resource-based green economies and climate smart blue
economy, increase use of green bonds, and so on.

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UN Environment Focus

Green Growth for Green Finance

Green growth is defined as growth generated through the harmony between the economy
and the environment.

• It aims to achieve the goal of a low-carbon economy.

• It strategically promotes green industry, including environmental pollution prevention
projects and renewable energy development projects.
• Green growth is the solution to three current threats to the global economy: climate
change energy constraints financial crisis.

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 2.2 WHY GREEN FINANCE IS IMPORTANT

Green Finance is important as it promotes and supports the flow of financial instruments and
related services towards the development and implementation of sustainable business
models, investments, trade, economic, environmental and social projects and policies. As the
financial sector plays a key role through its intermediary functions and risk management in
advancing sustainable economic development while directing investment to the real
economy, the intertwinement of these two is crucial.

Moreover, based on the lessons learned from the global financial crisis in 2006-2009, the
availing of the global warming and the need for more sustainable business practices, Green
Finance Initiatives have also been addressing the 2030 Sustainable Development Goals
(SDG’s) Agenda by emphasizing the shift of focus from shareholders’ value creation
(economic) to the generation of stakeholders’ value (economic, environmental and social).

Green Finance represents the future of the financial sector through innovative financial
mechanisms and by supporting the investments in projects with positive and sustainable
externalities.

It is estimated that between US$5-7 trillion of investment in green infrastructure globally

would be required to mitigate the effects of climate change globally in order to meet the goals
of the 2015 Paris Agreement. It is clear that public finance cannot play a major role in funding
this amount—the answer must lie in the private sector. However, goals for financial
sustainability are often out of alignment with profitability goals in the real economy.

The Bank of England governor, Mark Carney, has stated that “there is a need to reset the
financial system” so that the finance industry will be able to constructively help achieve the
goals as set out in the September 2015 UN Sustainable Development Goals by 2030.

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 2.3 SUSTAINABLE DEVELOPMENT GOALS (SDGs) & GREEN FINANCING

UN Environment has been working with countries, financial regulators and finance sector to
align financial systems to the 2030 sustainable development agenda – to direct financial flows
to support the delivery of the Sustainable Development Goals. At the core of today’s
globalized economy are financial markets through which banks and investors allocate capital
to deferent sectors. The capital allocated today will shape ecosystems and the production and
consumption patterns of tomorrow.

The main areas for the current work on green financing are:

➢ Supporting public sector on creating enabling environment

➢ Promoting public-private partnerships on financing mechanisms such as green bonds
➢ Capacity building of community enterprises on micro-credit

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UN Environment through its resource efficiency program will offer countries the service of
reviewing their policy and regulatory environment for the financing system and developing
sustainable finance roadmaps, and assisting central banks, regulators on how to best improve
the regulatory framework of domestic financial markets to shape the way and supporting
multi-country policy initiatives at sub-regional, regional and global level.

Partnership

Multi-stakeholder partnerships will be promoted to include major actors in financial markets,

banks, investors, micro-credit entities, insurance companies along with public sector.

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 CHAPTER - THREE

3.1 GREEN FINANCE IN DEVELOPING COUNTRIES

Developing countries in relation to green finance, particularly focusing on developing

countries that are not members of the G20. It also highlights emerging innovations, drawing
in particular from engagement with practitioners and regulators from Bangladesh, Colombia,
Egypt, Honduras, Jordan, Kenya, Mauritius, Mongolia, Morocco, Nigeria, the Philippines,
Thailand and Viet Nam, and the findings from the UNEP Inquiry’s country studies.1 Green
Finance is a strategy for financial sector and broader sustainable development that is relevant
around the world. But the context differs considerably for different countries. Developing
countries, notably those with underdeveloped financial systems, face particular challenges in
financing national development priorities.

IDFC Green Finance Mapping 2017

16
Financial Development shapes the context for green finance. Different sources of capital and
financial institutions are particularly relevant in different countries. Financial systems in
developing countries tend to be characterized by a dominant banking sector, and have large
areas of the economy that remain unserved by the formal financial sector. Public finance and
foreign direct investment can be particularly important as sources of long-term investment.
Broadly, concern and action to align financing to sustainable development is concentrated in
three areas: Preventing the Financing of Illicit Practices or Profiting from Weak Enforcement.
Weak enforcement of environmental, economic and social policies and regulations can lead
to social conflicts and market impacts resulting in losses to lenders and investors, and even
macroeconomic stability risks. Unlocking Opportunities for Green Investment. In many
countries, opportunities for green finance such as renewable energy, energy efficiency,
agricultural development and Small and Medium-sized Enterprises (SMEs) productivity, as
well as insurance markets, are potentially commercially viable, but inadequate owing to
barriers in demand or supply. Exploring Solutions to Dilemmas and Trade-Offs. Many
developing countries face a tension between the need to expand the electricity supply and
reduce fossil fuel intensity. Similarly, SME finance is an area where regulators must be careful
that lending requirements do not result in reduced overall lending or higher rates of non-
performing loans and financial instability.

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 3.2 GREEN BANKING

The concept of “Green Banking” will be mutually beneficial to the banks, industries and the
economy. Green financing is the part of green banking. Green banking means promoting
environment friendly practices and reducing your carbon footprints from your banking
activities. Green banking aims at improving the operations and technology along with making
the clients habits environment friendly in the banking business. It is like normal banking along
with the consideration for social as well as environmental factors for protecting the
environment. It is the way of conducting the banking business along with considering the
social and environmental impacts of its activities.

Green banking is very important in mitigating the following risks involving in banks.

Credit Risk

Due to climate change and global warming there will be direct as well as indirect costs to
banks. It has been observed that due to global warming there had been extreme weather
condition which affects the economic assets financed by the banks thus leading to high
incidence of credit default. Credit risk can also arise indirectly when banks lead to companies
whose businesses were affected due to changes in environmental regulation.

Legal risk

Banks like other business entities face legal risk if they do not comply with relevant
environmental regulation. They also face risk of direct lender liability for cleanup cost for
damages in case they actually take possession of pollution causing assets.

Reputation Risk

Due to increasing environmental awareness banks are prone for reputation risk if their direct
or indirect actions are viewed as socially and environmentally damaging. Reputation risks
emerge from the financing of environmentally objectionable projects.

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 3.3 GREEN BOND ANNUAL ISSUANCE

London is already a world leading hub for green finance – backed by deep and liquid capital
markets and a strong reputation for innovation. As the market grows, the City’s institutions
have a great chance to be the first choice for structuring and arranging green infrastructure
finance and issuing green bonds across the globe. In tandem, opportunities for UK-based
investors to invest in the global green economy should also be promoted. Whilst some see
there being competition between financial centers for green finance, global coordination
and cooperation is critical. Indeed, it is the global nature and outlook of London’s capital
market interactions, as well as the deep expertise in green finance and sustainable
investment that positions it so well to help drive and catalyze the green economy to the
benefit of societies and financial centers around the world. This means that enhancing
London’s global offer in green finance will have a global impact as well as help the UK meet
its very significant domestic investment obligations.

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 3.4 GGFI RANKS & RATINGS

GGFI 1
Centre
Rank Rating
London 1 402
Luxembourg 2 389
Copenhagen 3 385
Amsterdam 4 384
Paris 5 381
Shenzhen 6 380
Stockholm 7 379
Guangzhou 8= 376
Zurich 8= 376
Shanghai 10= 375
Beijing 10= 375
Brussels 12 374
Hamburg 13 370
Sydney 14 367
Singapore 15 366
San Francisco 16 365
Munich 17= 364
Seoul 17= 364
Los Angeles 19= 361
Frankfurt 19= 361
Tokyo 19= 361
Dublin 22 360
Hong Kong 23 359
Washington DC 24 358

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 GGFI 1
Centre
Rank Rating
Edinburgh 25 357
Milan 26= 356
Jersey 26= 356
Geneva 26= 356
Cape Town 29 355
Toronto 30= 353
Madrid 30= 353
Vienna 32 351
Rome 33= 350
Johannesburg 33= 350
Boston 35 348
Kuala Lumpur 36= 346
Dubai 36= 346
Isle of Man 38= 343
Chicago 38= 343
Abu Dhabi 38= 343
Mexico City 41= 342
Guernsey 41= 342
New York 43 341
Mumbai 44= 335
Bangkok 44= 335
New Delhi 46= 333
Moscow 46= 333

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 CHAPTER - FOUR

4.1 GREEN FINANCE IN BANGLSDESH

Importance of Green Finance in Bangladesh

The Climate Change Vulnerability Index (CCVI), collated by the global risks advisory firm,
Maple croft, rates Bangladesh as the country most at risk of the adverse impacts of climate
change among 170 countries. Maple croft highlight that this is because Bangladesh struggles
with the lowest adaption capacity to the predicted impacts of climate change, the highest risk
of flooding, a high risk of drought, a large reliance on agriculture, and a poverty rate of 31.5%.
In spite of this, Bangladesh has recently emerged as a low middle income country and aspires
to sustain the current trend of economic growth and social development which is reflected in
the ‘Perspective Plan of Bangladesh (2010-2021)’, also termed as ‘Vision 2021’. The plan aims
to enhance sustainable agricultural production, fostering industrial growth, mobilizing
internal resources and attracting foreign investments for employment generation. It also
targets addressing critical challenges like gaps in energy supply, infrastructure development
and vulnerability to climate risks. The country aspires to increase investment from 28% to
38% of GDP over the decade, facilitated by both public and private investments. Public
investment funds will mostly be deployed for infrastructure development, while the major
increase is targeted through mobilizing private sector resources from BDT 1.2 trillion (US$ 15
billion) in 2010 to BDT 4.8 trillion (US$ 61 billion) by 2021. A green mind-set is critical to help
Bangladesh achieve the targets set out in these documents in a sustainable manner.
Bangladesh currently stands at the crossroads of accelerated economic growth and green
transformation. There is a window of opportunity for Bangladesh to minimize environmental
damage and use its natural resources efficiently by adopting a sustainable growth path. If
implemented correctly, long term benefits of going green will include the opportunity for
increased employment through innovation; increased energy security and industrial
efficiency; and a reduction in the vulnerability of poor people to the adverse effects of climate
change. Greening the financial system will determine how Bangladesh faces its environmental
challenges throughout this pathway of growth.

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 4.2 GREEN FINANCING AGENTS IN BANGLADESH

Government of Bangladesh as a Source of Green Finance

Bangladesh is the first country among the least developed countries (LDCs) to come out with
a national strategy with a clear vision to effectively deal with climate induced challenges. The
Bangladesh Climate Change Strategy and Action Plan (BCCSAP) identified 44 programmed
under six thematic areas that demand proactive action from the GoB to better prepare
Bangladesh to deal with the challenges introduced by climate change. The thematic areas are:
food security, social protection and health; comprehensive disaster management;
infrastructure; mitigation and low carbon development; research and knowledge
management; capacity building and institutional strengthening. The strategy document
attaches special importance to low carbon development in conformity with the UN
Framework Convention on Climate Change (UNFCCC). BCCSAP paved the way for follow up
actions to be taken up by line ministries including the need for a financing mechanism from
domestic and external sources. In 2009-10 the Government of Bangladesh through an Act of
Parliament set up the Bangladesh Climate Change Trust Fund (BCCTF) under the Ministry of
Environment and Forests (MoEF) to finance adaptation projects from its own resources. The
intention behind setting up the BCCTF was to finance projects which improve climate
resilience of the nation in key sectors as identified in the BCCSAP. The other objective was to
reduce the gestation period of adaptation projects bypassing normal routes of the
development project approval process of the government. A Board of Trustees (BoT) with a
sizeable number of cabinet ministers and representatives of civil societies is constituted to
approve the projects. The BoT is aided by a technical committee which recommends projects
from sector ministries and agencies of the government. Between 2009-10 and the 2016-17
fiscal year, a total of BDT 3,100 crore taka (US$400 million approximately) has been allocated
to BCCTF. The support to the fund has been reduced in recent times due to misdirected
allocation of resources for non-adaptation purposes. Though the activities of the fund are
ongoing the pace of climate finance to home grown adaptation projects has drastically slowed
down.

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 Amount allocated by GoB to BCCTF1

Government of Bangladesh as a Recipient of Green Finance

Climate finance, which often also supports green growth and sustainable development,
comes through several bilateral and multilateral sources. Some international funding
mechanisms, outlined in greater detail below, have explicit objectives to promote green
growth. In the past, Bangladesh has encountered challenges to directly access international
climate finance. Lack of preparedness from an institutional perspective and a poor track
record of fiduciary governance are barriers which impact on the ability of Bangladesh to
directly access external finance. Given its extreme vulnerability to climate change, some
nations have shown their support in creating an innovative climate fund dedicated to
supporting Bangladesh develop its resilience against the adverse impacts of climate change.
In the early years of global awareness building about the risk of climate change, Bangladesh,
as a frontier country, was able to secure some early funding. This was through the formulation
of two well drafted key documents during 2008-09: the UNFCCC guided BCCSAP and the
National Adaptation Programme of Action (NAPA). Bangladesh Government’s allocation of
US$100 million each year in three successive years in the national budget for building its
Climate Change Trust Fund for combating the impact of climate change was applauded
internationally. The international community led by the UK, Denmark, Sweden and
Switzerland responded to these gestures through a DFID organized international forum in
London where the Government of Bangladesh presented a 'Climate Change Strategy and
Action Plan', and sought international support. The Government reiterated the

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Intergovernmental Panel on Climate Change’s (IPCC’s) estimate, that rising sea levels may
permanently submerge six to eight percent of the coastal and low-lying lands of Bangladesh
by 2050. Consequently, a US$110 million Bangladesh Climate Change Resilience Fund (BCCRF)
was created in 2010. This was further consolidated when Bangladesh was awarded US$110
million in grant and highly concessional loans through the Pilot Programme on Climate Change
(PPCR), funded by the Climate Investment Fund (CIF), the proceeds of which are currently
used under various green projects. Bangladesh was also a recipient of about US$135 million
from an unknown Middle-eastern philanthropist which went mainly to the construction of
cyclone shelters around the coastal lines of the country implemented under the supervision
of Islamic Development Bank (IDB). The Global Environment Fund (GEF), managed by the
United Nations (UN) and the World Bank is the other source of funding which is aimed at
restoring ecological balance and the prevention of environmental degradation.

In the near future, there are indications that Bangladesh will be accessing the Forest
Investment Programme (FIP), which is a US$250,000 technical assistance program prepare
bankable 11

projects. Further, a US$75 million loan-grant mix financing has recently been signed which
will be used mainly for research in ramping up efficiency in solar irrigation pumps through
promoting innovative practices. Finally, the World Bank has indicated it will make another
US$400 million available to Bangladesh if profitable projects in renewable energy can be
worked out. A detailed discussion on the various international sources of green finance
Bangladesh receives funding from is presented in the following sub-sections.

Bangladesh Climate Change Resilience Fund (BCCRF)

BCCRF, a multi-donor trust fund, was established in 2010 to finance adaptation and mitigation
projects in Bangladesh, with the mandate of developing the country’s resilience to climate
change vulnerabilities. As of 2014, the fund drew around US$187 million in contributions from
Denmark, the European Union (EU), Sweden, the United Kingdom, Switzerland, AusAID, and
USAID over six years. The World Bank served as the trustee of the fund and the party
responsible for providing technical backstopping to develop projects in line with the BCCSAP’s
core thematic areas. The World Bank provides technical backstopping to develop projects in

25
line with the BCCSAP core thematic areas. The Government, through the Ministry of
Environment and Forests, set up the BCCRF Secretariat and manages its day to day activities
under the close supervision of the World Bank. The BCCRF is guided by an Operational Manual
approved by the highest office of the Government. With a two-tier governance structure, the
projects are approved by the Governing Council headed by the core Cabinet Ministers along
with representation from the donors, World Bank and civil society. As per the guidelines, 10
per cent of the total funds are being routed through the Palli Karma Shohayak Foundation
(PKSF) to NGOs. The BCCRF is set to end in June, 2017, with unmet objectives as originally
schemed. However, the BCCRF Secretariat could still act as a window for accessing
international climate finance.

Global Environment Facility (GEF)

Established in 1991, the Global Environment Facility Programme is one of the largest and
longest standing trust-fund programmes administered by the World Bank. GEF grants
managed by the World Bank Group support low-carbon and carbon-resilient development in
client countries that help them adapt to a changing climate by investing in climate resilient
approaches. This is an unique funding mechanism which extends support to promote green
growth and sustainable development in the areas of sustainable conservation and
management of protected areas, integrating biodiversity conservation into production
landscapes, and designing sustainable financing to encourage long-term biodiversity
conservation The fund focuses on the prevention of carbon loss from forests, soil erosion and
salinization; recovery of marginal lands; and the introduction of climate risk insurance
through adaptation strategies to encourage sustainable land and water management. The
fund is also enhancing trans-boundary cooperation and management of shared water
resources in order to mitigate water pollution and build capacity and cooperation across river
basins, aquifers, and seas. GEF follows the STAR allocation principle under which it determines
the amount of resources that a given country can access in a replenishment period. Since
1991, Bangladesh has received total grants worth US$143.59 million from GEF to implement
41 projects. Notably, Bangladesh accessed the fund to support in combating desertification

26
in the country’s drought prone Northern part and to support an ADB funded Sustainable
Urban Transport project.

Climate Investment Funds

The US$8.3 billion CIF were set up by the World Bank in 2008. CIF accumulates funding from
14 developed nations and provides funding to 72 developing and middle-income countries in
urgent need of finance for battling climate change and reducing greenhouse gas emissions.
Contribution of different developed countries to CIF is displayed in Figure 2.

Bangladesh accesses the fund through three of these:

Pilot Programme for Climate Resilience (PPCR): The PPCR is a major provider of grant support
to climate vulnerable countries. Bangladesh first accessed the fund in 2010 and received
US$110 million, of which 45 per cent was provided as a grant (US$50 million) and 55 per cent
was provided as highly concessional loan support (US$60 million) for projects articulated in
the Strategic Programme for Climate Resilience document submitted with the Fund
Secretariat. The fund support is expected to contribute towards improving climate resilient
agriculture and food security, strengthening the security and reliability of fresh water supply,
sanitation, and infrastructure, and enhancing the resilience of coastal communities and
infrastructure. The provision of funding through loan support received wide criticism from
civil society because Bangladesh is an active member of the LDC forum in UNFCCC. As per the

27
original setup of the LDC forum, developed countries should provide grants, not loans, to
climate vulnerable countries for their adaptation needs.

Scaling up Renewable Energy in Low Income Countries Programmes (SREP): The investment
plan for Bangladesh under SREP was approved in November 2015 but the funding is yet to be
disbursed. Bangladesh requested US$75 million of financing for scaling up the use of
renewable energy in the nation. Up to US$35.75 million of the funding will be provided to
Bangladesh as a grant.

Forest Investment Programme (FIP): FIP provides funding to combat deforestation and forest
degradation with the view to promoting sustainable forest management. Bangladesh, in
January 2017, submitted an Expression of Interest to be selected as a Pilot Country for FIP.
The FIP subcommittee selected 15 countries, including Bangladesh to receive investment
support. Bangladesh with support of the World Bank is now in the process of preparing an
Investment Plan with a list of projects for future consideration for the FIP sub-committee.

Green Climate Fund (GCF)

Within the framework of the UNFCCC, GCF was founded as a mechanism to assist developing
countries in adaptation and mitigation practices to counter the adverse impact of climate
change. Bangladesh is one of the first recipient countries to access the Fund for a climate
adaptation project with support of KfW. The project, Climate Resilient Infrastructure
Mainstreaming, received funding worth US$40 million. Meanwhile, the Government of
Bangladesh has designated the Economic Relations Division (ERD), of the Finance Ministry as
the Designated National Authority for direct access to the GCF, while four institutions have
been identified as National Implementing Entities

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Clean Development Mechanism (CDM)

The Clean Development Mechanism (CDM) is one of the flexible mechanisms defined in the
Kyoto Protocol (IPCC, 2007) that provides for emissions reduction projects which generate
Certified Emission Reduction units which may be traded in emissions trading schemes. The
CDM helps developed countries with emission reduction targets under Kyoto in achieving
compliance by allowing them to purchase offsets created by CDM projects. Under the CDM,
projects are issued Certified Emissions Reductions (CER), with each CER unit equal to a
reduction of one ton of carbon dioxide equivalent. These CERs, or offsets, can be bought and
used by developed countries to meet their Kyoto commitments. Bangladesh has succeeded
very little in accruing CDM benefits.

Adaptation Fund

All developing countries party to the Kyoto Protocol are eligible to nominate an entity for
accreditation. Once the entity passes the Fund’s rigorous accreditation review, it may apply
for project funding, through direct access, accredited NIE’s can access financing and manage
all aspects of climate adaptation and resilience projects, from design through implementation
and monitoring. Bangladesh initially applied to be accredited to NIE but the application was
unsuccessful.

REDD+

Reducing emissions from deforestation and forest degradation (REDD+) is a mechanism

developed by Parties to the United Nations Framework Convention on Climate Change
(UNFCCC). It creates a financial value for the carbon stored in forests by offering incentives
for developing countries to reduce emissions from forested lands and invest in low-carbon
paths to sustainable development. Developing countries would receive results-based
payments for actions. REDD+ goes beyond simply deforestation and forest degradation, and
includes the role of conservation, sustainable management of forests and enhancement of
forest carbon stocks. The UN-REDD program and other multilaterals including the Forest
Carbon Facility and Forest Investment Program facilitated by the World Bank support

29
developing countries with financial and technical assistance to build the capacities to design
and implement REDD+ strategies. Bangladesh, meanwhile, with support of UNDP and FAO
has already formulated the REDD readiness roadmap, but it is yet to join the Forest Carbon
Partnership Facility to have access to REDD+ Readiness Fund. 2.2.8. Nationally Appropriate
Mitigation Action (NAMA) Facility This is a multi-donor program that supports the
implementation of Nationally Appropriate Mitigation Actions (NAMAs) that induce
transformational change towards a low-carbon development pathway. It conducts open
competitive calls for NAMA Support Projects. In the NAMA Facility’s fourth Call for NSPs,
national ministries and other legal entities were invited to submit NSP outlines for receiving
support for their NAMA implementation. NAMAs are considered to be voluntary climate
change mitigation measures by emerging economies and developing countries to be
embedded in their national development plans. By moving countries towards a low-carbon
development trajectory, NAMAs have the potential to significantly contribute to global efforts
to reduce greenhouse gas (GHG) emissions. Bangladesh being a LDC could not avail the
NAMA fund in consort to the INDC. Bangladesh did not submit any project till the third call.

Nationally Appropriate Mitigation Action (NAMA) Facility

This is a multi-donor program that supports the implementation of Nationally Appropriate

Mitigation Actions (NAMAs) that induce transformational change towards a low-carbon
development pathway. It conducts open competitive calls for NAMA Support Projects.

In the NAMA Facility’s fourth Call for NSPs, national ministries and other legal entities were
invited to submit NSP outlines for receiving support for their NAMA implementation. NAMAs
are considered to be voluntary climate change mitigation measures by emerging economies
and developing countries to be embedded in their national development plans. By moving
countries towards a low-carbon development trajectory, NAMAs have the potential to
significantly contribute to global efforts to reduce greenhouse gas (GHG) emissions.
Bangladesh being an LDC could not avail the NAMA fund in consort to the INDC. Bangladesh
did not submit any project till the third call.

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 4.3 ANNUAL REPORT OF BANGLADESH BANK ON GREEN FINANCE 2016-17

Sustainable banking appeared in conventional financial service institutions with the

management of environmental risks. The integration of sustainability into the banking sector
has taken two key directions. Firstly, the pursuit of environmental and social responsibility in
a bank's operations through environmental initiatives (such as recycling programs or
improvements in energy efficiency) and socially responsible initiatives (such as support for
cultural events, improved human resource practices and charitable donations). Secondly, the
integration of sustainability into a bank's core businesses through the integration of
environmental and integration of environmental criteria into lending and investment strategy
and the development of new products that provide environmental businesses with easier
access to capital. BB has been pursuing policy and instructions in all possible areas of
sustainable banking for banks and non-bank financial institutions (NBFls) to ensure
sustainable banking practices. Sustainable banking mainly focuses on three broad categories–
green banking, corporate social responsibility and financial inclusion.

Green finance in diGerent Products in FY17

Category of green finance SCBs DFls PCBs FCBs Fls Total

Renewable energy 47.9 4.3 2202.5 330.1 1859 4443.8
Energy eficiency 0 2.1 3118.8 0 277.4 3398.3
Solid waste management 0 0 7.3 0 0 7.3
Liquid waste management 101.3 0 8678.2 15.3 282.4 9077.2
Alternative energy 0 0 132.7 0 0 132.7
Fire burnt brick 441.1 11.9 4646.6 0 1085.7 6185.3
Non fire block brick 1 0 192.6 0 0 193.6
Recycling & recyclable product 283.2 0 5813 0 180.2 6276.4
Green industry 481.8 0 4212.2 152.6 900.2 5746.8
Safety and security of factory 40 0 1438 53.3 46.5 1577.8
Misc. 9.7 0 10.3 0 0 20.6
Others 1478.4 18.9 126.3 0 1.2 1605.9
Total 2884.4 BB. 30578.5 551.3 4632.6 38665.7
Source: Sustainable Finance, BB BB.

Green Banking
Generally Green banking includes: Sustainable banking, Ethical banking, Green mortgages,
Green loans, Green credit cards, Green savings accounts, Green checking accounts, Green
money market accounts, Mobile banking, online banking, Remote deposit, Waste
Management, Roof Gardening, and Green Financing. Bangladesh Bank is the first central bank

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which has taken real initiatives, according to a definite agenda in its vision and mission to play
a specific role in Green Banking by taking responsibility in safeguarding the planet from
unusual weather patterns, rising greenhouse gas and declining air quality. Bangladesh is one
of the most environmentally influenced country in the world. Keeping this in mind,
Bangladesh Bank established a Green Banking Policy in 2011 for proactively guiding the banks
and NBFls for encouraging them to adopt risk management practices to safeguard against
inevitable environmental concerns.

Direct and indirect green finance in FY17

Types of banks Direct green lndirect green Total green Sector-wise
finance finance finance contribution

SCBs 2884.4 4336.2 7220.6 1.3

DFls 18.9 0 18.9 0.0
PCBs 30578.5 395366 425944.5 77.7
FCBs 551.3 100973.6 101524.9 18.5
Fls 4632.6 9275.1 13907.7 2.5
Total 38665.7 509950.9 548616.6 100.0
Source: Sustainable Finance
department, BB.

Policy Initiatives
First policy instruction of BB regarding green banking was the issuance of guidelines on
Environmental Risk Management (ERM) for all banks and NBFls in January 2011. ln February
2011, a policy guideline for green banking was issued to the scheduled banks. A policy
guideline for green banking was issued to NBFls in August 2013 and to the new banks
(scheduled in 2013) in September 2013. To expedite the ongoing initiatives of banks and NBFls
at faster pace for sustaining the environment compatible to climate change risk, a minimum
target of direct green finance has set at 5 percent of the total loan disbursement/investment
from January 2016 onwards for all banks and NBFls. Banks and NBFls have been instructed to
form a ‘Climate Risk Fund’ according to the above mentioned policy guidelines for green
banking. To ensure the movement towards sustainability against the climate change, Banks
and NBFls shall allocate at least 10 percent of their corporate social responsibility budget for
climate risk fund and this funding can be done in both ways— by providing grants or financing
at reduced rate of interest. Meanwhile, banks and NBFls have been instructed to set up solid
waste management system, rainwater harvesting and solar power panel in their newly
constructed or arranged building infrastructure. Alongside, Guidelines on Environmental and
Social Risk Management (ESRM) for Banks and Financial lnstitutions in Bangladesh along with
an Excel- based Risk Rating Model have been issued vide SFD Circular No. 02/2017 which will
be enforceable from January 01, 2018 replacing the Guidelines on ERM to all extent. Besides,

32
by the direction of Honorable Prime Minister, and Bangladesh Bank’s instruction in
conformity with that, all the banks & Fls must ensure the establishment and activeness of
Efluent Treatment Plant (ETP) during financing to all possible clients.

Environmental risk rating of banks and NBFIs in FY17

Types of banks No. of projects No. of projects No. of rated Amount

applicable for rated projects disbursed in
EDD financed rated projects
(million BDT)
SCBs 1,774 1,723 1,681 43,699.8
SDBs 20 14 20 828.1
PCBs 81,799 71,442 61,784 2,125,465.3
FCBs 2,735 2,117 2,012 156,449.2
Fis 2,592 2,721 2,949 112,638.3
Total 88,920 78,017 68,446 2,439,080.7
Source: Annual report 2016-17, BB.

Green Finance
A total amount of BDT 548.6 billion was disbursed during FY17 by 50 banks and NBFls involved
in green finance. Sector-wise contribution of the total green finance shows that the PCBs
played the main role (77.7 percent) followed by FCBs (18.5 percent), NBFls (2.5 percent), and
SCBs (1.3 percent). Product-wise and direct and indirect green finance by banks are given in
Table 6.1 and Table 6.2 respectively.
Climate Risk Fund and Green Marketing
Total amount of utilization from climate risk fund and for green marketing by banks were
BDT 876.1 million and 48.2 million respectively in FY17. For the NBFls total amount of
utilization from climate risk fund was BDT 3.5 million and total expenditure for green
marketing was BDT 2.0 million in FY17
Utilization of Green Fund in FY17
Type of Bank/Fl Green Finance Climate Risk Fund Training and Total
Capacity Building
SCBs 7,220.6 7,227.5
DFls 18.9 0.0 0.0 18.9
PCBs 425,944.4 823.7 43.7 426,811.9
FCBs 101,524.8 49.9 0.0 101,574.7
Fls 13,907.7 3.5 2.0 13,913.2
Total 548,616.3 879.6 50.2 549,546.1
Source: Sustainable Finance Department, BB.

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Environmental Risk Management (ERM)
Environmental Risk can be regarded as a facilitating element of credit risk because of its
connectivity with environmental condition and climate change. Environmental Risk Rating
(ERR) is obligatory above the threshold as mentioned in guidelines on ESRM for banks and
NBFls. ERR is applicable for the projects as well as the credit facility that fall above the
threshold limit. All banks have conducted environmental risk rating in FY17 (Excluding
Shimanto Bank Ltd). The number of projects applicable for Environmental Due Diligence (EDD)
during the year is 88920. Total amount of BDT 2439.1 billion disbursed in 68446 rated projects
out of 78017 rated projects in FY17.

Disbursement trend of BB refinance scheme for green products

FY13 FY14 FY15 FY16 FY17

Bio gas 113.6 212.8 83.3 84.8 46.6
Solar home system (SHS) 40.2 32.2 87.5 114.7 35.3
Solar irrigation pump 0.0 17.9 26.5 0.6 0.0
Solar assembly plant 122.7 49.6 148.1 16.3 0.0
Solar Mini-grid 0.0 0.0 0.0 10.0 0.0
Efluent treatment plant 57.4 10.0 0.0 58 179.6
HHK technology in brick kiln 172.2 59.0 47.0 177.8 10.0
Vermicompost 0.0 0.0 1.1 1.6 1.3
Green lndustry 0.0 0.0 0.0 400.0 0.0
Safe Working Environment 0.0 0.0 0.0 35.7 55.3
Organic Manure from Slurry 0.0 0.0 0.0 0.2 0.1
Paper Waste Recycling 0.0 0.0 0.0 20.0 20.0
Energy Eficient Tech 0.0 0.0 0.0 0.0 0.6
Total 506.1 381.5 393.5 919.7 348.8
Source: Sustainable Finance Department, BB.

Product wise Refinance Disbursement in FY17

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Sectorwise Allocation of BB Disaster Management and Corporate Social Responsibility
Fund in FY17

Sectors Million BDT

Education 27.9
Health 7.0
Environment 0.5
Human resources development/capacity building 2.8
Financial inclusion/ women empowerment 7.5
Others 8.0
Total 53.7
Source: Sustainable Finance Department, BB.

No-Frill Accounts (NFAs) for Farmers and under-privileged group of the society
6.24 To ensure banking services for the poor marginal farmers, BB instructed the SCBs and
DFls to open NFAs for farmers in January 2010. Up to FY17, BB has gradually issued
instructions to these banks for opening nine categories of NFAs other than farmer’s account.
BB has also instructed all the banks to open NFAs for RMG workers, workers of small footwear
& leather product industries, and physically challenged persons.
6.25 The number of NFAs opened by the banks have been increased at the end of June
2017 compared to June 2016, due to continuous initiatives from the central bank. The number
of farmers' accounts reached at 9.2 million by the end of June 2017 which was 8.9 million in
previous year. As of end June 2016, sector-wise distribution of NFAs shows that the
beneficiaries under social safety net program opened 9190054 farmer’s account, followed by
hardcore poor (2287179 accounts), RMG workers (230143 accounts), BDT 10 account (338500
accounts) freedom fighters (201113 accounts), physically challenged persons (160176
accounts), small life insurance policy holder BDT 100 account (98932 accounts), food &
livelihood security (97782 accounts), national service program (33414 accounts), city
corporation cleaning workers (9734 accounts) and distressed rehabilitation (1277 accounts).
Thus, total number of all categories of accounts by the banks reached at 17074454.

Total number of NFAs as of June 2017

SCBs DFIs PCBs FCBs Total

Farmers 4694828 4042024 453212 0 9190054

Hardcore poor 1504316 770278 12585 0 2287179
Freedom fighters 196454 3034 1625 0 201113
Social Safety net
allowance 3526159 892656 3091 0 4421906
Food & livelihood
security 94528 1969 1285 0 97782

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 Poor rehabilitation
under Religion
Ministry
1105 0 172 0 1277
City corporation
workers 9703 0 31 0 9734
RMG Workers 42889 178 187056 52 230143
Leather lndustry
Workers 71 0 3996 167 4234
National Service
Program 18227 11571 3616 0 33414
Small Life insurance
Program
90652 5393 2887 0 98932
Physically
challenged 125707 34384 85 0 160176
Others 302641 28122 7737 0 338500
Total 10607280 5789609 677378 219 17074454
Source: Sustainable Finance Department, BB

School Banking
ln order to broaden and deepen the base of financial inclusion through including the
students under age of 18, BB has advised the banks to introduce school banking activities in
2010

Number of School Banking Accounts and Balance as of June 2017

Type of banks Number of accounts Balance (billion BDT)

SCBs 408100 1.60

DFls 130768 0.23
PCBs 793599 9.36
FCBs 1871 0.10
Total 1334338 11.28
Source: Sustainable Finance Department, BB.

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 4.4 INITIATIVES TAKEN BY BANGLADESH BANK ON GREEN FINANCING

Bangladesh bank has undertaken certain initiatives to help implement the relevant provisions
of environment-related acts enacted by the government of the country. In 1997, commercial
FIs/banks of the country were asked9 by the central bank to undertake necessary steps to
implement certain decisions in regard to environmental conservation and protection by the
National Environment Committee. FIs/banks of the country were asked to ensure that steps
have been undertaken to control environmental pollution before financing a new project or
providing working capital financing to the existing enterprises.10 According to the BB
requirements, the industrial units (that may cause environmental pollution) to be established
under bank credit would get permission for opening LC to import machinery only after
ensuring that the list of machines includes equipment to set up waste treatment plant.11 A
comprehensive guideline on Corporate Social Responsibility (CSR) has been issued by BB
where FIs/banks have been asked to concentrate hard on linking CSR at their highest
corporate level for ingraining environmentally and socially responsible practices and engaging
with borrowers in scrutiny of the environmental and social impacts.12 Online
financing/banking has been the starting point of GB in many instances. Bangladesh bank has
been encouraging commercial FIs/banks to undertake online financing/ banking activities.
FIs/banks have been brought under the purview of e-commerce with a view to providing the
customers with online-financing/banking facilities covering payments of utility bills, money
transfer and transactions in local currency through internet as well.13 Considering the
adverse effects of climate change, FIs/banks have been advised by BB to be cautious about
the adverse impact of natural calamities and encourage the farmers to cultivate salinity-
resistant crops in the salty areas, water-resistant crops in the water logged and flood prone
areas, drought-resistant crops in the drought prone areas, using surface water instead of
underground water for irrigation and also using organic fertilizer, insecticides by natural
means instead of using chemical fertilizer and pesticides.14 Bangladesh bank has also been
taking initiatives for the rehabilitation of cyclone and other natural disaster-affected people
of the country from time to time.

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 4.5 KEY GUIDELINES REGARDING GREEN FINANCING IN BANGLADESH

Here are some of the recommendations on the topic of initiating green financing/banking in
a wide arena. The comments are categorized according to focus as follows

Policy and regulation-related proposals for government

Environmental parameters should be incorporated in the business certificates like Tax
Payer’s Identification Number (TIN). Thus, the supervision of projects should be ensured by
government. This is one pragmatic step that the government can initially undertake.
Besides, corresponding authorities should impose enforcement to move environmental
hazardous industries to remote areas. The government can introduce rewards and impose
punishments in corresponding cases.

Policy and regulation-related proposals for BB

BB should undertake initiatives such as formulating policies, for sector divisions according to
hazard or environmental risk. These policies should be formed in such manner as to ensure
a homogenous environment for all the FIs/banks in green financing/banking implementation
progress. The environmental risk issues may be included in CRM guideline in this
connection. Above all, their initiatives should be parallel to the steps taken by the
government.

Initiatives proposed for individual FIs/banks

The best action of one individual institution is to build self-awareness. It can help the
environment through small initiatives like promoting car sharing, promoting the
environment through their advertisements, instead of cell formation one person could be
held responsible for environmental compliance, setting some environmental standard to be
maintained while providing loans and many others

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 FINDINGS

As Green finance has become one of the most important financial activity for sustainable
economy so some key findings has been listed here retrieved from this term paper.

• The promotion of green growth, growth that aims to minimize the negative
environmental impacts of economic operations, requires substantial financial
commitment.

• Bangladesh bank has undertaken certain initiatives to help implement the relevant
provisions of environment-related acts enacted by the government of the country.

• Developing countries in relation to green finance, particularly focusing on developing

countries that are not members of the G20.

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 RECOMMENDATION

The whole report contains detailed information about Global Green financing and
Bangladeshi Green financing. Throughout this term paper, I have summarized every view of
Green finance.

Here are some recommendation regarding this report and the topic:

➢ Green financing should be spread out to all countries.

➢ The United Nation may offer funding to developing countries.
➢ Bangladeshi private & public organizations should consider GF more.
➢ Every institution may promote Green financing.
➢ NGO & Public organizations can come forward to help Green financing.

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 CONCLUSION

Though many large and influential companies have started to introduce themselves as highly
committed to sustainability, they still have a long way to go. Financial industries can be
efficient and lucrative even following the principles of sustainable development. But it must
also initiate wide-ranging risk management systems which will lead to the effective
implementation of policies. Banks and financial institutions are supposed to play a key role in
adopting environmental and ecological facets as an integrated component of their lending
standards. This is expected to compel industries to incorporate environmental issues as an
integrated part of their investment. The key players of the industry will be motivated to use
environmentally friendly technologies and appropriate management systems. As our financial
sector is still in the policy formulation phase, it is very difficult to measure how far our banking
or financial industry has reached towards the ‘Green Financing’ vision. But this sector enjoys
a great opportunity to lead towards a green economy for a developing country such as
Bangladesh. No individual financial institution can claim full adoption of sustainable
development in their operations. But this is the crucial time where the central authority or
the policy makers of Bangladesh and the individual financial institutions should come forward
to implement a green financing concept for a sustainable economy.

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 BIBLIOGRAPHY

• UN Environment (2018), Green Financing. Retrieved from:

https://www.unenvironment.org/regions/asia-and-pacific/regional-
initiatives/supporting-resource-efficiency/green-financing
• Finex Folio (2018), Green Financing. Retrieved from:
https://www.bworldonline.com/green-financing/
• SMU (2017), Sustainable Finance. Retrieved from:
https://www.smu.edu.sg/perspectives/2017/01/31/need-sustainable-finance
• Green Growth Knowledge, Retrieved from: http://www.greengrowthknowledge.org
• Green banking policy (2016), Retrieved from:
https://www.bb.org.bd/pub/publictn.php
• Bangladesh Bank, retrieved from:
https://www.bb.org.bd/pub/annual/anreport/ar1617/index1617.php

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