Bangladesh: Steps to Promote Local Green Bond Market Identified

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Oct 2019
Bangladesh, October, 28 2019 - International Finance Corporation, a member of World Bank Group, in partnership with Bangladesh Bank, identified steps to promote the local green bond market in Bangladesh as a way to mobilise capital for climate-related initiatives.

International Finance Corporation, a member of World Bank Group, in partnership with Bangladesh Bank, identified steps to promote the local 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, said a press release.

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 nationally determined contribution (NDC) targets.

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 NDCs and broader development strategies, the study said.

The study identified market barriers those are hindering the Green Bond market development in Bangladesh.

It said that domestic investors had faced severe competition from alternative fixed income products such as national savings certificates as the NSCs are high return and low risk liquid assets.

It also identified that green investments had been struggling to compete financially with conventional investment opportunities due to fiscal benefit.

The study identified poor credit rating and management capacity and regulatory restrictions as barriers for domestic investors.

According to the study, excessive currency and country risk, unclear green impact and little verification and small project size are the key barriers to foreign investors.

‘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. IFC is ready to work with both regulators and financial institutions in Bangladesh to move the green bond market forward,’ said Wendy Werner, country manager of IFC for Bangladesh, Bhutan, and Nepal.

‘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,’ Werner added.

The IFC report said that Bangladesh’s fixed income market remained small and underdeveloped.

In 2018, the bond market totalled $16 billion, or about 6 per cent of the GDP as the investors and issuers alike face a wide range of barriers when investing in and issuing bonds, it said.

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, said the press release.

The central bank and 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 government of Bangladesh, along with the other signatories of the 2015 Paris Agreement, has recognised the risks and opportunities to transition to a low-carbon growth path.

IFC and Bangladesh Bank on Sunday jointly organised a workshop on Green Bond Market Assessment in Bangladesh at Intercontinental Hotel in Dhaka.

BB governor Fazle Kabir, finance ministry additional secretary Arijit Chowdhury, BB deputy governor Ahmed Jamal and BB general manger Khondkar Morshed Millat, among others, attended the event.



Source : New Age
 

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