Addressing Ecological Challenges: Sustainable green financing essential: Experts
Staff Reporter :
As a disaster-prone country, environmentally friendly and sustainable green financing is extremely important for Bangladesh, experts said.
Stakeholders including business leaders said banks and financial institutions are now giving more attention to such loans. With the aim of sustaining economic growth and moving further ahead, Bangladesh seeks to green its energy, manufacturing, transport and agriculture sectors.
A World Bank document prepared for the government states that more than USD 200 billion in climate financing will be required over the next two decades to support this vast undertaking. But securing that financing is a major challenge.
Bangladesh Bank’s Sustainable Finance Policy, banks can provide loans for 68 products under 11 categories of sustainable finance. Most of these products fall under green financing. Sustainable projects include agriculture, CMSMEs, environment-friendly factories, and socially responsible ventures. Banks have been instructed to allocate 20 percent of their current lending to sustainable projects. Among environmentally friendly projects, solar power generation, effluent treatment plants (ETPs), and environment-friendly brick manufacturing are major components. Banks must provide at least 5 percent of their total term loans to these sectors.
However, despite the central bank’s guidelines, the main reasons for falling behind in sustainable green financing are policy weaknesses, financial mismanagement, lack of awareness and the impacts of global climate change.
The absence of a clear framework for green financing, slow progress from banks and FIs, and a lack of eco-friendly financial management have contributed to this lag. Moreover, Bangladesh still lacks specific policies and structures required for sustainable green financing, making the financing process complicated and ambiguous. Consequently, entrepreneurs, investors and the general public remain insufficiently aware of the green economy, causing further setbacks.
Experts say ensuring the large amount of financing required for green growth is a major challenge. To address these problems, an effective public financial management (green financing) system and a comprehensive green-finance roadmap are critically important.
Architect Ehsan Khan, founder of Architects Ltd and principal urban designer; economist and Labaid Hospital Managing Director Sakif Shamim; and City Bank Managing Director & CEO Masrur Arefin shared their insights on the issue while talking with journalists.
The experts said for Bangladesh’s economy, sustainable green trade is no longer optional – it is an essential strategy for addressing environmental challenges, reducing pollution, building a sustainable economic base and improving global market acceptance. To achieve this greater objective, policies must be formulated focusing on two key pillars: implementation of effective financing mechanisms and reducing structural pressure on the capital, Dhaka.
Architect Ehsan Khan said that due to a weak policy framework, everyone is forced to move toward Dhaka. Constructing alternative cities and empowering local governments – not just assigning responsibilities – is essential. Urbanisation and political decentralisation must be implemented simultaneously.
He noted that urbanisation is one of the key drivers of Bangladesh’s economic growth, yet Dhaka-centric urbanisation is harmful to long-term GDP. A lack of labour, industrial and service-sector capacity, shortage of urban facilities, and overly centralised governance limit the benefits of urbanisation. Outside Dhaka and Chattogram, urban amenities are extremely limited. Effective urban planning and decentralisation require proper coordination and appropriate distribution of authority among local governments, elected urban leaders and central ministries and agencies.
Business leader Sakif Shamim said Bangladesh can learn from developed countries in reducing carbon emissions, lowering fossil fuel imports, increasing renewable energy production, and producing green-export products. He noted that Bangladesh has enormous potential for green growth. Although initial costs may seem high, long-term environmental and health benefits make such projects sustainable. If we want sustainable development, we must follow green growth.
He further said development must be environmentally responsible. Development that damages the environment cannot be sustained. Therefore, ensuring lending to green and sustainable sectors is now imperative. Ensuring sustainable and eco-friendly loans will also make it easier to secure low-interest foreign financing. If banks and FIs practice 100% environmentally responsible financing and initiatives, it will create a positive impact on society. What was once considered symbolic or cosmetic is now extremely important.
City Bank CEO Masrur Arefin said carbon-emission reduction, climate-risk assessment and sustainable green financing initiatives are crucial. City Bank is committed to integrating climate-related issues into its core business strategy and will continue working with domestic and international partners to expand climate financing. To survive in today’s global banking system, banks are acting in their own interest by addressing environmental pollution and climate change.
He pointed out that factories failing to meet environmental and greenhouse-gas emission standards face difficulties exporting their products internationally. This increases lending risks for banks. On the other hand, converting factories into green factories requires sustainable and green financing – creating opportunities for banks. Thus, sustainable financing opportunities are expanding in sectors like ETPs, renewable power plants, energy-efficient and resource-efficient projects, green factories, waste management, hybrid/electric vehicles, green buildings, and more.
The experts said Green Finance, Alternative Finance and Equity Finance can play transformative roles in ensuring economic stability and environmental responsibility.
Countries such as the EU and China have successfully issued large-scale green bonds, investing billions in renewable energy and green infrastructure, reducing environmental risks and creating sustainable jobs.