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A major step forward has been taken to help Mongolia tackle its environmental challenges, with a new regulation approved by the Board of the Financial Regulatory Commission (FRC) to help grow green finance in the country. Following a memorandum of understanding between IFC and FRC, IFC assisted the FRC to draft the regulation on issuance and registration of the green bond in line with the internationally recognized Green Bond Principles. The FRC approved this regulation as part of the newly enacted Company Debt Instrument Registration Regulation. The Green Bond Regulation paves the way for Mongolia to establish a vibrant domestic green bond market and to finance green development projects.
While green bonds are becoming increasingly important in mobilizing finance for tackling climate, pollution, energy efficiency, transport and waste issues, no green bonds have been issued yet in the country. However, there is interest in issuing green bonds, with estimates that Mongolia has around $1 billion in green investment demand annually.
“The government of Mongolia has introduced several policies and commitments to build a low carbon, climate resilient future for the country. This latest move will help open up a market for green finance,” said Bayarsaikhan Dembereldash, Chairman, Financial Regulatory Commission. “We are working with IFC to set clear and consistent national standards for green assets and green bond issuance so more public and private players could take part in this development.”
At the Climate Ambition Summit last December, Mongolia committed to a higher Nationally Determined Contribution (NDC) target of 27.2 percent reduction in greenhouse gasses by 2030. According to an IFC study, $11.5 billion in climate investments will be required to achieve this new target.
“Mongolia’s geographic and climatic conditions offer unique financing opportunities for projects that support renewable energy, energy efficiency, green buildings, climate-smart agriculture, and clean urban services,” said Qamar Saleem, IFC’s Regional Manager Advisory Services for Financial Institutions Group in Asia and Pacific. “We’ve already seen interest from financial institutions and other organizations to invest in green bonds to tap into the climate and green finance opportunities in the country, which can help deliver a cleaner, more energy efficient and sustainable environment for the people of Mongolia.”
Mongolia’s harsh climate and heavy reliance on coal, combined with low energy efficiency, contributes to the country’s high annual per capita greenhouse gas emissions, relative to other countries with similar levels of economic output and income. Financing from green bonds could help spur renewable energy projects as well as investments in energy efficiency.
IFC is one of the world’s largest financiers of climate-smart projects for developing countries. IFC launched a Green Bond Program in 2010 to help catalyze the market and unlock investment for private sector projects that support renewable energy and energy efficiency. As of June 30th 2020, IFC has issued over $10 billion green bonds in 20 currencies.