The International Finance Corporation (IFC) is investing $15 million in the first-ever green bond to be issued by Khan Bank, Mongolia’s largest commercial financial institution. The bond is worth $60 million and has attracted another $45 million from international investors, including $35 million from Dutch entrepreneurial development bank FMO and $10 million from MicroVest Capital Management. The investment will enable the bank to fund renewable energy, energy efficiency, green buildings, green mobility, and climate-smart agriculture projects in Mongolia, which is facing significant environmental challenges. IFC’s subscription will also contribute to the sustainability of the country’s financial market.
The investment is expected to support Mongolia’s goal to increase green lending from 1.4 percent to 10 percent of all banking sector lending by 2030 and help mitigate climate change by avoiding tens of thousands of tons of greenhouse gas emissions annually. IFC advised Khan Bank on adopting a green bond framework for this issuance and plans to help the bank develop more climate and gender finance products.
Earlier this year, Khan Bank received a $130 million syndicated loan arranged by IFC to support micro, small, and medium enterprises, especially women-owned businesses, in Mongolia. Mongolia has committed to reducing greenhouse gas emissions by 22.7 percent by 2030, and the annual financing required to achieve its green development targets is estimated to be $413 million, with 80 percent from international investors and private sector players.
IFC has been a strong supporter of Mongolia’s sustainable finance development in the past decade, helping the country develop and adopt environmental and social risk management requirements for commercial banks and formulating Mongolia’s Green Bond Regulation and Guideline documents, enabling the issuance of green bonds in the local market.