Assessing needs for sustainable financing

The technical cooperation module ‘Improved Coordination of International Climate Finance in the Context of the SDGs and Implementation of the 2030 Agenda’ of the GIZ in Bangladesh aims to improve the capacities of national and local actors to develop high-quality climate projects tailored to the requirements of different financiers. In this context, we have been contracted by GIZ Bangladesh to conduct a capacity needs assessment for the Sustainable Finance Department of Bangladesh Bank to enable them to formulate Sustainable Development Goals (SDGs) and Nationally Determined Contributions (NDCs) relevant strategies, policies and guidelines for the commercial banks and other financial institutions. The capacity needs assessment will suggest tools, guidelines, national and international training modules including online trainings, exchange visits among others, and help develop a Sustainable Finance Strategy for Bangladesh Bank with SDG and NDC relevance, taking into account international climate finance sources.

Challenges

In Bangladesh, there is a need to improve both coordination and strategic direction in accessing international climate finance to implement climate change mitigation and adaptation measures. There is no strategic approach to prioritising climate projects and no allocation to specific funding options; project proposals are thus not tailored to the requirements of different donors and alternative funding possibilities, for example, through the private sector, are not exhausted. The achievement of the SDGs is rarely considered in climate projects. Synergies and potential conflicts with the SDGs are barely addressed; the needs of target groups, particularly vulnerable groups and women at local level, are not explicitly considered. The capacities required to link national climate goals (NDCs) to SDGs and to secure funding to implement concrete projects are not available.

The main sources of funding currently used in Bangladesh will not suffice to cover the financing required to adapt to climate change. Bangladesh will have to diversify climate finance, approach further bilateral and multilateral donors and consider commercial funding options where possible. Access to climate funding largely depends on professionally prepared eligible project documentation that is strategically tailored to financiers’ requirements. In the face of scarce financial resources, the aim should not be to plan measures to implement the NDCs in an isolated way, but to consider them in conjunction with the SDGs of the 2030 Agenda. There is, however, a lack of capacities when it comes to linking the NDCs to SDGs and securing funding to implement concrete projects.

Our approach

To strengthen the policy framework for sustainable financing and for the capacity needs assessment, we will conduct extensive discussions with the Bangladesh Bank officials, selected financial institutions officials as well as representatives from the private sector engaging in green activities to identify challenges and opportunities for sustainable green financing. This will include background research and analysis of the general scope of action of Bangladesh Bank, existing policies and guidelines for green financing, environmental and social risk management activities related to commercial lending both within Bangladesh Bank, commercial banks, non-bank financial institutions (NBFIs), as well as an analysis of climate finance resources and instruments being used (e.g. green bonds) etc. Tools for SDG and NDC relevant financing will also be explored.

Outcomes

The findings of the study will support Bangladesh Bank to strengthen its capacities to improve the framework of sustainable finance in the areas of climate change mitigation, adaptation and climate finance. This will enable the bank, particularly Sustainable Finance Department, to develop strategies, policies and guidelines which contribute to Bangladesh’s NDCs and SDGs - both directly through the design of new or modification of existing green financial products by including SDG/NDC considerations, and by establishing an enabling framework for sustainable finance in the (commercial) financial sector.