Mongolian Banks Choose Green Lending Competitiveness and Resilience
An estimated 2,200 staff from Mongolia’s 14 banks were trained on sustainable finance over the past year, thanks to a program being led by the country’s financial sector with support from IFC.
Sustainable finance, which takes into account environmental and social risks and business opportunities in lending decisions, is playing an increasingly important role in creating climate-smart, inclusive, and resilient economies, particularly in emerging markets. With the banking sector accounting for 95 per cent of the investment funding in Mongolia, sustainable finance has been an opportunity to help drive Mongolia’s green development while stimulating new markets, such as low-carbon financing.
Led by the Mongolian Banking Association (MBA) and supported by IFC and other partner agencies, CEOs of leading Mongolian banks signed in 2013 a Declaration on Sustainable Finance and established the Mongolia Sustainable Finance Initiative (ToC). These efforts quickly led to the successful launch, in December 2014, of the Mongolian Sustainable Finance Principles.
Mongolia is one of 10 pioneering emerging markets that have launched national policies, guidelines, principles, or roadmaps on sustainable finance. IFC is supporting these efforts through training and technical guidance, as well as knowledge sharing through the Sustainable Banking Network (SBN), a unique international learning platform for banking sector regulators.
Launched in September 2012 and facilitated by IFC, this network now comprises 19 countries from Asia, Africa, Eastern Europe and the Middle East, and Latin America. It is expected to double in size over the next three to five years.
All of Mongolia’s banks began integrating the Sustainable Finance Principles and guidelines into their operations in early 2015. Environmental and social risk assessment is being applied to all types of business loans of over 50 million MNT (US$ 25,087) and with a tenure longer than 12 months. Sector requirements are also being applied in mining, agriculture, construction, and manufacturing.
To date, 13 commercial banks have approved their sustainable finance policies along with the relevant procedures and risk-assessment tools, and have appointed dedicated staff for sustainable finance.
Mongolia held its 3rd Sustainable Finance Forum in Ulaanbaatar, in November 2015, recognizing the tremendous success of the ToC initiative. The objective was to discuss how the private and public sectors could jointly develop a green-financing framework to support investment in climate-smart projects.
Mongolia has a small economy, heavily focused on mining, a sector that can have an impact on fragile ecosystems and social structures, particularly the distinctive nomadic culture. Other important sectors of the economy are agriculture, construction, and transportation, which are linked to air pollution.
With this in mind, a National Green Development Policy was adopted in 2013, with a commitment to work toward a low-carbon economy; conserve natural, cultural and historical heritage; and promote human development.
The 3rd Sustainable Finance Forum was organized by the Mongolian Bankers Association (MBA) in cooperation with Xac bank, the Ministry of Environment, Green Development and Tourism (MEGDT), Bank of Mongolia (BoM), UB City Mayor's office, the National Chamber of Commerce and Industry (MNCCI), IFC, FMO, UNEP FI, and Partnership for Action on Green Economy (PAGE).
The approximately 400 participants included government representatives, regulators, banks and other financial institutions, development finance institutions and international organizations, clients, businesses, civil society members, experts, academia, and media representatives.
For more information on the Mongolian Sustainable Finance (ToC) Initiative, visit: www.mba.mn
For more information on the Sustainable Banking Network, visit www.ifc.org/sbn
