Bangladesh and its Partners are Launching the Bangladesh Climate and Development Platform to Leverage Adaptation and Mitigation Investments
IMF News, December 3, 2023
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- Published: December 3, 2023
Partnership and purpose
- International financial institutions, bilateral donors, and private sector partners are collaborating with the Government of Bangladesh to establish the Bangladesh Climate and Development Platform (BCDP), a project preparation facility, and to mobilize financial commitments for public and private investments for adaptation and mitigation following the Resilience and Sustainability Facility (RSF) arrangement.
- The collaboration aims to leverage additional private sector investment in the future and bolster Bangladesh’s efforts to address climate change impacts on vulnerable communities.
- The initiative is described as the first partnership of its kind in Asia.
Context and existing IMF/partner programs
- The $1.4 billion Resilience and Sustainability Facility (RSF) arrangement was approved by the IMF’s Executive Board in January 2023.
- World Bank programmatic series of Green and Climate Resilient Development (GCRD) Policy Credits total $1 billion.
- The ADB has ongoing funding for climate projects in Bangladesh, including processing a $400 million policy-based loan in 2023.
Financial commitments and instruments (exact figures)
- RSF arrangement: $1.4 billion.
- World Bank GCRD Policy Credits: $1 billion.
- ADB 2023 project financing allocated towards climate financing so far: 53 percent of $1.9 billion.
- ADB commitment for 2024-26 allocation for Bangladesh: $5.5 billion, with ADB committed to allocating more than half toward the GoB’s climate agenda.
- Korean Government pledge: $50 million.
- AIIB consideration at request of GoB: $400 million in 2024.
- GCF public and private sector projects supporting Bangladesh: totaling over $400 million.
- Bangladesh Renewable Energy Facility total: $430.5 million.
- EU-guaranteed EIB Loan component: $381.5 million.
- EU Grant component: $49 million.
- Technical Assistance within the grant: $6.5 million.
- Investment Grant within the grant: $42.5 million.
- Renewable Energy Facility expected mobilization: up to $763 million in investments.
- Renewable Energy Facility estimated contribution to capacity: an estimated 750 MWp of new renewable energy capacity.
- AFD processing a ~$320 million climate policy-based loan program.
- Private sector climate project financing breakdown:
- GCF contributions: $441.2 million.
- Other development partners, national implementing entities, and private banks: $135.5 million.
- Government of Bangladesh: $33 million.
- Aggregate approximate private-sector financing noted: ~$610 million.
- JICA loan agreement with BRAC Bank in early 2023: $90 million.
- World Bank decade commitment to climate change mitigation and adaptation financing in Bangladesh: $7.2 billion, representing 35 percent of total IDA commitments in Bangladesh across all sectors.
- Outcome cited: resilience-building measures have helped build greater resilience for 6.3 million people living in vulnerable coastal regions.
Reform agenda and policy measures supported
- RSF arrangement and GCRD credits support reforms to:
- Strengthen resilience to climate change.
- Advance decarbonization of the economy.
- Manage transition risks.
- Specific reforms include:
- Integrate climate and green dimensions into public procurement and public planning.
- Incentivize locally led climate actions.
- Scale up a national disaster risk financing strategy.
- Adopt a periodic formula-based price adjustment mechanism for petroleum products.
- Tackle air pollution and GHG emissions.
- Enhance the efficiency and resilience of water supply and sanitation services.
- Bangladesh Bank to update the Policy on Green Bond Financing.
- Expected outcomes of reforms and partner collaboration:
- Integrate climate risks into fiscal planning.
- Improve sensitivity of public investment management to climate-related challenges.
- Bolster climate-related risk management for financial institutions (including climate stress testing).
- Strengthen and institutionalize monitoring and reporting of climate-related spending.
- Fortify disaster risk reduction and management.
Institutional coordination and governance
- Ministry of Environment, Forest, and Climate Change (MoEFCC) formed the National Committee for Environment and Climate Change (NCECC) as an inter-ministerial platform headed by the Prime Minister.
- NCECC responsibilities: monitor implementation progress of national climate strategies, provide guidance and solutions for implementation problems, and consider implementation of decisions from UN climate conferences.
Project Preparation Facility (under BCDP)
- A multi-donor/multi-sector project preparation facility will be established within the BCDP to improve bankability of priority projects and support scalability to attract private investments.
- The facility aims to mainstream projects in development plans while reducing the financial burden on the public sector.
- The ADB and the World Bank are preparing the facility, enhancing coordination with other development partners.
Sectoral and programmatic support
- World Bank:
- $1 billion GCRD Policy Credit series to support transition to green and climate-resilient development.
- Support for alignment with Article 6 of the Paris Agreement and preparation of the first Article 6 carbon market transaction.
- Engagement in air quality management and financing pollution abatement in energy and industry sectors (which can generate carbon credits).
- JICA:
- Support BCDP through technical assistance, concessional loans, and grants.
- Adaptation priorities: flood control, river management, water supply, sanitation, fishery and food security.
- Mitigation priorities: renewables, energy-saving technology per the Integrated Energy and Power Master Plan, low-carbon urban transportation, forest and natural resources management.
- UNDP:
- Technical assistance on climate change-sensitive planning and budgeting, strengthened climate public finance governance, and local-level climate finance planning and budgeting.
- Technical support to the Bangladesh Securities and Exchange Commission on a Sustainable Development Goals Thematic Bond Framework, taxonomy upgrades, and impact management and reporting framework.
- GCF:
- Supporting several public and private sector projects totaling over $400 million across energy, agriculture, water management, and resilient livelihoods; several multi-country programs including Bangladesh are in GCF’s pipeline.
- EIB/EU (Team Europe):
- Bangladesh Renewable Energy Facility (see financial figures above) under EU Global Gateway strategy.
Private sector mobilization and instruments
- IFC:
- Will deploy own funds and crowd in other investors; explore a platform approach for financing mitigation and adaptation with innovative structures for risk sharing, currency hedging, and performance-based incentives.
- MIGA:
- Will provide investment guarantees to mobilize foreign direct investment, especially in renewable energy, and help reduce cost of climate finance.
- Standard Chartered Bank (SCB):
- Has introduced local green bond and first sustainable letter of credit in Bangladesh.
- Asserts that $1 invested in adaptation can yield up to $10 of economic benefits.
- Leading provider of blended finance solutions; supports blended finance platforms across Asia.
Technical assistance, access to climate finance, and capacity building
- UK Taskforce on Access to Climate Finance:
- Will support improved coordination of bilateral climate finance and assist Government of Bangladesh to increase access to all sources of climate finance via a country-owned programmatic approach.
- UNDP:
- Continued technical assistance for strategic climate change-sensitive planning and budgeting, climate public finance governance, and local-level climate finance planning.
- JICA:
- Technical assistance and financing to enhance project pipelines and align investments with Bangladesh’s climate agenda.
Expected impacts and scaling
- The Renewable Energy Facility is expected to mobilize up to $763 million and contribute an estimated 750 MWp of new renewable energy capacity.
- The AFD and Team Europe commitments aim to continue allocating a significant share of their Bangladesh financing to climate change (AFD: since 2015, more than 75 percent of AFD project financing provided to Bangladesh—over $1 billion—allocated to tackling climate change).
- Public-private financing packages and project preparation support are intended to increase project bankability and mobilize private capital, with private-sector climate projects currently receiving approximately $610 million across GCF, development partners, national implementing entities, private banks, and GoB contributions.
Notable outcomes cited from past engagement
- World Bank-supported investments in early warning systems, embankments, cyclone shelters, and afforestation have helped reduce cyclone-related fatalities 100-fold since independence and built greater resilience for 6.3 million people in vulnerable coastal regions.
International Monetary Fund press release, December 3, 2023.