December 3, 2023
PRESS OFFICER: Maria Candia Romano
Phone: +1 202 623-7100Email: MEDIA@IMF.org
Dubai – December 3, 2023. The Asian Development Bank (ADB), the World Bank, International Finance Corporation (IFC), Multilateral Investment Guarantee Agency (MIGA), Asian Infrastructure Investment Bank ( AIIB), Agence Française de Développement (AFD), the European Union and the European Investment Bank (EIB), as part of Team Europe, the Green Climate Fund (GCF), the Government of South Korea, Japan International Cooperation Agency (JICA), and the United Kingdom announced today a collaborative approach to support a package of measures for Bangladesh aimed at enhancing the nation’s ability to mitigate and adapt to the effects of climate change. [1] This collaborative support will bolster Bangladesh’s efforts to address the impact of climate change on vulnerable communities.
This partnership, the first of its kind in Asia, takes place in the context of the $1.4 billion Resilience and Sustainability Facility (RSF) arrangement approved by the International Monetary Fund (IMF)’s Executive Board in January 2023, the programmatic series of Green and Climate Resilient Development (GCRD) Policy Credits by the World Bank totaling $1 billion, and the ADB’s ongoing funding for climate projects in Bangladesh.
The RSF arrangement and the GCRD credits support reforms to strengthen Bangladesh’s resilience to climate change, advance the decarbonization of the economy, and manage transition risks. [2] Specific reforms supported by the IMF program and the GCRD aim to integrate climate and green dimensions into public procurement and public planning, incentivize locally led climate actions and scale up a national disaster risk financing strategy. Other reforms include adopting a periodic formula-based price adjustment mechanism for petroleum products, tackling air pollution and GHG emissions, enhancing the efficiency and resilience of water supply and sanitation services, and for Bangladesh Bank to update the Policy on Green Bond Financing. These reforms and the collaboration with partners are expected to create an enabling environment that will help attract additional climate finance.
Bangladesh’s climate reform agenda: an innovative approach to addressing climate change
Inter-ministerial and inter-agency coordination. Bangladesh is one of the most vulnerable countries to the impact of climate change and has been a forerunner in climate change adaptation and disaster risk preparedness. To enhance government coordination, the Ministry of Environment, Forest, and Climate Change (MoEFCC) has formed the National Committee for Environment and Climate Change (NCECC) as an inter-ministerial platform headed by the Prime Minister. The NCECC will monitor implementation progress of the national climate strategies, provide guidance on and solutions to the problems for implementing the strategies and consider implementation of decisions taken at the United Nations’ conferences on climate change.
Development partners are pledging their support to the Government of Bangladesh’s climate agenda in many ways:
Launching the Bangladesh Climate and Development Platform (BCDP). The Government of Bangladesh (GoB) and its MDB and bilateral development partners are setting up the BCDP to implement the country’s climate agenda. The BCDP will generate a robust pipeline of climate projects, integrated with a financing strategy. This integrated approach together with the cooperation between the GoB and the partners is expected to integrate climate risks into fiscal planning, improve the sensitivity of public investment management to climate-related challenges, bolster climate-related risk management for financial institutions including climate stress testing, strengthen and institutionalize the monitoring and reporting of climate-related spending, and fortify disaster risk reduction and management.
Establishing a Project Preparation Facility under the BCDP. To improve the bankability of priority projects, a multi-donor/multi-sector project preparation facility will be established within the BCDP. This will also support scalability to attract private investments across Bangladesh, mainstreaming projects in development plans, while reducing the financial burden on the public sector. The ADB along with the World Bank are preparing the facility, which will enhance coordination jointly with other development partners.
Policy-Based Lending ($1.85 billion). The ADB is processing a $400 million policy-based loan to Bangladesh in 2023. About 53 percent of the ADB’s 2023 project financing ($1.9 billion) has been allocated towards climate financing so far, and the ADB is committed to allocating more than half of its 2024-26 allocation for Bangladesh ($5.5 billion) in support of the GOB’s climate agenda. The Korean Government also pledged $50 million in support of the GOB’s climate agenda, and AIIB is considering the provision of an additional $400 million in 2024 at the request of the Government of Bangladesh.
World Bank funding towards sustainable development. The World Bank’s $1 billion in Green and Climate Resilient Development Policy Credit series financing is helping the country’s transition to green and climate-resilient development. [3] The World Bank is also supporting Bangladesh’s alignment with Article 6 of the Paris Agreement, to better access and utilize international climate and carbon finance, through enhanced institutional arrangements and preparation of the first Article 6 carbon market transaction. Through its engagement in air quality management, the World Bank will finance pollution abatement measures in key sectors such as energy and industry, which can also generate carbon credits.
Improving access to climate finance.The UK, through its Taskforce on Access to Climate Finance, will support improved coordination of bilateral climate finance, as well as support to the Government of Bangladesh to increase access to all sources of climate finance, building on a country-owned programmatic approach to climate finance. [4]
The GCF is supporting several public and private sector projects, totaling over $400 million, including national direct access entities and in sectors such as energy, agriculture, water management and resilient livelihood. In addition, several other multi-country programs, which include Bangladesh, are in the GCF’s pipeline.
Bangladesh Renewable Energy Facility ($430.5 million). As announced at the EU Global Gateway Forum on 25 October 2023, the European Union and the EIB, as part of Team Europe, have committed to providing a “Bangladesh Renewable Energy Facility,” consisting of an EU-guaranteed EIB Loan of $381.5 million. This loan will support renewable energy projects, which will contribute to a sustainable green transition of Bangladesh’s power sector and to the achievement of the country’s climate mitigation targets. The Renewable Energy Facility is expected to mobilize up to $763 million in investments and to contribute to the installation of an estimated 750 MWp of new renewable energy capacity in Bangladesh. The EIB support will be accompanied by an EU Grant worth $49 million, including Technical Assistance ($6.5 million) and an Investment Grant ($42.5 million) provided under the EU Global Gateway strategy, as part of the Team Europe Initiative on the Green Energy Transition.
Agence Française de Développement (AFD) is processing a~$320 million climate policy-based loan program, aligned and complementary to the IMF, WB, and ADB commitments. Since 2015, more than 75 percent of AFD project financing provided to Bangladesh (over $1 billion) have been allocated to tackling climate change. This strong commitment will continue in the coming years, in coordination with Team Europe and local and international partners, in favor of the GOB’s climate agenda.
Technical Assistance and Financing. JICA will support the BCDP by enhancing its project pipelines aligning Bangladesh’s climate change agenda through a combination of technical assistance, concessional loans, and grants. In support of adaptation JICA’s work includes flood control, river management, water supply, sanitation, fishery and food security. Mitigation, infrastructure improvements, including renewables and energy-saving technology introduction in line with the Integrated Energy and Power Master Plan are priorities together with low-carbon urban transportation and forest and natural resources management.
The United Nations Development Programme (UNDP) will continue providing technical assistance to the GoB on strategic climate change-sensitive planning and budgeting management, strengthened climate public finance governance, and in more effective planning and budgeting for climate finance at the local level. UNDP is also engaging with the GoB in the analysis of possible bond solutions by providing technical support to the Bangladesh Securities and Exchange Commission in designing a Sustainable Development Goals Thematic Bond Framework, upgrading the existing taxonomy, and in drafting an impact management and reporting framework.
Private Sector Financing (~$610 million).Bangladesh is currently receiving funding for nine private-sector climate projects with contributions of $441.2 million from the GCF, $135.5 million from other development partners, national implementing entities, and private banks, and $33 million from the Government of Bangladesh. JICA will expand support for Bangladesh’s green transition and green industrial diversification through its direct financing facility to the private sector in addition to concessional loans to the government. JICA signed a $90 million loan agreement with BRAC Bank in early 2023 to support expanding its green financing for projects aligned to the Sustainable Finance Policy set by the Bangladesh Bank.
The IFC will deploy its own funds and crowd in other investors for climate financing for the private sector of Bangladesh. Under this initiative, the IFC will explore a platform approach to channel financing for both mitigation and adaptation activities by deploying innovative structures on risk sharing, currency hedging and performance-based incentives. MIGA will leverage its rich experience in Bangladesh to provide investment guarantees to mobilize foreign direct investments, especially in the renewable energy sector, and help reduce the cost of climate finance.
Standard Chartered Bank (SCB), as the largest and longest-standing multinational bank in Bangladesh, has been leveraging its local market knowledge, innovation, and its robust green and sustainable product lineup to introduce new products to support local clients in financing their climate ambitions, launching the first local green bond and the first sustainable letter of credit. SCB is fully committed to supporting climate adaptation in Bangladesh, where $1 invested in adaptation can yield up to $10 of economic benefits. SCB is also a leading provider of blended finance solutions and has supported blended finance platforms across Asia.
Quotes:
Kristalina Georgieva, Managing Director of the International Monetary Fund, said “Bangladesh has been at the forefront of those warning about the elevated risks of climate change for vulnerable countries as well as stressing the importance of international collaboration to support those in need. Bangladesh is also making significant strides to bolster climate resilience, adaptation, preparedness, and conservation. We commend Bangladesh’s steadfast implementation of their climate agenda and their tireless efforts to promote global collective action to address climate change.”
Ajay Banga, World Bank Group President said “Increasing climate risk is affecting the lives and livelihoods of millions of people in Bangladesh. The country has demonstrated leadership in disaster preparedness and adaptation. Today’s announcement once again shows Bangladesh’s strong commitment in collaborating with international and local partners to address climate challenges. The urgency is high, and we all need to work together to share knowledge and provide financing to the countries that are most vulnerable to the impacts of climate change."
Masatsugu Asakawa, ADB President, said: “Climate risk is growing and addressing it requires progressive action and strong partnerships. With commitment and leadership, Bangladesh has made significant progress in advancing its climate agenda. The NCECC will forge a whole-of-government approach to advance the climate agenda, and the Bangladesh Climate and Development Partnership will facilitate increased and coordinated support to Bangladesh. ADB is firmly committed to working with all development partners to support Bangladesh in the fight against climate change.”
Rémy Rioux, CEO of Agence française de Développement, said: “As one of the world's most vulnerable countries, Bangladesh has become a pioneer in adaptation to climate change. Together with the Government of Bangladesh, AFD is committed to tackle climate change for many years. The momentum behind this package clearly demonstrates that only a coordinated response can protect the population from climate-related disasters on a large scale. We are proud of this innovative partnership with the IMF as part of the Finance-in-Common movement.“
Werner Hoyer, President of the EIB stated: “As the EU’s Climate Bank, the EIB is supporting the global transition to a low-carbon economy through renewable energy investments. I am happy that we can join forces with fellow international financial institutions and partners, like Bangladesh, that are committed to accelerate this process and promote development through climate action.”
Mafalda Duarte, Executive Director of the GCF noted: “The GCF is helping Bangladesh build resilience and transition to low-carbon growth. We will continue partnering with national and international entities to scale up climate finance where it is most needed. The new climate development partnership launched by Bangladesh’s government and partners is an excellent model for mobilizing coordinated investments. This innovative collaboration will help accelerate climate adaptation and resilience investments through the Resilience and Sustainability Facility. The GCF fully supports this model approach of aligning finance, technical expertise, and policy reforms to implement Bangladesh's climate strategies. We must work as one to turn climate commitments into climate action on the ground."
The Rt Hon Andrew Mitchell, Minister of State for Development and Africa in the Foreign, Commonwealth and Development Office, said “As one of the most vulnerable countries to the effects of climate change, it is vital that Bangladesh has access to climate finance to mitigate the impacts of climate change. Through the Bangladesh Climate Development Partnership - the first of its kind in Asia - the UK will be working with global partners to support the coordination and implementation of climate finance to build a more sustainable and climate resilient future for Bangladesh.”
Naser Ezaz Bijoy, Chief Executive Officer, Bangladesh, Standard Chartered Bank, said, “We’re delighted to be supporting this new climate partnership, lending the wealth of Standard Chartered’s market experience and expertise across blended finance, to scale up finance for adaptation and mitigation in Bangladesh. Efforts across stakeholder groups are needed to accelerate the transition to a low-carbon, nature-positive and climate-resilient economy and we look forward to working with our cross-sector partners on this project.”
[1] These institutions and donors have been engaging on a long-standing basis in providing financial and technical assistance in support of Bangladesh’s efforts to enhance its climate resilience.
[2] This cross-sectoral reform agenda has been informed by the World Bank's Country Climate and Development Report (CCDR) for Bangladesh, completed in 2022.
[3] Over the past decade, the World Bank committed $7.2 billion to climate change mitigation and adaptation financing, representing 35 percent of total IDA commitments in Bangladesh across all sectors. The World Bank supported Bangladesh to invest in early warning systems, embankment, and cyclone shelters, along with afforestation activities, which that has helped reduce cyclone-related fatalities 100-fold since independence. This has helped build greater resilience for 6.3 million people living in vulnerable coastal regions.
[4] The UK will draw on experience of other Taskforce pilot countries (for instance, Jamaica and Rwanda) where similar approaches are being coordinated by the IMF and MDBs.
