Green financing in Mongolia

Mongolia’s efforts to transition to a more sustainable and greener economy will require very substantial investment.  The Mongolian Bankers’ Association has estimated that approximately USD 7 billion is required for national projects focusing on energy efficiency, renewable energy, buildings, waste and transportation.  A further USD 4.3 billion is required to tackle air and soil pollution and quality.

Evidence suggests that, to date, there are limited efforts by Mongolia’s financial sector to support Mongolia’s transition to a greener economy.  To further highlight the challenge, Figure 5 below shows the last five years of capital investment for the protection and rehabilitation of natural resources.  As can be seen, in the three years until 2015, investment increased by approximately 26%.  However, in 2016, capital investment fell by 13%.  This is likely to reflect tightening economic conditions in Mongolia more generally.

Notwithstanding this, there are positive signs elsewhere that Mongolia’s financial sector is interested and participating in supporting Mongolia’s transition to a green economy.  Since 2013 Mongolia has held an annual Mongolian Sustainable Finance Forum (sponsored by the Mongolian Bankers’ Association), bringing together key government agencies, industry players and financial institutions to discuss how they can work together to support a greener Mongolia.

Link: More about “Sustainable Finance Initiative” 

Various initiatives underway demonstrate that limited funds are being made available for green and sustainable projects.  For example, in December 2016, XacBank entered an accreditation agreement with the Green Climate Fund (GCF), and in July 2017 GCF completed a USD 20 million transfer to XacBank as part of a USD 60 million project to support micro, small and medium-sized enterprises finance low-carbon initiatives in Mongolia.

Another positive sign is the announcement of the Mongolian Green Climate Fund at the 2017 Mongolian Sustainable Finance Forum.  This fund is the first dedicated financial vehicle for climate finance, and has been established in conjunction with the Global Green Growth Institute.  When launched, it is expected the fund will initially mobilize USD 8 – 10 million to fund energy efficiency retrofit projects in public buildings throughout UIaanbataar.

Whilst these initiatives are welcome, and should be encouraged to the greatest extent possible, it is clear that the challenges remain to increase financial flows in support of a greener Mongolia.


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