Mongolia's largest bank goes green with historic $60m bond issuance

Mongolia's largest commercial bank, Khan Bank, announced the issuance of the country's first green bond, according to a statement from the bank and the International Finance Corporation (IFC). The $60 million bond, with a term of five years, will be used to increase lending to environmental projects such as renewable energy, energy efficiency, and climate-smart agriculture. The green bond was privately placed, and $35 million was invested by the Dutch development bank FMO, $15 million by the IFC, and $10 million by Microvest Capital Management, all of which were to support specific eligible environmental projects.

The cattle on the Hulunbuir summer grassland, Mongolia.

The use of funds is restricted to environmental projects as per the green bond clause. Investors believe this transaction will help Mongolia achieve its goal of increasing green lending from 1.4% to 10% of total lending by 2030. Mongolia also committed to reducing greenhouse gas emissions by 22.7% by 2030.

Mongolia is a landlocked country with environmental issues such as sandstorms in the southern Gobi desert and heavy air pollution in the capital, Ulaanbaatar, due to the use of coal for heating during the country's freezing winters.

According to Allen Forlemu, Regional Industry Director of the Asia-Pacific Financial Institutions Group at the IFC, the issuance is a historic move for Mongolia. It is crucial that the country achieve its climate goals. With the assistance of the IFC, Mongolian financial regulators issued regulations in 2021 to support the issuance of green bonds.

Although the global market for green debt instruments has grown significantly in recent years to around $500 billion per year, the emerging market sector of this market accounted for less than 20% in 2021. The IFC noted that Chinese issuers accounted for 63% of funds raised by green borrowers in the emerging market in 2021. This shows that there is still room for development led by other states as well.

DGB Group’s green bonds offer a chance to make an impact and receive an 8% steady return in a growing carbon market. Our projects support the steady and healthy development of local ecosystems and communities living in such areas. Only collective action can offer long-term solutions for all. And we must all play our part in safeguarding nature.