From 2025, banks will be required to allocate 40% of their net outstanding loans to green and sustainable ventures.
Bangladesh Bank has revised the lending targets for green and sustainable ventures as part of the country’s efforts to achieve the UN’s Sustainable Development Goals (SDGs) by 2030.
In a circular, the central bank stipulated that banks must provide 40 percent of their net outstanding loans to green and sustainable ventures in the private sector from 2025. Of this 40 percent, 5 percent has to be allocated to green initiatives.
According to local reports, the directive comes at a time when the financial sector has exceeded the previous benchmark for disbursing loans to green and sustainable projects. Until now, banks were given targets to provide 20 percent of their total loans to eco-friendly sectors.
Sustainable finance accounted for more than 30 percent of the total loan disbursement in the first half of 2024, said Chowdhury Liakat Ali, Director of Bangladesh Bank’s Sustainable Finance Department. “As the disbursement has increased, we have revised the limit to assist the government to meet the SDGs and Nationally Determined Contribution [NDC] targets,” he added.
Bangladesh Bank has also stated that banks should adopt CAMELS and Sustainability Ratings in evaluating and monitoring the performance of their sustainable ventures. In addition, financial institutions must submit periodic reports to the central bank, detailing the progress on their sustainable lending portfolios and maintaining regulatory compliance.
Bangladesh is aiming for net zero carbon emissions by 2050.