Khan Bank, Mongolia’s largest commercial financial institution, has issued the first-ever green bond to be issued in the country, a US$60 million, five-year offering.
The International Finance Corporation (IFC) is investing US$15 million in the offering, which has attracted another US$45 million from international investors, including US$35 million from Dutch entrepreneurial development bank FMO and US$10 million from MicroVest Capital Management.
This investment will allow the bank to grow its climate portfolio by funding projects that support renewable energy, energy efficiency, green buildings, green mobility, and climate-smart agriculture in Mongolia. IFC says its subscription will also contribute to improved sustainability of the country’s financial market.
Mongolia is facing significant environmental challenges. Air pollution levels in its capital Ulaanbaatar are among the highest in the world, with coal and wood burning in homes and coal power plants all contributing to the pollution.
The country has also experienced significant climate change, with average temperatures increasing higher than the global average. Rainfall has also declined with more extreme climate-driven hazards, including heat waves, droughts and river floods, all expected to put pressure on the country’s unique fragile ecosystem.
IFC’s investment in Khan Bank’s green bond is expected to support Mongolia’s goal to increase green lending from 1.4% at present to 10% of all banking sector lending by 2030. The project is also expected to help mitigate climate change by avoiding tens of thousands of tonnes of greenhouse gas emissions annually.
“Green finance is a priority for the bank. With the steadfast support of our longstanding partners, IFC, FMO, and MicroVest, Khan Bank, as the largest bank in Mongolia, is proud to issue Mongolia's first-ever green bond.
Khan Bank chief executive officer Munkhtuya Rentsenbat says: “This transaction marks a significant milestone for our bank and Mongolia’s banking sector to promote green financing and sustainable economy. This investment will enable us to provide long-term loans to our clients and help us diversify our funding sources.”
IFC advised Khan Bank on adopting a green bond framework for this issuance and plans to help the bank develop more climate and gender finance products. Earlier this year, Khan Bank received a US$130 million syndicated loan arranged by IFC to support micro, small, and medium enterprises, especially women-owned businesses, in Mongolia.
“Green bonds are an effective way to draw in funding to finance green projects for the benefit of the country and its people,” says Allen Forlemu, regional industry director, financial institutions group, Asia and the Pacific, at IFC.
“By supporting the country’s first green bond, in line with international standards, IFC is helping set a standard in the market and we hope it will send a strong signal to other banks and corporates to tap into green finance and develop projects that will help the country meet its climate and development goals.”