Sustainability goes beyond addressing environmental concerns and achieving a country’s climate change goals. It should ensure that everyone’s needs and voices are heard to achieve sustainable development. Green bonds help many developing nations beyond building climate-resilient infrastructure or disaster risk mitigation in fostering inclusive economic growth. As a country with an emerging economy, Mongolia’s first green bonds will be heavily focused on supporting businesses led or owned by women.
In October, the Asian Development Bank (ADB) announced an investment of $12.5 million in Khan Bank in green bonds. This investment is the first on the Mongolian Stock Exchange. The money raised from the three-year bonds will be utilized to offer green loans. These bonds will focus mainly on assisting small and medium-sized businesses (SMEs) and microenterprises. SMEs, especially those run or owned by women, will benefit from this investment.
The European Bank for Reconstruction and Development (EBRD) had invested equally in the Khan Bank bond. As strategic investors, the EBRD and ADB have fully subscribed to the entire US dollar tranche. Local individual investors were allowed to purchase an extra $5 million tranche in togrog.
According to a report, in more than 70 years, Mongolia’s air temperature had a 2-degree Celsius rise. This shows how Mongolia is susceptible to the impacts of climate change, from extreme droughts and harsh winters, locally called “dzuds.” These environmental issues negatively hit the nation’s rural and nomadic inhabitants, who mainly depend on agriculture and cattle for their livelihoods. This in turn will pose a threat to the country’s economic stability.
With the portion of Mongolia’s first green bonds directed toward women-owned SMEs, these small enterprises can obtain green financing while promoting an inclusive economy. This support is vital in Mongolia since women-led/owned businesses are often more vulnerable to climate-related risks and economic shocks.
Small businesses are essential to Mongolia’s economy. According to an ADB report, micro, small, and medium-sized enterprises (MSME) made up the majority of all registered businesses and jobs in the country. However, a major obstacle to their expansion is credit availability. As of 2023, MSMEs accounted for less than one-third of all outstanding bank loans.
Despite making up nearly half of the workforce and having higher repayment rates, Mongolian women entrepreneurs confront unique hurdles since they are less likely than men to be approved for loans. Aside from this, focusing on women entrepreneurs aligns with the global efforts to promote gender equality in sustainable development. This is outlined in the United Nations Sustainable Development Goals.
ADB’s Director General for the Private Sector Operations Department, Suzanne Gaboury, said, “This landmark green bond offering deepens Mongolia’s green finance market while enabling inclusive investments to support small businesses, including those run by women, and improve the livelihoods of smallholder farmers.”
She also mentioned that ADB is happy to help Khan Bank, the biggest bank in Mongolia, with this historic green bond issue. This establishes a standard for inclusive green financing in Mongolia going forward.
A green taxonomy was established by Mongolia’s Financial Stability Council in 2019. This is to aid in identifying and categorizing investments according to their environmental sustainability. By 2030, the banking industry has pledged to meet a 10% green lending target. Only a small number of banks are now financing green investments. As of June 2024, their green loan book is still in its infancy, accounting for just 3.2% of all loans.