'Raise awareness, capacity-building for sustainable finance'

The financial sector in Bangladesh is still facing challenges in moving towards sustainable finance due to a lack of awareness and capacity-building, stakeholders said yesterday.

Sustainable finance is the process of incorporating environmental, social, and governance considerations into financial investment decisions, resulting in longer-term investments in sustainable economic activities and projects.

"Awareness is very poor in this sector," said Sakhawat Hossain, joint director at the Bangladesh Bank.

There is no alternative to enriching capacity-building in the financial sector, including non-bank financial institutions (NBFIs), he said.

Hossain made these comments while presenting a keynote paper at a daylong conference, titled "Sustainable Banking and Finance", organised by the Bangladesh Institute of Bank Management (BIBM) at its office in the capital.

"Everyone has a responsibility of sustainable finance. But we, even bankers, need to know more about this to get the desired outcomes," said Syed Mahbubur Rahman, managing director and chief executive officer of Mutual Trust Bank Limited.

"There is a need for a level-playing field in the financial sector so everyone follows the guidelines," he said.

"The contribution of NFBIs to sustainable finance is still small. It is confined to large and specialised institutions like IPDC, IDLC and Bangladesh Finance," said Mominul Islam, managing director of IPDC, an NBFI.

Most NBFIs are very small and lack the capacity to contribute to sustainable finance.

"This is the biggest challenge."

Not only NBFIs, but some banks are also suffering from sustainability issues, said Islam.

Masrur Arefin, managing director of the City Bank, said board members of banks should be involved in initiatives of sustainable finance.

Shah Md Ahsan Habib, Professor at BIBM, added: "The financial sector needs strong policy support from government agencies to create the kind of incentive and supportive framework for the agents of change of green growth through sustainable finance."

He urged effective collaboration among stakeholders, including the government, regulators, banks and financial institutions, investors and corporations.

AKM Sohel, joint secretary of the Economic Relation Division (ERD), said there was a huge shortage of funding for the climate crisis.

The National Adaptation Plan (2023-2050) needs $230 billion to be implemented.

"But we spend only $1 billion a year. If we want to reduce this funding crisis, we need a minimum of $5 billion by 2030," he said.

"We are happy that the Asian Infrastructure Investment Bank wants to invest $4.5 billion over the next five years. Climate change mitigation and adaptation are key sectors of this fund."

He asked: "Are we ready to accept this investment? Do we have climate units in our banks?"

Sharifa Khan, secretary to the ERD, added: "Most of us are not aware of the environmental cost of development."

Unplanned rapid urbanisation and industrial growth have been taking a heavy toll on the natural resources that provide critical ecosystem services, she said.

Bangladesh is an innocent victim of climate change-induced disasters. Our annual per capita carbon emission stands at 1.29 tonnes, yet we are the 7th most climate-vulnerable country in the world.

"Climate-induced disasters are eroding a substantial portion of our hard-earned growth," she added.