ROLE OF CENTRAL BANKS REGULATORS IN SUPPORTING SUSTAINABLE

ROLE OF CENTRAL BANKS &REGULATORS IN SUPPORTING SUSTAINABLE FINANCE IN DEVELOPING COUNTRIES Atiur Rahman Professor, Department of Development Studies Dhaka University

NUDGING THE BANKS BEYOND SHORT-TERMISM TO SERVE GOALS OF SUSTAINABLE DEVELOPMENT • In developing countries financing is generally • Short-term in nature • With large presence of state-owned banks • And supervisory challenges • Financial system or market alone is not enough. • “Markets have hands but not soul or conscience” Conserving Nature Poverty for None Financing real economy Prosperity for all Post-Paris Climate Agreement & UN mandate for financing SDGs requires financing real economy

BROADER DEVELOPMENTAL ROLE OF THE CENTRAL BANKS • Policy innovations to confront climate vulnerabilities have already begun in some developing countries Socially Responsible • In Bangladesh, the central bank has come out of its conventional narrow shell. Central Bank of Bangladesh Inclusive Environment -ally Sustainable • Priority areas are- Agriculture, MSMEs, Women Entrepreneurs, Green Business and Industries • Mandatory ERM guidelines for banks • Sector specific policies & reporting “We tried many small things, monitored what works or does not, and asked why. ”

BANGLADESH BANK’S ROLE IN GREENING THE FINANCE SYSTEM • Besides greening its own energy supply, is leading by examples and demonstrating commitment • Green finance efforts funded by own resources as well as support from international development partners. • Using local bank liquidity for green finance. • Promoting and awarding green banking nationally. • Macro-prudential and supervisory moves to encourage green banking. Widening green initiatives with support from WB, ADB & JICA Green refinance schemes funded by Shariah-based banks (over 50 products now available) Bangladesh Bank Massive digitization towards ‘Paperless Office’ and other macro -prudential & supervisory moves Incentives for green banking. Bank CSR funds for green initiatives undertaken by CSOs

EARLY AND GRATIFYING OUTCOMES • Around 40 thousand projects received green finance (worth USD 7 billion), mostly through private banks. • As a result • 13 million people have access to off-grid energy. • SHS reaching 4. 5 million households replaced kerosene worth USD 225 million per year and saved 41 thousand m. ton of firewood. • Solar-powered irrigation will save huge amount of forex now spent on diesel.

JOURNEY AHEAD Policymakers • Greening finance is a journey and not a destination. • Central bank alone is not enough, highest level of policy ownership is needed. Regulators Policy & Implementation Ecosystem • Three fold role of public finance is crucial. I. Financial support (funding & subsidies) II. Market development (green bond) III. Rules and regulations • Coordination and capacity building of the policy and implementation ecosystem. Citizens Public & Pvt. Entities

Let’s move ahead, together, with resolve, curiosity, and humility …