Bangladesh Bank (BB) Governor Dr Atiur Rahman has urged the global stakeholders to create clear and standard definitions on ‘green projects and green bond.’
He observed that there is no clear and standard definition yet on the two concepts.
“So, before getting into the Green Bond approach, we should reach some sort of consensus in cautious manner in defining Green Bond and its principles and methodology,” he said, while participating in the panel discussion on ‘Green Bond for Water’ at the Global Green Growth Forum 2014 in Copenhagen, Denmark Tuesday, reports UNB.
As per a message received in Dhaka, the central bank governor said that Green Bond issuers need to declare upfront use of proceeds for eligible green projects, whose environmental benefits can be described in a very transparent manner through third party external audit for verifying internal tracking.
He opined that green bond financing should be segregated or otherwise tracked with a formal process linked to the investment or lending process for climate action. Green Bond issuers are required to report at least annually on projects with due coverage on impact of the specific investment, he added.
During his discussion, Mr Rahman laid emphasis on multitude of challenges in sustainable management of water resources; public sector engagement for longer term infrastructural investment assessing national, zonal and city government levels in addition to private sector engagement at individual or collective levels.
He said water management projects in Bangladesh are not big enough in size or structure which may attract or succeed affordably raising green bond. But Green bonds on principle should have healthy appetite for clean water projects irrespective of size.
Therefore external finance at affordable cost is an important factor for sustainable water project investments. International investment banks, ADB, KFW, DFIs, IFC like the World Bank can raise green bond funds from international markets on the strength of their high credit ratings for onward financing of eligible ring-fenced sustainable water projects.
This can indeed open up new opportunity for lower income developing countries like Bangladesh, he said adding that boosting up activation of Green Bonds will require proper risk assessment, predictable and reliable revenue streams, setting tariff at municipal level, sufficient utility revenue to cover amortisation of new assets.
Corporatization of utilities that need to be up to the international standard, risk mitigation tools, professional management and performance based incentives and technical assistance to support for bankable projects are also needed.
He said since Bangladesh is at the forefront of the fight against climate challenge and working for climate adaptation, such a bond will attract huge interest from the global interests.
The central bank governor said the BB is very much in principle to concentrate hard on this highly demanding issue and would like to suggest the government to go after transforming proposed launch of Bangladesh sovereign bond to sovereign green bond.