Financing a green revolution in Bangladesh

A new-world order—one described by increasing numbers of economists as the climate economy—is arising. Rather than being fueled by smoke and coal, it will be propelled by clean energies, climate-resilient infrastructure, clean technologies, and sustainable finance. In reaction to global changes brought about by reduced-carbon manufacturing from developed and developing countries, trillions of dollars have started to be redirected towards such clean pursuits, opening up brand-new avenues for smart players.

The question posed to Bangladesh is direct yet difficult to define: shall we be reactive holders of climate disruption’s passport to their new planet? Shall we now instead stand tall as active builders of their cleaner, sharper, and strong economy?

Bangladesh Cannot Lag Behind:
At COP28, conducted in Dubai, leaders worldwide were united in their strong message to the world about transitioning from fossil fuels quickly, and this must be just and irreversible. The message did not just represent symbolic language. Rather, it signifies a global shift in economics, which stands to be the biggest seismic shift in global energy policy since the Industrial Revolution.
In Bangladesh’s case, it’s do or die. Experts have warned that 28 per cent of land in Bangladesh may be inundated due to sea-level rise by 2050. Climate change displacement of population from the coast to other areas in Bangladesh has already started. The loss to Bangladesh’s economy from climate change events every year can be estimated in terms of billions of dollars. The World Bank even warns about reduction in Bangladesh’s GDP by as much as 9 per cent by 2050 if it’s not properly managed.

However, actions on climate change do not solely serve environmental goals.

It is now “the most strategic economic decision of our time.”

Nations that pursue the climate economy will be driving forces in the global economy of the future. Nations that do not pursue it will be unable to recover. Bangladesh cannot be one of the latter.
COP28 Commitments: During COP28, Bangladesh reiterated four major elements of its commitments to be followed as part of its climate strategies.

Fast-Tracking Growth in Renewable Energy. Bangladesh committed to increasing the use of renewable sources to 40 per cent by 2041. Setting such goals is not only very ambitious but also imperative. Our overdependence on imports from global LNG sources and fossil fuels makes us vulnerable to fluctuations in global market prices and depletes our foreign exchange reserves; it simply isn’t sustainable for such a rapidly growing economy. The development of home-based solar power stations, large solar power stations, floating solar power stations on our reservoirs, and harnessing wind power from the Bay of Bengal can make such challenges less threatening to us.

Climate Change Adaptation & Loss & Damage Financing.
Bangladesh has always been a moral driving force in the global climate justice community. The loss and damage fund’s operationalisation at COP28 is one of the biggest triumphs for developing countries. Nevertheless, to be able to tap into these resources, developing countries must have strong institutions to ensure credibility in financial institutions and transparency in project pipeline development. Otherwise, we can lose precious financial assistance meant for the worst-hit nations like Bangladesh.

Carbon Market Involvement. Under commitments towards Article 6 of the Paris Agreement, Bangladesh is set to join global carbon trading markets soon. It definitely holds great promise if implemented properly and can usher in completely new sources of revenue. Regions like Asia and Africa have already raked in several hundred million dollars from carbon trading transactions involving high-quality carbon credits. Our own sources of renewable power generation, reforestation efforts, and methane reduction make us a potent player in this new market.

Private Sector Engagement. The government repeatedly stated that climate-resilient and smart growth cannot be accomplished just by public expenditure. The private sector must have a prime role to play here, not in lip service to CSR but in down-to-earth ESG investing. The global market starts favoring enterprises that make ESG considerations their integral part of business. In export-driven Bangladesh, it’s mandatory to make adjustments to survive in carbon-taxed global markets such as the EU. These commitments form a very sound blueprint. The challenge now would be to finance them.

The Growing Trend of Green Finance Instruments: The climate economy essentially constitutes a financial economy. Ambitious intentions would be mere words if they lacked financial backing. The positive part of this situation is that global green finance is rapidly witnessing historic growth. In 2023 alone, global issuance of sustainable bonds reached US$ 1.7 trillion. The carbon market is expected to reach US$ 250 billion by 2050. ESG assets would cross US$ 50 trillion by the end of this decade.

A role for Bangladesh must be carved out in this constantly changing global environment.

Climate Bonds. Climate bonds have proved to be one of the most potent financial instruments to finance large-scale climate change mitigation and adaptation efforts. The climate bonds invest finances solely in such initiatives as renewable power plants, climate-resilient roads, coast protection systems, recycling plants for waste materials, water purification plants, and transport systems.

Bangladesh has already started this by issuing guidelines for green bonds in Bangladesh Bank. However, it’s not large in scale to fulfill national requirements. Other nations such as Indonesia, India, and Chile have showcased their capabilities in aggressive climate bonds. Indonesia alone has succeeded in issuing over USD 1.25 billion of its sovereign green sukuk. India has tapped green bonds to the tune of US$ 6 billion to promote clean energy development. Chile, a pioneer internationally in climate finance, utilized green sovereign bonds to shift its energy structure.

Bangladesh can follow this tiered structure by issuing sovereign green bonds for resilience efforts, enabling large cities to issue municipal green bonds, and exploring corporate green bonds to be issued by industries to fund cleaner production lines and greener supply chains. If such initiatives occur with transparency and reliable data related to climate change, Bangladesh will be able to mobilise investment from global institutions to the tune of several billion dollars.

Carbon Credits. Carbon credits stand among the most promising yet not fully explored opportunities for Bangladesh. Carbon credits provide nations and organizations with avenues to earn money by saving emissions either via avoided deforestation, Solar Home Systems, Biogas Digester, Efficient Brick Kilns, Waste-to-Energy Plants, and Methane-Rich Rice Production techniques.

The potential in Bangladesh is broad. Projects such as the Sundarbans, one of the biggest mangrove forests in the world, have high blue carbon credits. Cook stove projects can cut emissions from households while improving public health. Municipal landfill methane digester projects can turn pure trash to profit.

To fully capitalise on such opportunities, Bangladesh must first construct their national carbon registry and build strong monitoring verification systems (MRV). They must also work in collaboration with worldwide carbon market experts to ensure development of high quality credits to sell to other countries. If such structures and capacity were in place, carbon credits would realistically be one of their greatest export commodities.

Renewable Energy Investments. Every year, it spends several billion dollars on imports of fossil fuels; this will be further threatened by global carbon taxes. Depending on renewable sources of energy must not only be a function of its environment; there must be security considerations.

The opportunities here are varied and promising. Solar power stations in northern districts, floating solar plants over Kaptai Lake, wind farms off the coast of Cox’s Bazar, and solar-powered irrigation systems for farmers can drastically change our energy scenario. Biogas plants can provide clean fuel to rural dwellers and minimize their dependence on wood and charcoal. Waste-to-energy solutions can stem the tide of wastage in cities and provide power to households.

The Bangladesh government will have to depend not only on public-private partnerships but also mobilise climate finance and encourage private investments following ESG criteria while increasing Green Micro Finance for rural households. Only then will renewable energy projects prove to be financially viable and resilient to risks.

ESG Integration and Profitability Alignment. The current global business environment faces a major shift where organisations failing to prove ESG compliance are losing their competitiveness in the market, while organizations embracing sustainability principles succeed.

The private sector in Bangladesh, especially export-oriented companies, must embed ESG considerations into their business strategies. Consumers in developed countries have become aware of the carbon footprint associated with their products. Investors provide cheaper capital to companies embracing sustainability. Regulatory bodies like the European Union have implemented penalties for carbon-intensive imports via the Carbon Border Adjustment Mechanism (CBAM).

For Bangladesh, this implies ESG considerations in business decisions aren’t ethical imperatives but business necessities.

The RMG industry has demonstrated what can be achieved. Today, Bangladesh has the maximum number of “green” factories in the global RMG industry. The country already possesses “LEED-certified factories” that not only use less power and water but also provide “higher quality” products. The “green” factories have ensured long-term contracts from buyers along with maximum “price premiums.” Changes like these need to happen in such industries as pharmaceuticals, agribusiness, steel, cement, shipyard, and food.

ESG and profitability aren’t necessarily synonymous. They’re becoming synonymous.

Investing in Climate-Smart Agriculture.
The agriculture sector in Bangladesh, whose performance ensures food security for the nation, faces extreme climate-related risks. Heat stress, salinity intrusion, fluctuating rainfall, pests, and rising water levels pose current risks to crops. The adoption of climate-resilient agriculture practices is thus very critical. This would encompass increasing awareness about salt-tolerant and drought-tolerant crops, expanding drip irrigation methods which essentially save water, implementing solar-powered cold storage to prevent post-harvest loss of foodstuffs, and increasing awareness about climate-resilient fishery systems which can sustain water salinity variations. The adoption of regenerative agriculture and vertical farming would provide key alternatives in densely populated cities.

Financing such a transition would need to be accomplished either by green microfinance services developed specifically to service farmers, additional agro-tech venture capital to finance innovations, climate-risk insurance to safeguard farmers from disasters, and public-private-partnership models used to fund rural renewable energy installations. A climate-resilient agri-value chain would be critical to food security.

Institutional Reforms: To effectively tap into green financing in Bangladesh, there must be some major institutional changes. The creation of Bangladesh Climate Finance Authority would help these institutions be controlled and coordinated from a central location by the government of Bangladesh. Enhancing climate change disclosure would ensure transparency in their carbon footprint management, their use of energy, water management systems, their treatment of wastes, and their governance structures.

The creation of a national green taxonomy would serve as a guide to ensure what constitutes a green investment, thus combating issues related to greenwashing. The development of human capital by creating training initiatives for climate analysts, carbon auditors, engineers, economists, and renewable energy technicians would ensure the human resource needed for implementing climate initiatives. The last area to be discussed would be to ensure greater promotion of green banking.

Green growth matters to Bangladesh. Green growth is not something fashionable in Western culture and brought to Bangladesh for adoption. Rather, it represents a source of survival for Bangladesh as far as economy is concerned. The country’s leaders in green expenditure will control worldwide trade in the coming tomorrow. The cost of failure to act will be increased export restrictions.

Bangladesh can be a powerhouse in solar and wind energy in South Asia. The Industries of Bangladesh can be global leaders in ‘Sustainable Manufacturing.’ The agriculture of Bangladesh can be ‘Agro-Ready to Extreme Climate Changes.’ The cities of Bangladesh can be ‘Smart & Livable.’ The economy of Bangladesh can be ‘eco-friendly and Thriving.’

The choices we make in this present era determine the fate of tomorrow’s generation.

A Call to Vision: Bangladesh has proven repeatedly that it can defy expectations whether through poverty reduction, rapid industrialization, women’s empowerment, or export success. The next frontier is green competitiveness. The tools exist. The capital exists. The ambition exists.

What remains is a collective commitment to green transformation is a recognition that the economic future of Bangladesh and the ecological future of Bangladesh are inseparable.

Green growth is not merely an agenda item. It is the only viable direction for our national development. It is our opportunity. It is our responsibility. It is our future.

Dr Serajul I Bhuiyan is a professor and former chair of journalism and mass communications at Savannah State University, Savannah, Georgia, USA. sibhuiyan@yahoo.com