From June 13 to 16, international forum Sustainable Finance Week-2023, was held under the auspices of the Mongolian President with theme “Financing a green and SDG aligned future”. The event was held by the Office of the President, the Mongolian Sustainable Finance Association (MSFA), Institute of Finance and Sustainability (IFS), International Finance Corporation (IFC), Association of Sustainable Banking and Financial Institutions, Trade and Development Bank and other partner supporting organizations. The Sustainable Finance week is held within the framework of the 10th anniversary of the implementation of the Sustainable Finance Program in Mongolia and the fifth anniversary of the establishment of the MSFA.
Opening the forum, President U.Khurelsukh emphasized the need to fully define the comprehensive green development policy, improve the legal framework, ensure coordination and cooperation with stakeholders, and create a green business environment. He noted the importance of Mongolia actively participating in the carbon market, clarifying the environment for carbon tax and green financing, rationally introducing innovative financing tools, and creating a legal framework. In this context, he clarified that they would work more intensively with the government, private sector, foreign and domestic investors, and international organizations to increase sustainable financing.
At the forum the participants discussed how to reduce the negative effects of climate change, increase efforts, and to solve the financing of planned projects and programs.
For Mongolia, it is estimated that 11.5 billion USD will be required to implement the “Nationally Determined Contribution”. In this context, they are working to spend at least one percent of the gross domestic product every year to combat climate change and desertification. Private sector organizations have also been actively working in recent years to increase sustainable funding. For example, during last year’s Sustainable Financing Week Conference, Mongolia approved its sustainable financial roadmap, and the financial sector decided to significantly increase green loans by 2030. In addition, sustainable financing principles and methods have been developed in accordance with international standards. At the same time, commercial banks successfully issued the first green bond in the international market and planned to issue the first green bond in the domestic capital market during the forum.
It is internationally recognized that making a sustainable financing system is a key driver for achieving “Vision 2030” and the Sustainable Development Goals, including major goals related to the environment and climate, has become a priority. For example, the Working Group on Sustainable Financing of the G20 has included the mechanism of increasing the financing flow of the SDGs as one of its main directions in 2023.
The Green Finance International Leadership Program is a global recognition of the efforts of public, private, and international partnerships to promote and implement sustainable finance. A good example of this is the outstanding activity being carried out within the framework of the 10th anniversary of Mongolia’s Sustainable Financing Program. The program includes plenary sessions and panel discussions on sustainable finance trends and topics including private sector leadership and policy levers, sustainability and climate risk reporting, transition financing, social impact finance, financing environmentally based technology solutions, and the role of national green banks.
More than 250 to 300 participants, including global sustainable finance leaders, industry experts, analysts, investors, members of the International Sustainable Banking and Finance Federation (SBFN), and members of the MSFA, are participating in the Leadership Program. Participants will share their knowledge and experience about the current situation of sustainable finance and the main development goals of their country through open presentations and discussions organized as part of the event. At the same time, it was given an opportunity to start cooperation to create a sophisticated financial system.
On June 15, there was a panel discussion on taxonomy of green and sustainable finance and its important role in promoting sustainable investment, transparency and reducing the risk of greenwashing. In the discussion it was mentioned that as the number of taxonomies increases internationally, there is a call for comparability, coherence, and consistency in sustainability reporting. This will create a comprehensive, standardized system for identifying, measuring, and reporting sustainability issues. Therefore, aligning taxonomies can improve transparency and reporting, reduce the cost and complexity of data collection and analysis, and create conditions that attract investors to sustainable investments. Investors will be able to identify sustainable investment opportunities based on more sophisticated information, and as a result, there will be an increased tendency to consider sustainability indicators in the investment decision-making process. This section discusses strategies and practical measures for aligning the revised taxonomy with the existing taxonomy.
Afterwards the discussion, they approved of the “The Taxonomy of Financing of SDGs”. Minister of Finance B.Javkhlan, Chairman of the Financial Regulatory Commission D.Barsaikhan, Governor of the Mongol Bank B.Lkhagvasuren, and Executive Director of the Deposit Insurance Corporation S.Baatarsuren reviewed the order to approve the Taxonomy of Financing of Mongolia’s SDGs.
With the financing of the Ministry of Finance and the United Nations (UN) SDG joint fund within the framework of the joint program “Introduction of the Integrated Financing System for Sustainable Development in Mongolia” and the UN Development program, MSFA developed the SDGs Financing Taxonomy in accordance with international and domestic good practices and standards, reflecting the opinions and recommendations of stakeholders and characteristics of Mongolia. Thus, Mongolia became one of the first countries in the world to adopt the SDG taxonomy.
For Mongolia, the National Green Taxonomy, or the unified definition and taxonomy for recognizing activities and projects that can provide green financing, was first developed, and approved in 2019. According to this, banks and non-bank financial institutions register their green loans, prepare industry-wide consolidated reports, and submit the measurement of the flow of green loans of them from the private sector. In addition, the first green bonds, insurance products and investment funds have been created according to the categories and activities in the green taxonomy.
However, due to the lack of a taxonomy of SDG financing, or a category that includes social sectors, there is no common standard for the development of credit products in this area, large investments, and various bond financing in accordance with the SDGs, and the private sector’s SDG-oriented investment and financing flows are not registered. By approving this taxonomy, it is possible to register and report the contribution of any financing and investment flow to the SDGs and to increase the confidence of foreign and domestic investors.
The Financing Taxonomy of the SDGs is based on the classification of the National Green Taxonomy, and by adding social sectors such as education, health, information and communication, and accessible infrastructure to it, economic activities corresponding to the 17 Sustainable Development Goals and 142 indicators are classified into 12 main sectors and implemented. It also includes criteria for measuring, verifying, and reporting impact.
Within the framework of the Nationally Determined Contribution target and Vision 2050, by 2030, Mongolia will reduce greenhouse gas emissions by 27.2 percent, adapt to climate change, improve quality of life and human development, and create quality education and good governance. It is estimated that 11.7 billion USD will be needed to meet the Nationally Determined Contribution target, and 43 billion USD will be needed to meet the SDGs until 2030.
For this, there is a need to direct current and future funding flows to Mongolia’s sustainable development goals, strengthen and coordinate multi-party cooperation. With the adoption of the SDG taxonomy, it is possible to make a significant contribution to increasing public and private funding, attracting new resources, and opening new market opportunities in support of the above objectives.
Also, on the last day of the forum, “Fund for energy saving buildings” was held with the purpose to discuss at a high level the policy environment, technological solutions, and financing mechanisms required to drastically reduce energy efficiency and greenhouse gas emissions in the construction industry by creating an energy-efficient housing ecosystem, and reach a common understanding. The participants presented the policy environment of energy-efficient buildings and housing, energy-efficient building technologies that have been effectively tested and approved in Mongolia, solutions related to their widespread adoption and accessibility, and possible green financing mechanisms.
