Staff Reporter, Manila: Dr. Atiur Rahman emphasized at a panel discussion on green bond at the ADB head Quarter, Manila on november 24 about the need for a greater cooperation between regulators, policy makers and multilateral organizations for boosting green financing including bonds.He said that Bangladesh, like most developing country, depends overwhelmingly on banks for financing medium and long-term financing. So there can be mismatch between tenors of savings and investment. Hence the need for developing capital market. The panel was moderated By Noel Peters of ADB and participated by Christopher Knowles of EIB, Gregory Schneider Maunoury of Humanis Gestion of Actifs, Anthony Ruschpler of ADB.
Green bonds can flourish only in an environment where conventional bond market has already been vibrant. So there is a need for developing the ecosystem for the overall bond markets as well. In addition, the challenges like standardization, appropriate regulations, disclosures, lack of awareness, governance issues have to be addressed to jumpstart the issuance of green bond.Also the secondary market for bond market, more particularly green bond, is indeed thin. Hence, the capacity building of financial institutions in developing countries with desired regulatory and fiscal support need to be prioritized to overcome these constraints.Given the abundance of liquidity in the developed economies we can draw international investments from their pension fund or sovereign wealth funds as retail and institutional investors value green products.And here can come multilateral agencies like ADB and IFC in improving credit ratings,providing credit guarantees, insurance, securitizing cashflow techniques for the SMES for credit enhancement and as well as introducing domestic currency denominated bonds in developed stock exchanges to avoid foreign exchange rate volatility risk as was done by IFC in introducing Masala Rupee denominated bond in the London Stock Exchange.
Growing urbanization and industrialization in developing economies like Bangladesh will need a huge amount of additional investment fund and green bond could be a desired option for the sovereigns to support and encourage central bank, development banks and city corporations to go for such blended strategy of mobilizing green resources from abroad.This could be as good as attracting foreign direct investment which could as well be contributed by our non-resident Bangladeshis who may be buying this green bond as they dream of building desired infrastructures of their motherland as fast as possible. We, therefore, need to work together including public finance policy makers, regulators, banks and municipalities.This collaboration will also help avoid green washing as there can be closer monitoring of whether the mobilized resources are actually going to green projects or not. The younger population will be more than happy to buy such bonds for a better future of their country and as well as for better planetary good.
There is a saying that you need a village to raise a child. You also need the whole country to embrace sustainable financing agenda. Only deeper familiarization of all the stakeholders can instill sense of ownership of new financial product like green bond. So there is an imperative of educating the issuers and investors of green bond. Multilateral organizations like ADB and IFC can play this bridging role of providing technical assistance for such financial literacy and exchange of lessons on such product.