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Bangladesh has made significant progress in growth but remains highly vulnerable to climate change. Although it contributes only 0.56% to global emissions, it ranks seventh on Germanwatch’s 2021 Global Climate Risk Index. Between 2000 and 2019, Bangladesh suffered economic losses of USD 3.72 billion from 185 extreme weather events. The UN Intergovernmental Panel warns that Climate change could reduce Bangladesh’s GDP by 2% to 9% by mid-century. Women are especially affected, making up 80% of those displaced by climate change (UN Environment).
Bangladesh is the 35th largest economy globally and the third in South Asia, with a steady growth rate of 6%- 7%. As of June 2023, it was reported as the fastest-growing economy in the Asia-Pacific region. Transitioning to renewable energy is essential to sustain this growth and prevent disruptions in production and supply chains.
Bangladesh requires significant investment in the climate and clean energy sector to meet its Nationally Determined Contributions (NDCs) from the Paris Agreement. The International Finance Corporation estimates that $172 billion is needed by 2030 to achieve these goals. Small and medium-sized enterprises (SMEs) are vital for economic growth but are particularly affected by climate change. Potential Impacts include job losses, economic decline, infrastructure damage, disrupted production, and increased resource costs. SMEs cannot often adopt green technologies due to their size and limited investment. Addressing these challenges involves implementing renewable energy, pollution control, waste management, energy-efficient machinery, climate-resilient agricultural practices, and recycling systems.
Key barriers to SME climate resilience include limited awareness, knowledge gaps among financial institutions and investors, and policy implementation issues. Promoting access to finance for SMEs is essential. Financial institutions and investors are critical in advancing green recovery through gender-smart climate finance initiatives, including women-focused businesses. Resource mobilization and equitable resource allocation are crucial for reducing societal inequalities.
A collaborative approach involving the government, private sector, SMEs, investors, financial institutions, and development organizations is essential for climate adaptation and mitigation in Bangladesh. Blending public, private, and philanthropic capital can incentivize climate-smart solutions. Empowering SMEs to implement these solutions can significantly impact the environment and benefit low-income communities.
Truvalu, supported by the Embassy of Switzerland and in partnership with the United Nations Capital Development Fund (UNCDF) and One to Watch, launched the Access to Green Finance for Enterprises (A2GF) program. This initiative engages SMEs (especially women-focused), financial institutions, investors, and policymakers to facilitate green financing, helping SMEs adapt to and mitigate climate change risks.
A2GF is a multi-year project to enhance capacity development for financial institutions and impact investors, provide technical assistance and facilitate access to green financing for SMEs, and advocate for supportive policies. The goal is to improve economic opportunities and resilience for marginalized communities by enhancing green financing and SME capacity to deliver low-carbon, climate- resilient solutions.
Key interventions include raising SME awareness about green business practices and available financing options. SMEs will receive financial literacy training, technical assistance, business development support, and investment readiness guidance. Emphasis will be placed on digital financial literacy and strong governance within SMEs.
Green financing loans are mostly given to larger corporations because SMEs often need more knowledge and resources to meet central bank requirements. The A2GF Program includes training for financial institution employees and (impact) incentives to encourage financing for SMEs.
The program also aims to equip (regional branches of) financial institutions and investors to expand their green portfolios and incorporate a gender lens. Financial institutions will receive training on evaluating green financing proposals based on ESG guidelines and risk management strategies. SMEs will be integrated into the formal financial system through capacity-building support. A2GF’s partnerships with selected financial institutions is one of the critical steps to ensuring access to green finance for SMEs.
One to Watch and Truvalu joined forces under the banner of OneTrueValue to enhance access to climate financing in Bangladesh. They will co-launch a Green Fund to mobilize further funding and partnerships. Initially, the fund will aim to invest through replicable, scalable, and proven financing models to finance green solutions. A financing vehicle modeled as an Energy Service Company (ESCO) is one of such models that we are currently focusing on. We will also explore the possibility of collaborating with other investors.
