THE world economy is going through a turbulent spell. But alongside rising inflation, geopolitical instability and tightening global credit, there is another worrying trend taking shape — a rather indiscreet and ill-judged withdrawal from climate financing. For countries like Bangladesh, among the most climate-vulnerable in the world, this shift is not merely disappointing; it is dangerous. And it comes at a critical juncture. As we begin to chart a new phase in our national development story, we must ask — will this trajectory be sustainable, or will it mirror the same extractive, carbon-heavy model that has brought the planet to its current brink?
There is an old Tagore song we often sing — if no one comes to your aid, go it alone. In many ways, that lyric captures the spirit Bangladesh must now embody. We are already bearing the brunt of climate change — hotter temperatures, heatwaves, erratic rainfall, intensified flooding and encroaching sea levels. Millions of livelihoods stand at risk. At the same time, the country is pushing forward with urban expansion, industrial growth and infrastructure building. These goals, however laudable, will prove hollow if we fail to ensure environmental responsibility alongside economic prosperity. That is precisely where green finance holds promise — as a critical tool to direct investment toward environmentally sound initiatives and build a future that is both equitable and enduring.
Now is an opportune moment to grasp that promise. Bangladesh is currently being steered by one of the finest economic minds at the helm of the state. But political leadership alone will not suffice. There must be coordinated policy, institutional readiness and private-sector commitment if green finance is to be more than a rhetorical flourish.
What, then, does green finance truly mean? Globally, it encompasses all financial instruments that contribute directly to environmental sustainability. This may take the form of green banking — where banks offer preferential loan terms to businesses adopting sustainable practices — or green bonds, raised specifically to fund renewable energy ventures, climate-resilient infrastructure or sustainable agricultural systems. In essence, green finance seeks to tie financial flows to environmental outcomes — ensuring that capital does not merely chase profit but also safeguards the planet.
In a country like ours, the stakes are far higher. Green finance is not a fashionable term for us — it is a necessity. Bangladesh requires substantial investment in renewable energy, low-carbon transportation, sustainable agriculture and resilient infrastructure. Bangladesh Bank has, to its credit, initiated several commendable steps. But are these measures sufficient? And more crucially, are they reaching the sectors that need them most?
With a population exceeding 170 million and rising energy demand, fossil fuels cannot remain our primary energy source. They are neither sustainable nor secure in the long term. Bangladesh’s weather conditions are highly conducive to solar and wind energy generation, and biofuels may also offer potential. Encouragingly, the central bank has prioritised renewable energy finance. Institutions like Infrastructure Development Company Limited have been active in promoting rooftop solar projects, and a number of state-owned and private banks, along with non-bank financial institutions, have made commendable progress in supporting solar initiatives. But isolated efforts are not enough. Bangladesh must pursue a coordinated shift toward large-scale green investments.
If institutional investors and financial bodies take this challenge seriously, Bangladesh could well emerge as a leader in renewable energy in South Asia. That is not an idle boast — our geography offers us abundant sunshine throughout the year, strong coastal winds and agricultural land that could support biofuel cultivation. What we need is vision — and a financial ecosystem willing to back that vision with real commitment.
Urbanisation poses another urgent challenge. Dhaka and Chattogram are expanding at breakneck speed, often without regard for environmental limits. Green financing can offer a lifeline — enabling construction of energy-efficient buildings, development of sustainable public transport and investment in infrastructure designed to withstand climate shocks. Done right, it could significantly reduce air pollution, traffic congestion and urban carbon emissions, making our cities more livable.
But the story does not end in urban centres. In rural Bangladesh, where agriculture forms the backbone of livelihoods, climate change has already begun to leave its scars. Rising sea levels and salinity intrusion are undermining crop yields. Floods, droughts and other extreme weather events are disrupting food systems. Green finance could help farmers transition to more resilient methods — be it climate-smart irrigation, organic farming or agroforestry practices.
Moreover, our cottage, micro, small and medium enterprises, which comprise a significant portion of the economy, must also be supported in adopting greener processes. The textile and leather sectors, for instance, are known pollutants. If banks and financial institutions offer preferential credit for cleaner technologies, these industries could reduce their environmental footprint without compromising productivity.
So what, realistically, can we expect from green finance? At best, it could usher in a financial landscape that supports long-term development rather than short-term profit. Bangladesh Bank’s green banking guidelines are a step in that direction, but more ambitious regulatory frameworks are needed. Private-sector involvement is critical — the state cannot carry this burden alone. However, this participation must be meaningful and not a veneer of corporate virtue-signalling. The central bank, Department of Environment and other oversight bodies must ensure transparency and accountability in green finance, to guard against the growing threat of greenwashing — deceptive marketing tactic where companies make false or misleading claims about their products or services being environmentally friendly or sustainable, often to mislead consumers into believing they are more eco-conscious than they actually are.
Access to global climate funds — such as the Green Climate Fund — must also be scaled up. While Bangladesh has received some external financing, the volumes remain insufficient. Most green ventures require long-term funding, yet domestic banks often shy away from such commitments due to perceived risks. Policy and institutional reforms must address this credit hesitancy through guarantees, blended finance instruments or state-backed refinancing mechanisms.
But we must not pretend the road ahead is smooth. Major obstacles remain. Many in the financial sector still consider green finance to be a complicated novelty. Banks are reluctant to disburse green loans, largely because they lack the technical expertise to assess environmental risk and reward. On the other hand, many business owners view environmental regulations as a bureaucratic hindrance rather than an economic opportunity. Shifting this mindset is perhaps the greatest challenge.
The enforcement of green banking norms is another weak point. Many banks still prioritise immediate returns over long-term sustainability. ESG reporting requirements, though introduced, need urgent refinement and better integration into lending practices. Corruption, too, cannot be ignored — it continues to stifle progress across sectors. Unless green finance is embedded within an efficient, corruption-free institutional framework, funds will simply not reach where they are most needed.
Ultimately, green finance is not a policy fad — it is a structural necessity. If we fail to embrace it now, we risk building an economy destined to collapse under its environmental contradictions. The state must lead, but success will depend on collective action — from policymakers, bankers, industrialists and citizens alike. Public pressure, consumer awareness and lifestyle change must complement financial reform.
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Nayeem Shahriar is a PhD researcher at the University of Dhaka.