ADB Invests $12.5M in Khan Bank's Landmark Green Bond, Boosting Mongolia's Green Finance Sector

The European Bank for Reconstruction and Development (EBRD) has matched ADB's investment, bringing the total strategic investment to $25 million.

The Asian Development Bank (ADB) has made a significant investment of $12.5 million in a green bond issued by Khan Bank JSC, marking the launch of Mongolia’s first green thematic bond program on the Mongolian Stock Exchange. This innovative financial instrument is designed to fund green sub-loans, with a particular emphasis on supporting small and medium-sized enterprises (SMEs) and microenterprises, especially those owned or managed by women.

Strategic Investment Partners

The European Bank for Reconstruction and Development (EBRD) has matched ADB's investment, bringing the total strategic investment to $25 million. Together, ADB and EBRD fully subscribed to the entire U.S. dollar tranche of the bond issuance. An additional $5 million tranche denominated in togrog was also made available to local retail investors, further expanding access to green financing.

Enhancing Mongolia’s Green Finance Market

“This landmark green bond offering deepens Mongolia’s green finance market while enabling inclusive investments to support small businesses, including those run by women, and improve the livelihoods of smallholder farmers,” stated Suzanne Gaboury, ADB’s Director General for the Private Sector Operations Department. “ADB is pleased to support Khan Bank in this milestone green bond issuance, which sets a precedent for future inclusive green financing in Mongolia."

Regulatory Support for Green InvestmentsIn 2019, the Financial Stability Council of Mongolia approved a green taxonomy aimed at identifying and classifying investments based on environmental sustainability. The banking sector has committed to achieving a green loan target of 10% by 2030; however, as of June 2024, green loans accounted for only 3.2% of outstanding loans, indicating significant room for growth.

Khan Bank's Commitment to Green Finance

"This placement of a United States dollar-denominated green bond in Mongolia highlights Khan Bank’s ability to attract new international funds in its capital market,” said Munkhtuya Rentsenbat, Chief Executive Officer of Khan Bank. “This issuance aligns with our strategy to become the leading provider of green finance in the country while supporting our clients on their journey toward transitioning to green and sustainable practices while contributing to the country’s climate goals.”

Focus on SMEs and Rural Communities

Khan Bank is Mongolia’s largest financial institution, serving over 500,000 borrowers, including low-income small and microenterprises, self-employed farmholders, and livestock herders. Notably, over half of Khan Bank’s customers are from rural areas, and more than half of its SME borrowers are women, emphasizing the bank's role in promoting gender equity and economic empowerment.

This green bond initiative by Khan Bank, supported by ADB and EBRD, is a pivotal step towards fostering sustainable development in Mongolia. By focusing on green finance and inclusive growth, the partnership not only addresses climate goals but also enhances the economic resilience of vulnerable populations, particularly women and rural communities. This investment could pave the way for more robust green financing frameworks in Mongolia, encouraging other financial institutions to participate in environmentally sustainable practices.