Nepal Rastra Bank (NRB) has instructed banks and financial institutions (BFIs) to incorporate climate change considerations into their investment decisions. This move highlights the central bank’s intention for financial sector participants to take a leading role in climate action.
By enforcing the “Nepal Green Finance Taxonomy,” NRB aims to guide BFIs in issuing loans according to established environmental guidelines. The taxonomy is designed to enhance sustainable finance, providing a standardized framework for classifying economic activities and mobilizing green investments effectively.
With rapid urbanization and increasing resource-intensive growth, Nepal faces rising demands for energy and infrastructure. In response to climate change, the country has implemented various national policies and regulatory frameworks, including the Environment Protection Act and National Climate Change Policy. Notably, Nepal pledged to achieve net-zero carbon emissions at the COP26 UN Climate Change Conference in 2021.
To meet its adaptation and mitigation goals by 2030, Nepal requires an estimated US $77 billion. The NRB emphasizes the need to mobilize private sector resources to achieve a climate-resilient future, as public funding alone cannot cover the extensive financial needs. The private sector is encouraged to enhance its technical capabilities and invest in green initiatives to complement government efforts.
NRB Governor Maha Prasad Adhikari underscored the financial sector’s critical role in achieving national climate targets, advocating for sustainability and low-carbon development. He noted that the green taxonomy will serve as a vital tool for the sector in transitioning to a greener economy.
The taxonomy aims to mitigate environmental and social risks, attract capital aligned with green and ESG criteria, and promote the development of financial products that support environmentally sustainable projects.
