Strategic Analysis of Green Finance: Risks and Opportunities in Bangladesh's Renewable Energy Sector

Bangladesh holds great promise when itcomes to renewable energy, especially in solar and wind power. With over 300sunny days each year, the country has a natural advantage for solar energyproduction. The government and Bangladesh Bank have taken some positive stepsby introducing green financing policies and encouraging investment in greenprojects. However, several challenges—like unclear policies, limited access tofinancing, weak infrastructure, and poor coordination among institutions—areslowing down progress. As a result, the environment is not yet friendly enoughto attract the level of private investment needed to meet the country’srenewable energy goals.

Green finance refers to loans andinvestments that support environmentally responsible activities. This includeseverything from reducing carbon emissions to building eco-friendlyinfrastructure. Green finance is not just about protecting the planet—it alsohelps drive economic growth. Around the world, this market is growing fast withtools like green bonds, green loans, sustainable investment funds, and evengreen credit cards being used to fund climate-positive projects.

Bangladesh’s earlier Renewable EnergyPolicy of 2009 set a target of producing 10% of electricity from renewablesources by 2020. Unfortunately, that target wasn’t met. The updated RenewableEnergy Policy of 2025 is more ambitious—it aims for 20% by 2030 and 30% by2040. Achieving this will require serious investment: about $1 billion everyyear until 2030, rising to $1.46 billion annually from 2031 to 2040. To raisethese funds, large-scale private investment is essential.

Other developing countries like Vietnam,India, China, and Morocco have made major progress in renewable energy bymaintaining consistent policies, reducing investor risks, and building strongpartnerships between government and private sectors. Bangladesh can learn fromthese countries and design both short-term and long-term plans to encourageinvestment.

Bangladesh Bank has played a strong rolein pushing for green finance. Since 2016, banks are required to allocate atleast 5% of their loans to green financing. Special refinancing programs likethe Green Transformation Fund (GTF) offer low-interest funding. However,according to data from IEFA, the use of such funds has been quite low—forexample, only 19.05% of the GTF was used between 2018 and 2024. To fix this, weneed better planning, stronger institutions, and improved coordination.

Unfortunately, policy instabilitycontinues to be a major barrier. The repeal of the Quick Enhancement ofElectricity and Energy Supply Act (QEEESA) and the cancellation of over 30renewable projects have hurt investor confidence. Even more concerning, thereare discussions about reviving coal-based power plants in Matarbari, which goesagainst Bangladesh’s climate goals. Additionally, the 2025-26 budget did notinclude any new incentives for renewable energy, which sends the wrong messageto investors. For the sector to thrive, Bangladesh must ensure policy stabilityand a long-term commitment.

A shining example of sustainabledevelopment in Bangladesh is the LabAidCancer Hospital & Super Speciality Centre, which recently received LEED Gold certification—aninternational standard for environmentally friendly buildings. As the ManagingDirector, this recognition is deeply personal to me. The hospital is not only acenter for world-class healthcare, but also a green oasis, featuring gardens,shaded walkways, and natural ventilation—proving that healthcare andsustainability can go hand in hand.

Finally, Bangladesh has the potential toearn around $1 billion annually from the global carbon market. Yet, weakpolicies and limited private involvement have restricted growth. Since 2006,Bangladesh has earned only about $17 million through carbon-reduction projects.The new Renewable Energy Policy mentions introducing Renewable EnergyCertificates (RECs), which could open the door to foreign investment andincome. Right now, most of this work is handled by Indian consultants. Bringingit under local control will not only build capacity but also ensure that theeconomic and environmental benefits stay within the country.

Bangladesh is at a critical point. Withthe right steps, it can lead the way in renewable energy—ensuring energysecurity, economic growth, and a greener, more sustainable future for all.

Writter: Sakif Shamim,Managing Director, Labaid Cancer Hospital& Super Specialty Centre