With its geography largely consisting of low-lying delta plains and its high-density population, Bangladesh is exceptionally vulnerable to climate change. It is ranked as one the seventh most vulnerable countries in the Global Climate Risk Index (CRI). The Bangladesh government has taken a wide range of measures to combat the effects of climate change and has been lauded for its policies and strategies. The country's central bank is playing an active role in engaging the financial sector in order to channel financial resources to address the challenges of climate change. As per the guidelines, banks must lend 5 percent of their loan as Green Finance and 20 percent as Sustainable Linked Finance.

Overall, as per the SDG progress report 2020, Bangladesh has performed better than other countries in addressing climate change. However, it is estimated that 4.5 percent of GDP would be required to integrate environmental protection with our growth strategy. Significant investments will be required in green technology and infrastructure for which innovative financing solutions from different sources are essential.

Emerging markets such as Bangladesh are often the most vulnerable to climate change. But we also have the biggest opportunity to build green infrastructure from the ground up, embracing electrical vehicles, building energy-efficient transportation infrastructure and turning to renewable energy sources. However, the low carbon transition won't be possible without proper financial support.

Getting the energy-mix right to power the nation forward while ensuring long-term sustainability is a key part of this challenge. We helped the nation take its first step toward achieving this balance when we supported the development of the first utility-scale solar power plant feeding Bangladesh's national electric grid. This was a pioneering deal, creating a new template for private sector renewable energy operators in Bangladesh. One of the key issues was how to structure a deal with such a long maturity—15 years—beyond the level that commercial banks would have been comfortable with. The answer was a unique structure and repayment mechanism that aligned the financing needs with the risk appetites of all stakeholders.

The RMG sector, the nation's largest export earner, has also been making significant strides towards sustainability. The sector has moved towards sustainable and green manufacturing with 138 LEED green factories, 39 of which are Platinum certified by the United States Green Building Council. 13 of the 20 highest ranked LEED certified factories around the world are in Bangladesh, and 500 more factories have already registered for certification.

But there are challenges, and opportunities, ahead. A new study by Standard Chartered revealed that 78 percent of multinationals (MNCs) will not be able to engage suppliers that endanger their carbon transition plan by 2025. On one hand, this means that Bangladesh-based suppliers are risking almost USD 18.7 billion in exports if their carbon emissions are not cut in line with their biggest clients' net zero plans. The flip-side is that the same study shows exporters can share in USD 1.6 trillion worth of business if they can remain part of MNC supply chains.

Overall, the new financing required to keep global temperature rise to within 1.5 degrees Celsius may be as high as USD 8 trillion annually while the UN estimates that the funding gap to reach the Sustainable Development Goals (SDGs) by 2030 is USD 2.5 trillion a year. We need innovative financial products that can bridge investor interest with the impact on the ground, whether through deposits, fixed income bond, private equity, equity markets or other products.

One of the biggest challenges to raising more sustainable finance, particularly for emerging markets such as Bangladesh, is the lack of information and transparency on impact and the various standards and conflicting definitions. Standardisation can help Bangladesh grow and protect against the risk of green or SDG-washing. While we need to balance standardisation with fostering innovation, building greater transparency will continue to be vital.

In the last 50 years, Bangladesh has come a long way and is seen in the international stage as a role model of sustainable growth. For continued growth and inclusive prosperity, the nation has to mitigate the threat of man-made climate change. The Bangladesh government has taken bold initiatives to reduce its climate change vulnerabilities and with proper implementation, it will overcome the challenge. While Covid-19 remains the key focus, the global community will have to be resilient in tackling climate change as well. We must act now, and we must act together: businesses, consumers, governments, regulators and the financial sector must collaborate to develop sustainable solutions, technologies and infrastructure.

It's time to take action and create a better world for the generations to come.

Alamgir Morshed is MD and Head, Financial Institution, Standard Chartered Bangladesh.