Ulaanbaatar, June 16, 2023 /MONTSAME/. The Office of the President of Mongolia, in collaboration with the Mongolian Sustainable Finance Association, China Institute of Finance and Sustainability, International Finance Corporation, International Sustainable Banking and Finance Association, and the Trade and Development Bank, is hosting the "Green Finance - International Forum." As part of this groundbreaking event, we engaged in a captivating conversation with N. Batsaikhan, Economic Advisor to the Governor of the Bank of Mongolia.

- You worked as a moderator of the discussion " Enhancing interoperability of green and sustainable finance taxonomies”. Why is taxonomy so important?

In the face of mounting global challenges, such as climate change, it has become evident that urgent action is required. Consequently, the concept of green financing has emerged as a vital instrument in combatting global warming and reducing greenhouse gas emissions. Central to this concept is the idea of green taxonomy—a shared language for nations to communicate effectively. During our thought-provoking discussion, it became apparent that each country has its own distinct taxonomy. This divergence arises from varying initial data sets and unique contextual factors, such as geographical location, level of development, and income disparities. Consequently, nations have developed their own taxonomies to reflect their specific circumstances. Remarkably, there exist over 200 distinct taxonomies worldwide, which highlights the inherent complexity of translating and harmonizing these diverse systems.

Therefore, today's discussion revolved around identifying potential solutions to the aforementioned issue. One viable option is to have universally accepted fundamental principles by each country. Within this framework, it was proposed that countries could incorporate their specific challenges while adhering to the fundamental principles. This option might be further discussed. The determination of whether a product or activity qualifies as "green" in the issuance of green bonds and green loans relies on taxonomy. That’s why all parties have been giving significant importance.   

Mongolia has implemented green taxonomy for several years. Within this established framework, relevant goals have been proposed, including those outlined in the "One Billion Trees" national campaign initiated by the President of Mongolia, the "Vision-2050" plan, and the "New Revival Policy" put forth by the Government. Additionally, Mongolia aligns with the 17 Sustainable Development Goals proposed by the United Nations. It may not be possible to fulfill all goals at once, however, we have expanded the green taxonomy, identified categories essential to society, and approved Mongolia SDG Finance Taxonomy with aim to provide clarity to investors and bond issuers.

-As I understand, before this concept solely referred to the financial sector, correct?

- Yes, that is correct. Now, four additional sectors have been included: health, education, energy, and information technology. This expansion enables us to present investment opportunities in these sectors as well. It is our responsibility to preserve a sustainable planet for future generations. Approving the SDG finance taxonomy means that we have now clear guidelines for green investments. As a result, our discussion topics will be changed as what environmentally friendly projects have been implemented with the allocated funds and how much reduction has been seen in greenhouse gas emissions, etc. Presently, the Bank of Mongolia provides certain percentage discounts for projects that adhere to green taxonomy. If banks provide loans for non-green projects, they will forfeit these incentives. This serves as an additional incentive for banks to exercise caution and fulfill their social responsibility without any errors.