Inclusive Green Finance in Nepal has taken a major step forward, following Nepal Rastra Bank’s issuance of a comprehensive Green Finance Taxonomy.

The taxonomy will help the financial sector to facilitate the transition towards a green economy. It aims to diminish environmental and social risks, attract capital seeking investments aligned with green and ESG criteria, and foster the creation of financial products and services that promote environmentally sustainable investments and projects. 

“The adoption of a dedicated green finance taxonomy is crucial given the pivotal role of private and public finance in tackling climate change. It will be essential for enhancing sustainable finance, providing a standardized framework to classify economic activities, and mobilizing green investments more effectively,” said NRB Governor, Maha Prasad Adhikari.

“Defining what ‘green’ means in the national context is a critical step in Nepal’s green finance journey, and the longer perspective is to drive finance towards both climate mitigation and adaptation,” said Johanna Nyman, AFI Head of Inclusive Green Finance. “An important development is that this taxonomy also focuses on smaller-scale adaptation projects and green finance for micro, small and medium-sized enterprises and includes a gender perspective.”

NRB was assisted to develop the Green Finance Taxonomy through an AFI grant, and the taxonomy benefited from peer review by Bangko Sentral ng Pilipinas and Bank Negara Malaysia. 

AFI’s Inclusive Green Finance workstream is part of the International Climate Initiative (IKI), supported by the German Federal Ministry for Economic Affairs and Climate Action (BMWK) and the German Bundestag.