Mongolia lacks the necessary resources to finance its planned transition to a low-carbon and resource efficient economy and achieve its Nationally Determined Contribution (NDC) targets. The financing necessary to achieve the NDC’s mitigation targets is estimated at USD 11.7 billion (85% of GDP). During the Mongolian Sustainable Finance forum in 2015, the discussion on private and public sector collaborations on developing a green financing framework to support green growth in Mongolia resulted in an initiative to establish a National Financing Vehicle (NFV).

GGGI supported the initiative by implementing Green Climate Fund (GCF) Readiness project together with the Ministry of Environment and Tourism (MET) and Mongolian Sustainable Finance Association (MSFA) in 2017 and played an instrumental role in the establishment of the Mongolia Green Finance Corporation (MGFC).

The MGFC is a joint public-private sector effort to overcome the existing challenges and constraints of climate change mitigation. The MGFC specifically targets the mainstreaming of green, affordable and gender-inclusive financing for households and businesses to switch to low-carbon technologies; and to create an improved policy environment and build the capacity and awareness of stakeholders in support of this mission. The MGFC will provide wholesale financing to participating financial institutions for energy efficiency in industry, thermal insulation and green affordable housing. Ultimately, the MGFC will also contribute to wider access to finance for segments of the economy that are under addressed, resulting in a healthier and sustainable environment, the creation of employment opportunities and a greater diversification of the economy.

In 2017, GGGI implemented a GCF Readiness project to assess market demand and to develop project pipeline of (i) thermal insulation and green affordable housing for peri-urban areas (ger districts); and (ii) energy efficiency measures for selected sub-sectors. As part of the Readiness project, GGGI also developed a detailed Business Plan for MGFC proposing the fund’s legal status and operational structure.

Successful completion of Readiness project enabled XacBank, Accredited Entity (AE) of GCF, to access the GCF’s Project Preparation Facility and MGFC to secure USD 50 million financing commitment from GCF, the Government of Mongolia, and a consortium of local banks in 2020. The MGFC is expected to be established and operationalized in 2021. The MGFC is the first NFV GGGI supported, the first NFV financed by GCF, and the first PPP initiative in the financial sector of Mongolia.

Impact:

• 216,000 households and at least 127 businesses transitioning to low carbon and energy efficient practices.
• Direct GHG emissions reduction of at least 3.75 mtCO2e and indirect upstream lifetime GHG emissions reduction of 333 thousand tCO2e.
• 1,470 jobs are expected to be created, of which 588 are for women

Outcome: Establishment and operationalization of MGFC

Project Outputs completed in 2019:

i. Green Growth Policies:N/A

ii. Green Investments: 

• Total investment required for MGFC is USD 50 million. In 2019, MGFC secured  co-funding of USD 23 million from the Government of Mongolia and consortium of participating financial institutions. In 2020, GCF approved financing of USD 27 million for MGFC. MGFC is expected to be formally established and become operational in 2021.

iii. Capacity Building and Knowledge Products: N/A