By Governor Dasho Penjore, Royal Monetary Authority of Bhutan

In 2009, the Royal Government of Bhutan delivered an announcement entitled, “Declaration of the Kingdom of Bhutan – The Land of Gross National Happiness to Save the Planet,” at COP15 in Copenhagen, Denmark. In this declaration, our country committed to remain carbon neutral where emissions do not exceed the sequestration capacity of our forests. On top of this, our constitution mandated that our county maintained at least 60 percent of land under forest cover at all times.

While these goals may appear ambitious, our high regard for nature is very close to our hearts. Bhutan’s sustainable development outlook is rooted in Buddhist philosophy and enlightened leadership. Respect for all living things is guided by our constitution and have led to the development and adoption of a national environmental strategy built around this personal relationship that we have with nature.

Working within these thoughtfully mapped lines, our country’s actions on climate change mitigation and adaptation not only need to ensure that all our developmental decisions correspond with our Gross National Happiness philosophy, but also encourages bold actions that is needed to address climate change.

Meticulous alignment between policies in the financial, sustainability, and real sectors has resulted in a comprehensive reform in our financial sector which includes non-banks, insurance companies, capital markets and institutional investors. To support these efforts, RMA Bhutan is proud to align itself with AFI’s Maya Declaration Targets, among which has already seen the implementation of Bhutan’s Mobile Payment System (2015-2016), and formulation of a National Financial Inclusion Strategy (NFIS) (2018-2023).

Financial inclusion is a key pillar in achieving Bhutan’s national goal of sustainable and inclusive socio-economic growth. Therefore, our NFIS has been designed to reinforce stable and inclusive economic growth, maintain the stability and integrity of our financial system, and to advance innovative financial services and technology.

We also see the connection between financial inclusion and climate change adaptation and mitigation. There is momentum to advance the resilience of the most vulnerable to the impacts of climate change, by advancing sustainable financial inclusion and we are committed to advance this agenda.

RMA Bhutan is currently developing a Green Finance Roadmap and this process has been a major turning point for us in bringing together important stakeholders to engage on long-term strategies. A key focus for us is mobilizing finance for Bhutan’s sustainable development goals. Following a joint learning program co-hosted with AFI in January this year, we continue to hold discussions on better policy coherence among public and private sectors, international organizations and other networks. Many efforts have already been made to strengthen sustainable finance in the country, but there is further opportunity to come up with a comprehensive reform in the financial sector incorporating non-bank, insurance companies, capital markets, and institutional investors. Some of the activities that is currently being explored include:

1. Green Insurance: Insurance companies can play an important role in bringing new products and services focused on climate related risks including the crop insurance.
2. Green Exchange: The Royal Securities Exchange of Bhutan will play a crucial role in promoting the Green capital market products within and outside the country. With assistance and support from the RMA, the RSEB can set up a separate market board to list companies that align to SDG goals and GNH Business Screening process and explore ways to attract international companies (that qualify as green) listed on the exchange. The RMA, in consultation with relevant agencies will ensure creation of an enabling environment to facilitate the process.
3. To enhance the flow of funds in the economy, RMA will create an enabling environment for the introduction of innovative green finance instruments like Green Bonds, Credit Guarantee Schemes, Impact Investments etc.
4. Provision of monetary and fiscal incentives to encourage the Financial Service Providers to scale up their investments in green projects.

Bhutan currently has several ongoing green finance projects that are aimed at promoting sustainable livelihoods and uplift disadvantaged communities through environmental tourism and other income generating opportunities. These projects not only serve as working models to prove that green financing makes great business sense for Bhutan, but they also helps us, as regulators, identify long-term gaps in the market, where innovative inclusive green finance (IGF) products and services can build resilience and enhance mitigation and adaptation initiatives.

Exposure of financial sector to external vulnerabilities has been reinforced by the ongoing Covid19 pandemic. Green recovery, post the current pandemic, is even more pertinent now, given that the environmental and climate risks are the potential adversities to our financial system. The RMA will continue its effort of prioritizing and promoting green finance to ensure that our financial system is more robust and resilient to external vulnerabilities at the wake of Covid19 pandemic. The immediate priority will be placed on finalization of the Roadmap; designing innovative green finance instrument like green bond; and adoption/promotion of ESRM framework across financial sector.

Finally, this year’s World Environment Day theme is ‘Biodiversity,’ and I am proud to say that RMA Bhutan’s effort to support our country’s environmental and financial inclusion ambitions are closely intertwined in the work that we do.

AFIs Inclusive Green Finance (IGF) workstream is part of the International Climate Initiative (IKI)  supported by the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU), based on a decision of the German Bundestag.