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Sustainable finance and solar power

30 January, 2020Ouida Taaffe

Financial services can make a practical and immediate difference to solving some of the biggest challenges posed by climate change. Ouida Taaffe looks at how sustainable finance is helping farmers in Bangladesh go carbon neutral and get better crop yields.

Farmer in rice field harvesting green shootsClimate change deniers exist, but they are fast becoming a very small minority.

Financial services firms, however, do have to operate on facts. They also have a major role to play in stopping and reversing the damage done by climate change.

Climate change is a global problem, so it might seem that individual firms can do very little to move the needle. However, by funding truly innovative solutions that fit local needs, financial services companies can make a real difference.

The FIA’s Best Sustainable Finance Initiative

A recent winner of the Financial Innovation Award 2019 for the Best Sustainable Finance Initiative – The Infrastructure Development Company Limited (IDCOL), of Bangladesh – shows what can be done.

To reduce the output of greenhouse gases that cause global warming, we need to burn fewer fossil fuels. People in the developing world who burn fuels like oil and gas to meet fundamental needs can be particularly hard hit by carbon reduction strategies. At the same time, they are also particularly hard hit by the increased temperatures that global warming brings.

IDCOL’s solar irrigation pump project is a way to tackle both of those problems at once.

Higher temperatures lead to drought and more crop failures, so farmers need to pump more water – particularly during the dry season. Typically, however, poor and subsistence farmers in Bangladesh  could not afford to pay for solar pumps. In particular, much of their money was absorbed by the cost of running and maintaining diesel pumps  – leaving little for investment in renewable energy .

Green finance plans for farmers

Clever technology on its own will not help solve climate change if people cannot afford to access and use it. IDCOL helped small farmers to buy the solar irrigation pumps through a green finance plan.

The benefits to the farmers were at least six-fold:

  • lower fuel costs
  • reliable access to enough water to grow their crops
  • better water management
  • easier budgeting as they knew how much it would cost them to run the pump each month
  • more time to spend on other work
  • and a cleaner environment.

Scaling up renewable energy

According to the World Bank, Bangladesh’s domestic solar power programme serves about one-tenth of the country’s population, which makes it one of the largest in the world.

Its success with projects like solar irrigation pumps has led to plans to extend it through the Scaling-up Renewable Energy Project. The project will use funds from the World Bank to support IDCOL as it develops renewable energy projects..

As part of the Scaling-up Renewable Energy Project , Bangladesh signed a US$185m financing agreement with the World Bank in August 2019 to back the development of around 310MW of renewable energy generation capacity.   

IDCOL will provide a renewable energy financing facility for solar photovoltaic cells, both for domestic and utility use.

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The Centre for Sustainable Finance considers issues relating to markets, regulation, risk management and government policy from an international perspective.

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