The role of the financial sector: aligning risk and opportunity

Bangladesh’s roadmap is unique because it regards banks and financial institutions as vital climate players. The direction from Bangladesh Bank has prompted the financial sector to include environmental, social, and governance (ESG) factors in their financial decisions and portfolios.

However, for a universal audience, one thing is crystal clear, and that is that a financial risk is also posed by a climate risk. As lenders incorporate a climate risk into their lending practices, eventually, this has a positive impact on capital allocation based on efficient risk management and stress testing for a climate scenario.

International climate finance: progress, but still far from the need

Although Bangladesh benefits from climate-related support from international partners, discussions increasingly emphasize that the funding needs are vastly greater. A recent reference point is the IMF evaluation of the Bangladeshi program in mid-2024, which identified immediate access to approximately USD 220 million support regarding climate change, as well as other economic-related assistance. While this is significant, this figure brings into focus the alarming fact that the requirements of Bangladesh are in the tens of billions, not hundreds of millions.

Globally, climate finance trends are also applicable. International funds are shifting toward:

•  Programmatic financing, which encompasses multi-year and multi-project structures instead of one-off grants.
• Blended finance that uses public or multilateral development bank capital to lower the risks for private investment.
• Results-Based Finance – which rewards for measurable outcomes such as increased resilience, avoided losses, and verified emission reductions.

In light of these global preferences in funding, the Bangladeshi road map should emphasize effective pipeline, outcomes, and governance.

Factors that could hold back Bangladesh: what investors have in mind

From an international investments point of view, Bangladesh introduces critical challenges that are not a matter of lack of ambitions but regard the following issues of scaling finance and implementation:

• Bankability and preparation gap: A number of climate change projects are technically qualified but lack the bankable project preparation to make them ready for investors in terms of cash flow, risk, procurement, and safeguards.
• Risk Perception and Capital Costs: There are risks perceived by investors concerning physical, policies, and currency factors, which need higher returns unless there are facilities for blended finance or guarantees.
• Data and measurement challenges: Investors and climate funds also require greater need of measurements, reporting, and verifications to measure any outcome in relation to adaptation and emissions. Lack of data and poor analytics of climate risk could hinder processing and result in high transactions costs.
• Implementation capacity and coordination: Effective climate spending relies on execution speed, technical oversight, and coordination among ministries, banks, and local governments.

While these constraints can be resolved, they require institutional improvements rather than simply additional funding.

A globally credible roadmap: what “good” looks like

A credible climate finance strategy for Bangladesh consistently delivers five key elements:

• A national climate investment pipeline that connects to the NAP’s identified needs (USD 230 billion) and prioritizes economic risks.
• Blended finance platforms that lower costs for private investment through guarantees, concessional resources, insurance, and first-loss structures.
• A pathway for a domestic green capital market to meet the long-term demands of infrastructure (through green bonds, project bonds, and pooled investment vehicles).
• Integration of climate risk into the banking sector so that capital flows support resilience and cleaner growth.
• More transparent management of climate public finances by tracking the budget and the outcome, which creates more confidence and reduces governance risk perceptions.

Closing thought: climate finance as a people-first investment story

A well-structured roadmap should still speak to human experiences because climate finance is ultimately about safeguarding lives and means of living. In Bangladesh, this means that farmers should have access to water, coastal communities should have goodhousing, workers must succeed in heat-resistant cities, and exporters must satisfy new global ES G criteria. The overarching lesson is clear: resilience can attract investment when policies are coherent, institutions can deliver, and financial structures are built around outcomes.

Bangladesh has already shown leadership in policy and commitment. The next phase is to scale up, transforming climate finance from various initiatives into an integrated national investment engine that is credible enough to attract global capital while remaining close to communities so that resilience impacts daily life.