Bangladesh needs an estimated $1.54 billion in annual investment in renewable energy through 2030, but the current pace of expansion suggests investment of only around $190 million a year – just 13 per cent of the requirement, according to a study by Change Initiative.
The resulting annual investment gap is approximately $1.35 billion. Meanwhile, around 90 per cent of the energy-sector climate finance examined in the study came in the form of loans, raising concerns about the impact of debt on the country’s ability to expand renewable energy.
The study calls for greater use of grants, affordable local-currency financing and stronger support from development banks to expand renewable energy without substantially increasing the government’s debt burden.
Titled “Navigating Debt Sustainability in the Energy Sector in Bangladesh: Channelling Multilateral Development Bank Finance into Renewable Energy through Public Finance Mechanisms”, the report was presented at a national dialogue organised by Change Initiative at CIRDAP in Dhaka on Tuesday.
In his welcome remarks, Change Initiative co-founder and chief executive M Zakir Hossain Khan said Bangladesh’s reliance on imported fossil fuels had made its energy system vulnerable to external shocks.
“Accelerating renewable energy is essential to achieving energy sovereignty and securing greater control over our energy future,” he said.
He added that the government’s target of generating 10,000MW of solar power needed to be backed by affordable finance, including grants, concessional funding and responsible investment. Such support would help households and industries adopt renewable energy without putting further pressure on public finances.
Chief guest State Minister for Foreign Affairs Shama Obaed Islam said Bangladesh needed an energy sector that reduced dependence on imported fossil fuels while avoiding excessive debt.
The government has set targets for renewable sources to supply 20 per cent of electricity by 2030 and 30 per cent by 2040, she said, stressing the need for transparency, coordinated investment and stronger climate diplomacy.
She also called for a unified national position at international climate negotiations, informed by researchers, civil society, the private sector and young innovators.
Bangladesh receives $9 in loans for every $1 in grants
The study’s analysis of energy-sector climate finance between 2002 and 2023 found that Bangladesh received approximately $9 in loans for every $1 in grants.
The corresponding average for the energy sectors of least developed countries was $1.53 in loans for every grant dollar, making Bangladesh’s ratio nearly six times higher.
A separate analysis of renewable energy investment between 2000 and 2025 found that 90.4 per cent came as debt and only 7 per cent as grants. The remaining 2.6 per cent was in the form of mezzanine financing, which combines features of debt and equity.
Sultana Jesmen, MP, said the imbalance between loans and grants in climate finance was putting pressure on Bangladesh and its renewable energy entrepreneurs.
Financing needed to become more affordable to allow domestic businesses to participate and remain viable, she said. Climate finance should also address water insecurity and farmers’ livelihoods.
The report argues that Bangladesh needs not only more investment but also better financing terms. Grants can support project preparation and reduce costs, while development-bank guarantees can share lending risks and encourage banks to finance renewable energy projects.
Loans in taka would also reduce foreign-exchange risks for businesses that earn in local currency but borrow in foreign currencies, the study says.
Fazle Rabbi Sadeque Ahmed, former deputy managing director of PKSF, said adaptation activities often generated public benefits without producing direct revenue, making grant-based financing essential.
Renewable energy investment also required affordable finance and access to appropriate technology, he said, adding that financing arrangements should support long-term resilience without creating an unsustainable debt burden.
Development-bank commitments must translate into investment
The study estimates that five major multilateral development banks have a combined annual sovereign financing capacity of around $6.3 billion for Bangladesh.
However, eligible renewable energy-related commitments identified for 2024–2026 amounted to around $820 million, equivalent to about 4 per cent of the estimated three-year financing envelope.
The report cautions that commitments, planned financing and actual disbursements are measured on different bases, so the comparison should be treated as an indicative estimate.
Access to approved funding remains another challenge. Citing World Bank documents, the study says one renewable energy financing facility had disbursed only 12 per cent of its funding five years after approval. Annual budget releases for the associated project were also delayed by four to five months.
The study recommends simplifying approval and financing procedures, particularly for smaller projects such as rooftop solar and solar irrigation.
Khondkar Morshed Millat, former director of Bangladesh Bank’s Sustainable Finance Department, proposed allocating at least 1.5 per cent of total lending to renewable energy and gradually raising the overall green finance target to 15-20 per cent by 2030.
He also stressed the need for better coordination among Bangladesh Bank, relevant ministries, BSCIC and financial institutions to ensure that available funds translate into actual investment.
Proposed facility to limit sovereign borrowing
The report proposes setting up a Renewable Energy Sovereignty Facility (RESF) under the Bangladesh Climate Development Partnership by mid-2027 to make financing more accessible.
Under the proposal, Infrastructure Development Company Limited (IDCOL) would manage the facility, while PKSF would oversee support for community-based projects.
The facility would combine grants, equity, guarantees and loans in local currency to support decentralised renewable energy projects. Sovereign borrowing for public infrastructure, such as grid connections and shared energy storage systems, would be limited to 10-15 per cent of the facility’s total assets.
Under the study’s least-debt financing scenario, new sovereign borrowing needed to meet the estimated $7.69 billion investment requirement for 2026-2030 could fall from around $4.61 billion under the conventional financing approach to $770 million.
The report describes these figures as model-based estimates, not confirmed financing or achieved results. Government liabilities could also arise from guarantees, depending on their terms.
To support the facility’s non-debt financing window, the study recommends redirecting at least 5 per cent of power and liquefied natural gas (LNG) subsidies from FY2027-28. Based on the subsidy allocations used in the report, this could provide around $190 million annually.
Turning commitments into action ahead of COP31
Programme chair State Minister for Environment, Forest and Climate Change Sheikh Faridul Islam said government commitments needed to be translated into practical action.
Expanding rooftop solar, reducing dependence on imported fossil fuels and strengthening environmental protection were among the priorities, he said.
At COP31, Bangladesh must highlight the scale of climate-related loss and damage and work with other Global South countries to advance climate justice, he added. He also welcomed recommendations from researchers and experts to help translate evidence into national policies and implementation.
The report further recommends making green financing available before projects are built, simplifying approval procedures and maintaining stable net-metering rules.
Ahead of COP31, Change Initiative is calling for greater attention not only to the volume of climate finance but also to its terms, accessibility and impact on public debt. It argues that affordable financing must reach projects and communities if Bangladesh is to expand renewable energy while limiting additional borrowing.
The event was also addressed by Imran Ahmed, deputy executive director of Shakti Foundation, and Farah Anzum, Bangladesh lead of the Global Strategic Communications Council (GSCC), among others.
