Bangladesh has been building a green finance framework for over a decade. It started early and is still, in some ways, ahead of its peers. But the framework has grown in pieces, issued by different regulators at different times for different issuers. The result is a green bond market with more than one rulebook and no single answer to the most basic question an investor can ask: what actually counts as green in Bangladesh?
Long before green bonds became a talking point in Dhaka, Bangladesh Bank was already pushing green finance into the private sector. It issued Green Banking Policy Guidelines in 2011, years ahead of most central banks in the region, followed by a mandatory green finance target for banks and non-bank financial institutions in 2016, an Environmental and Social Risk Management framework, a Climate Risk Fund and a Green Banking Reporting system that most emerging markets did not have.
This was not incidental. Green and climate finance in Bangladesh’s private sector has been almost entirely spearheaded by the central bank. Development partners went to Bangladesh Bank first. Banks and non-bank financial institutions built their sustainability functions around its circulars first. That history matters because it explains why the country’s taxonomy problem exists in the first place.
In September 2022, Bangladesh Bank issued its Policy on Green Bond Financing for Banks and Financial Institutions. This gave the market its first real green bond taxonomy: eight sectors mapped against Bangladesh’s Sustainable Development Goals and Nationally Determined Contributions and benchmarked to international practice. Banks and non-bank financial institutions now had a clear list of what qualifies as a green project, along with rules on eligibility, proceeds and reporting.
There is one problem. This taxonomy applies only to banks and non-bank financial institutions because that is who Bangladesh Bank regulates. It says nothing about a corporate issuer, a listed company or anyone else who wants to issue a green bond outside the banking system.
That gap sits with the Bangladesh Securities and Exchange Commission (BSEC). The BSEC (Debt Securities) Rules, 2021 provided a definition of a green bond, but no taxonomy to accompany it, no sector list and no eligibility criteria. For three years, any non-bank issuer had a label with nothing underneath it.
BSEC moved to address part of this in 2025 by introducing a sustainable bond guideline that added new categories, including social, orange and gender bonds alongside green bonds. That was progress. But it remains a set of bond categories, not a green taxonomy. It tells issuers what kind of bond they can issue. It does not tell them, sector by sector, what qualifies as green.
Two regulators, two rulebooks, one unanswered question
This is where Bangladesh stands today. Bangladesh Bank has a detailed green taxonomy, but it applies only to banks and non-bank financial institutions. BSEC has bond categories, but no matching taxonomy, and it regulates everyone else.
A bank issuing a green bond and a listed manufacturer issuing a green bond in Bangladesh today could, in principle, be applying two different standards of what counts as green.
Then there is a question nobody has answered yet: what happens when the government itself issues a green bond or a green sukuk?
Under the Public Debt Act 2022, Bangladesh Bank manages the issuance of government securities. But Bangladesh Bank’s own green bond taxonomy is explicitly written for banks and financial institutions as issuers, not for the sovereign.
Bangladesh already runs a sovereign sukuk programme, having raised close to Tk 19,000 crore through it. If the government decides to label a future sukuk or bond as green, which taxonomy does it use? Its own central bank’s, built for a different set of issuers? BSEC’s, which has no sectoral detail? Or does it need to write a third one?
Nobody has said.
Three rulebooks, or even the possibility of a third, is not a technical footnote. It is exactly the kind of ambiguity that makes international investors nervous and gives domestic issuers room to seek the most convenient definition.
The confusion does not stop at the boundary between regulators. Bangladesh Bank itself runs two separate taxonomies: a Green Taxonomy under its 2020 Sustainable Finance Policy, revised in 2023, which governs green loans and green finance targets for banks and financial institutions; and a separate green bond taxonomy under its 2022 Policy on Green Bond Financing.
The sector lists overlap heavily but are not identical, and they sit in two different documents issued two years apart.
This is a harder distinction to justify than the one between Bangladesh Bank and BSEC. A bank’s green loan book and a bank’s green bond both perform the same economic function: they extend credit to a borrower to fund a project. Whether that credit comes through a loan on the balance sheet or through bond proceeds does not change what makes the underlying project green.
A solar plant is either an eligible green project or it is not; it should not depend on whether the bank financed it through a loan or a bond. Running two taxonomies for what is, at its core, the same lending decision creates an internal inconsistency that Bangladesh Bank does not need and did not have to create.
This is, in a sense, good news. It means part of the fragmentation problem can be solved without waiting for BSEC or the Ministry of Finance. But it also strengthens the case for one taxonomy rather than a patchwork of them.
A single national taxonomy, if built well, would not just settle the question between Bangladesh Bank and BSEC. It would incorporate Bangladesh Bank’s own green finance and green bond taxonomies into one document because there is no economic reason for them to remain separate.
Bangladesh is not the first country to face this challenge. China’s green bond market went through precisely this fragmentation. Starting in 2015, the People’s Bank of China had one green bond catalogue, while the National Development and Reform Commission had another. Different regulators applied different definitions of what counted as green, creating confusion for investors and increasing the risk of greenwashing.
China’s response was not to allow each regulator to maintain its own version. In 2021, the People’s Bank of China, the National Development and Reform Commission and the China Securities Regulatory Commission jointly issued a single, harmonised Green Bond Endorsed Projects Catalogue, replacing earlier separate lists and applying it across the domestic bond market.
China did not resolve the issue by choosing a winner between regulators. It resolved it by making them publish one document together.
India took a related but slightly different route. The Securities and Exchange Board of India regulates green debt securities for listed issuers, with a framework introduced in 2017 and revised in 2023 to align with international Green Bond Principles. Separately, the government issued its own Sovereign Green Bond Framework in 2022, coordinated through the Ministry of Finance and the Reserve Bank of India.
India still lacks a single, comprehensive taxonomy like the European Union’s, and commentators there have identified that as a gap. But its private-sector and sovereign frameworks were designed to work alongside each other, anchored to common international principles rather than contradicting one another.
The lesson from both is simple: multiple regulators can coexist. Multiple taxonomies cannot, without cost.
Bangladesh does not need to choose between Bangladesh Bank and BSEC. It needs both because they regulate different parts of the market and both have valuable expertise to contribute.
What it does not need is two separate green taxonomies at Bangladesh Bank and BSEC, two separate frameworks within Bangladesh Bank itself, or the prospect of another taxonomy for sovereign issuance.
The solution is not complicated in concept, even if coordination will require effort. Bangladesh Bank and BSEC should jointly develop a single national green taxonomy covering green finance, green bonds and sovereign issuance, drawing on the sector-level work Bangladesh Bank has already done and BSEC’s market and disclosure expertise.
It should then be published under the authority of the Ministry of Finance and termed the “National Green Bond Taxonomy”, so it sits above both regulators rather than being seen as either institution’s private framework.
This is not a radical model. It is close to what China eventually adopted and reflects how India has kept its corporate and sovereign frameworks from contradicting each other. A jointly owned, Ministry of Finance-published taxonomy would carry greater weight with international investors and development finance institutions because it would remove uncertainty over which standard applies.
Bangladesh built an early lead in green finance because Bangladesh Bank moved first and moved seriously. That lead is now at risk of being diluted by fragmentation, not by a lack of ambition.
Fixing it does not require new institutions or new laws. It requires two regulators that already have the expertise to sit down, agree on one taxonomy and allow the Ministry of Finance to publish it as the single reference point for every green bond issued in Bangladesh, whoever the issuer may be.
Author is the Chairman of Edge Amc Limited and a Trustee of Panam Institute. The views expressed in this article are solely those of the author.
