NRB Executive Director Poudel Urges Government to Recognize Green Finance Taxonomy Nationally

Kathmandu. Nepal Rastra Bank Executive Director Guru Prasad Poudel has urged the government to give national recognition to the 'Green Finance Taxonomy'. Speaking at a program organized in the capital, Poudel stated that the government should recognize the 'National Green Finance Taxonomy' as a national document for mobilizing international climate funds and concessional financial resources.

Nepal Rastra Bank had issued the 'Environment and Social Risk Management' guideline in 2018. Similarly, in October 2024, it brought the Green Finance Taxonomy into implementation as a reference material for banks and financial institutions. Although the board of directors of Nepal Rastra Bank has already formally requested the Government of Nepal to recognize this taxonomy as a national document, that process has not been completed so far.

Clarifying the guideline brought by Nepal Rastra Bank, Executive Director Poudel mentioned that this taxonomy is a guide not only for banks and financial institutions but for the entire economic sector of Nepal, including the capital market and insurance. This guideline has classified economic activities into three categories: Green, Amber, and Red.

Poudel expressed the view that not every investment in any sector automatically becomes environmentally friendly or 'green'. For example, he clarified that extending loans for agriculture does not automatically make it a green activity. According to him, it is also important to see whether chemical fertilizers are used properly, stored, and whether environmentally friendly practices are adopted. Therefore, he emphasized the need to first identify green and non-green activities and only then direct investment towards green sectors.

It is believed that when the Green Finance Taxonomy is established as a national document, it will be easier to coordinate Nepal's taxonomy with international taxonomies. This will greatly help Nepal become eligible to receive grants and concessional long-term financial resources from green bonds, international climate funds, and various green funds established after the Paris Agreement.

Poudel stated that due to Nepal's terrain and geographical conditions, it needs to be more vigilant about climate change and give special importance to climate-related issues in sectors where it has a competitive advantage. 'The agricultural sector is highly affected by climate change. Considering Nepal's terrain and geographical conditions, we need to be more vigilant about climate change. Also, there is a need to give special importance to climate-related issues in Nepal's competitive advantage sectors,' Poudel said.

The Government of Nepal has made various climate commitments in international forums. Nepal has also set a goal of achieving net zero carbon emissions by 2045. Fulfilling such commitments will require billions of rupees in investment. For that, Nepal's access and claim to globally available green funds must be ensured, and Nepal needs to become capable and eligible for that, Poudel said.

He claimed that this taxonomy will prove to be a milestone in fulfilling the climate commitments expressed by the Government of Nepal in international forums and in building a green economy.