GCPF Finances Climate Change Mitigation Investments in Mongolia

GCPF supports investments in energy efficient housing and the financing of the production of insulation and heat material as well as energy efficient stoves in Mongolia. Together with its local partner, XAC Bank, financing of up to USD20m are employed to finance local producers, households and property developments.

During winter season, Ulaanbaatar, Mongolia’s capital city, ranks amongst the most polluted cities globally causing significant environmental damage to the already fragile ecological system. Major issues are caused by residents of the ger districts that essentially burn any material available for heating their often poorly insulated homes as temperatures can fall as low as -40°Celsius. Thermal, coal fired power plants dating back to Soviet times are the major source of energy production for Mongolia while the expanding economy – driven by increasing mining activities – confronts local operators with a growing demand for electricity and heat.

GCPF’s local partner, XAC Bank, has set up an eco banking department which pursues the mission to actively support the reduction of CO2 emissions which have become a significant threat to the population’s health causing up to USD470m health costs annually and contributing to 1 in 10 deaths in the city of Ulaanbaatar. XAC Bank plans to grant mortgages to households that intend to move into certified energy efficient buildings. Based on research supported by the UNDP, XAC Bank expects energy savings of up to 80% compared to the current status quo. Another substantial amount of financing will go to local SME manufacturers like producers of stoves that – compared to stoves currently in use – are able to operate at a higher temperature thus reducing emissions and costs for the local population of the ger districts. Other SMEs to receive finance produce or import energy saving building materials (i.e. polyurethane and polystyrene blocks or concrete), insulation ger blankets, improved fuel sources or vacuum sealed windows. Working capital in the SME sector is scarce and thus currently a bottleneck.

GCPF supports the activity with a 5 year USD20m loan facility out of which USD15m have already been disbursed to XAC Bank, Mongolia’s fourth largest bank with a market share of around 9% and a strong focus on the retail and VSME sector.

For more information on XAC Bank, please visit http://www.xacbank.mn/en

For more information on the Global Climate Partnership Fund, please visit http://www.gcpf.lu