Climate Change and Green Monetary Policy: Is Bangladesh Ready for a Sustainable Central Banking Model

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🔬研究者:Provides a comparative framework for analyzing central bank green transitions and identifies key gaps in risk management tools.

🏢実務担当者:Offers a practical three-horizon roadmap for central banks to integrate climate risks into monetary policy and financial supervision.

🏛政策担当者:Highlights the need for proactive climate stress testing and green collateral frameworks, informing regulatory design for financial stability.

Climate change constitutes an existential and multifaceted threat to the macroeconomic and financial stability of climate-vulnerable emerging economies. For Bangladesh, this reality necessitates a fundamental re-evaluation of its central banking functions. This paper critically assesses the readiness of Bangladesh Bank (BB) to transition from its current, pioneering green banking framework towards a fully integrated and strategic sustainable central banking model. While BB has been a regional leader - establishing a mandatory Sustainable Finance Policy with direct green finance quotas and detailed reporting requirements - we contend that this compliance-based, credit-direction approach is fundamentally insufficient for diagnosing and managing the systemic nature of climate-related financial risk. Through a rigorous, mixed-methods methodology involving critical policy document analysis, review of BB's financial performance data, and comparative case studies of frontrunner institutions like the European Central Bank and the People's Bank of China, this study identifies a critical governance gap. Our findings demonstrate that BB's framework lacks the advanced, proactive tools - such as climate stress testing to quantify portfolio vulnerability, a green collateral framework to incentivize sustainable assets, and differentiated reserve requirements that are essential for a resilient financial system. This gap between directing credit and internalizing risk leaves Bangladesh's economy exposed. Consequently, we argue the country is at a pivotal juncture. It possesses the foundational policies but must urgently embrace a strategic, risk-based paradigm to properly safeguard financial stability and channel capital at the scale and speed required by its ambitious Climate Prosperity Plan. The paper concludes by proposing a novel, phased three-horizon roadmap to guide this transition, emphasizing initial capacity building, subsequent market incentivization, and ultimate deep structural alignment to secure a prosperous and climate-resilient economic future for Bangladesh.

• openaire https://doi.org/10.34104/ajssls.025.04590467first seen 2026-05-14 21:37:46