BRAC Bank is set to issue a Tk 1,000 crore green bond, the first in the country to align with Bangladesh Bank’s policy on green bond financing for banks and financial institutions, as the private lender seeks to channel long-term money into renewable energy and energy-efficient industry.
The three-year bond will be senior, unsecured, non-convertible, fully redeemable and zero-coupon, the bank said at a press conference in Dhaka yesterday.
Each bond will carry a face value of Tk 10 lakh and will be offered to corporate institutions and individual investors. Eligible company provident and gratuity funds may also invest, subject to regulatory and investment requirements.
Proceeds will go to eligible green projects, including renewable energy, green buildings and industrial energy-efficiency initiatives.
The bank said the framework follows the International Capital Market Association’s Green Bond Principles and has received a second-party opinion from S&P Global Ratings. It also said it expects the funds to contribute to four United Nations Sustainable Development Goals: affordable and clean energy (SDG 7), industry, innovation and infrastructure (SDG 9), sustainable cities and communities (SDG 11), and climate action (SDG 13).
Tareq Refat Ullah Khan, managing director and CEO of BRAC Bank, said many factories were turning to renewable energy amid the global energy crisis and rising fuel prices, but such projects needed affordable, long-term financing.
“This green bond marks an important milestone in BRAC Bank’s sustainable finance journey and represents a meaningful step towards deepening Bangladesh’s capital market,” he said.
He said the bank was targeting a return of 7.5 percent and that the tax treatment of zero-coupon bonds could make the paper attractive to investors.
He thanked the government and the Bangladesh Securities and Exchange Commission for their support for the tax benefits. To ensure transparency, he added, the bank would conduct annual audits to verify that proceeds were used only for eligible green projects. A zero-coupon bond pays no periodic interest. Investors buy it at a discount and receive the full face value at maturity, with the difference being their return.
At a 7.5 percent yield, a Tk 10 lakh bond would be priced at roughly Tk 8.05 lakh at issue, assuming annual compounding.
For a banking sector that has struggled with a shortage of long-term funding, the issue is also a test of the domestic corporate bond market, which remains shallow, BRAC Bank officials said.
“Most bank lending to renewable energy and energy-efficiency projects is tied to tenors that are hard to match with short-term deposits, so a three-year instrument, though modest in length, could help ease that mismatch.”
BRAC Bank said sustainable finance accounts for more than 60 percent of its loan portfolio. It has been named among Bangladesh Bank’s top sustainable banks for five consecutive years and ranked first among Bangladeshi banks in Bloomberg’s ESG Rating. It previously issued a social bond.
The BRAC Bank managing director said the bank wanted to contribute to a financial ecosystem in which sustainability is embedded in investment decisions and that the bond would help create an alternative source of long-term financing for sustainable development.
https://www.thedailystar.net/business/organisation-news/news/brac-bank-issue-countrys-first-tk-1000cr-green-bond-4307256
