Exploring the Role of Green Bonds in Nepal's Green Growth

This research paper explores the applicability of green bonds in Nepal and also explores how green bonds can help Nepal move towards a more sustainable and climate-resilient future. As a country that is in a highly vulnerable position due to climate change, Nepal faces challenges in areas like agriculture, tourism, infrastructure and renewable energy. However, with the introduction of green bonds since the year 2025 Nepal has found an effective way to bridge the finance gap and by properly financing eco-friendly projects and work towards its commitment towards various climate goals. The main objective of this paper is to study the importance of green bonds, their growth globally, and their application in Nepal, including the green bonds that have been recently issued by NMB bank and NIFRA. Further, this paper also discusses the regulatory frameworks and the role of various regulators both in Nepal and internationally to initiate green bonds. This paper also highlights Nepal’s efforts in scaling up green finance by introducing Green Finance Taxonomy 2024. Using data from reputable sources like the World Bank, IFC, Nepal Rastra Bank, and Climate Bonds Initiative, the paper follows a qualitative approach in analyzing the green bond market and the issues therein in Nepal. Key findings are that although Nepal has made strong advances, issues like small market size, technical capacity shortfall, and greenwashing risk need to be addressed. The paper rounds off with policy recommendations to strengthen Nepal's green bond market and build investor trust.