How Mongolia Is Building a Climate Resilient Financial System
Climate risks — from physical hazards to the low carbon economy transition — can disrupt price stability and have wide-ranging impacts across financial systems and economies, areas that fall squarely within central banks' mandates. As a result, climate change is an increasingly important factor in how central banks prepare for emerging risks.
Mongolia illustrates these challenges. Its vast arid and semi-arid landscapes expose it to physical climate hazards, including “dzuds,” droughts and floods, which pose systemic risks to economic stability and development. At the same time, the economy is heavily reliant on emissions-intensive sectors.
In response, the Bank of Mongolia has made sustainable finance a policy priority. Its 2022 Monetary Policy Guidelines set a roadmap to integrate climate considerations into financial regulation, risk management and investment decisions.
Catalyzing Change Through Coordinated Support
Through the NDC Partnership’s Readiness Support for Greening Central Banks (GCB) initiative, the Economic and Social Commission for Asia and the Pacific (ESCAP) supported the Bank of Mongolia in greening the financial sector. With funding from the Partnership Action Fund (PAF), ESCAP delivered targeted technical assistance, analytical research and training on climate risk analysis, disclosure practices and sustainable finance regulation. The Bank of Mongolia has applied this capacity to pilot its first ever bottom‑up climate scenario analysis (CSA) –– laying the groundwork for future climate stress testing — while advancing climate-related disclosure frameworks and integrating climate considerations into supervisory and policy processes.
Building the Evidence Base: Climate Risk Analysis
The project began with two analyses: one focused on climate-related risks to the financial sector and the other on climate risks to monetary policy. Together, these analyses examine how physical and transition risks could affect the national economy and financial system in the coming decades. The studies focused on high-exposure sectors, such as agriculture, mining and energy, and examined potential implications for price stability in a small, commodity-exporting economy.
This work also surfaced opportunities for financial innovation linked to the green transition, including how the Bank of Mongolia can evolve its analytical and operational toolkits to address climate-related shocks.
ESCAP also trained more than 660 participants from regulators, line ministries and the financial sector, including 140 Bank of Mongolia staff, on climate risk assessment and its implications for financial stability and monetary policy.
Strengthening Transparency Through Disclosure Frameworks and Taxonomies
The lack of comparable, reliable climate-related financial data is a persistent challenge for central banks. Recognizing this gap, the Bank of Mongolia prioritized the development of climate-related disclosure guidelines for the banking sector. By providing consistent and comparable information, these guidelines help investors, regulators and other stakeholders assess resilience to climate-related risks and support strategic planning within firms aiming to align with emerging regulations, investor expectations and global climate goals outlined in the Paris Agreement.
ESCAP supported the Mongolian Sustainable Finance Association and the Bank of Mongolia in developing guidance on climate-related disclosures aligned with the International Sustainability Standards Board (ISSB). Launched in May 2025, the guidance aims to furnish financial institutions with best practices for compliance.
The Bank of Mongolia also developed discussion papers on environmental, social and governance (ESG) risk-based supervision and implementing a national green taxonomy that provide a knowledge base for future regulatory reforms and capacity building.
From Foundation Building to Scenario Analysis and Knowledge Sharing
In October 2024, the Bank of Mongolia launched its first-ever bottom-up climate scenario analysis, with technical support from ESCAP. Five systemically important banks — representing 96% of total banking sector assets — participated, joined by one additional bank that opted to participate. Banks engaged in training webinars, bilateral consultations and analytical exercises over several months, and by March 2025, all had submitted results. The exercises assessed how plausible future climate scenarios — varying in emissions levels, policy trajectories and socioeconomic factors — could affect participating banks' financial resilience.
This milestone means that Mongolia has effectively integrated climate risk assessments into macroprudential supervision, providing critical insights into sector wide vulnerabilities and identifying priority areas for strengthening risk management frameworks.
The initiative also supported regional knowledge sharing. In June 2024, ESCAP, Agence Française de Développement (AFD), the European Investment Bank (EIB) and the NDC Partnership Support Unit co-organized a peer learning webinar on climate risk assessment, convening 80 participants from 18 central banks. The session enabled regulators to share their experience with climate stress testing and has since been scaled up through the NDC Partnership in 2025, with continued ESCAP engagement across the Asia-Pacific region.
At the Mongolian Sustainable Finance Forum 2024, ESCAP was recognized for its contribution to advancing sustainable finance development in Mongolia.
Sustaining Action for a Climate Resilient Financial System
Mongolia is now better positioned to accelerate its transition toward a climate resilient and sustainable financial system. Achieving long-term impact will require sustained action from policymakers, financial institutions and investors to fully integrate sustainability into financial decision-making and risk management processes, alongside continued support from development partners. Mongolia has submitted two active requests to advance this work, which remain critical to sustaining progress.
Beyond the financial sector, the NDC Partnership is also supporting Mongolia to strengthen the systems needed to implement its Nationally Determined Contribution (NDC) and Long-Term Low Emission Development Strategy (LT-LEDS). To fill critical technical and capacity gaps, Mongolia has received continued support to develop a national measurement, reporting and verification (MRV) framework. Building on earlier PAF support, this ensures continuity and strengthens institutional capacity needed to track NDC implementation progress.
Learn more about the GCB initiative through the NDC Partnership.