MoU Signed Between Nepal Rastra Bank and IFC on Climate Finance Strategy Development

16th December 2025, Kathmandu

Nepal Rastra Bank (NRB), the central bank of Nepal, and the International Finance Corporation (IFC), a member of the World Bank Group, have officially entered into a transformative partnership. The two institutions signed a Memorandum of Understanding (MoU) in Kathmandu on Monday, December 15, 2025, to collaborate on the development of a comprehensive climate finance strategy for the country. The signing ceremony took place at the central bank’s headquarters in the presence of high-ranking officials, including Deputy Governor Bam Bahadur Mishra, marking a pivotal moment in Nepal’s journey toward environmental and financial resilience.

NRB IFC Signs MoU

The agreement was formally executed by Dayaram Sharma Pangeni, the Executive Director of the Governor’s Office at Nepal Rastra Bank, and Gregory Smith, the Manager for Country Advisory and Economics for South Asia at the International Finance Corporation. Under this newly established framework, the IFC will provide specialized technical assistance to the central bank to accelerate the maturity of climate finance mechanisms within Nepal’s borders.

Objectives and Technical Assistance Framework

The primary objective of this collaboration is to create a robust structural foundation for climate-related financial activities. This is particularly crucial for Nepal, which remains highly vulnerable to the impacts of climate change, ranging from glacial melt to erratic monsoon patterns that threaten the stability of the agricultural and energy sectors.

[Image showing a conceptual diagram of climate finance flow from international bodies to local adaptation projects]

Comprehensive Strategy and Roadmap: As part of the multi-year project, the teams will draft a detailed climate finance strategy tailored specifically to the unique topographical and economic landscape of Nepal. This strategy will be accompanied by a clear implementation roadmap, detailing the short-term and long-term milestones required to mobilize capital for green projects.

Phased Implementation Framework: The project will also develop a necessary framework to ensure that the strategy can be implemented in distinct, manageable phases. This approach allows the central bank to monitor progress and adjust policies based on the evolving needs of the domestic financial market.

Capacity Building and Training: A core component of the MoU focuses on the institutionalization of knowledge. The IFC will conduct extensive training and capacity-building programs designed for Nepal Rastra Bank officials and professionals across the broader financial sector. These programs will focus on the formulation, monitoring, and practical execution of climate finance policies, ensuring that the banking industry is equipped to handle emerging environmental risks.

Advertisement

Identifying Risks and Mobilizing Resources

The project is expected to yield significant results in two critical areas: risk mitigation and resource mobilization.

First, the implementation of the strategy will help the central bank and private financial institutions identify and mitigate climate-related financial risks. These include physical risks to collateral and assets caused by natural disasters, as well as transition risks associated with the shift toward a low-carbon economy. By addressing these factors proactively, Nepal Rastra Bank aims to safeguard the overall stability of the financial system.

Second, the partnership focuses on promoting the mobilization of financial resources. The project is designed to bridge the gap between global climate funds and local needs, making it easier for Nepal to attract investments for climate adaptation and mitigation initiatives. This is essential for funding large-scale projects in renewable energy, sustainable agriculture, and resilient infrastructure. According to the agreement, the project will remain operational until September 2028, providing a generous window for the deep institutionalization of these new practices.

Institutional Commitment and Future Outlook

During the signing ceremony, Deputy Governor Mishra emphasized the historical strength of the relationship between the two organizations. He noted that Nepal Rastra Bank and the IFC have collaborated for decades to strengthen the country’s financial architecture. He expressed high confidence that this new MoU would represent a significant leap forward in policy development, moving Nepal from a reactive stance to a proactive leader in regional climate finance.

Similarly, IFC Manager Gregory Smith voiced his optimism regarding the partnership’s potential to produce results-oriented outcomes. He highlighted that institutionalizing climate finance is not just an environmental necessity but an economic opportunity for Nepal to modernize its banking sector and attract high-quality international capital.

As Nepal moves toward its goal of becoming a middle-income country, integrating environmental, social, and governance (ESG) standards into its financial sector is paramount. This MoU serves as a strategic blueprint for that transition, ensuring that the country’s growth is both sustainable and resilient.

For More: NRB IFC Signs MoU