How XacBank Expanded the Role of Local Banks in Renewable Energy and Climate Finance in Mongolia
From renewable energy to energy-efficient housing, XacBank has shown how a local bank can build green finance step by step. With support from partners including the Green Climate Fund, ADB, and FMO-led financiers, the bank has expanded green lending in Mongolia while supporting cleaner heating, lower-emission businesses, and more energy-efficient homes.
The Challenge
In Mongolia, green finance is closely tied to everyday challenges. Air pollution from winter heating, high energy use, and demand for climate-smart housing and business investment have created a strong need for financing that is both practical and accessible. XacBank responded by developing products around these needs and embedding sustainability into its business model. By the end of 2024, green loans accounted for 4.1 percent of its total loan portfolio.
Strategic Approach
XacBank’s green finance approach grew through a combination of partnerships and targeted products. The bank was the first in Mongolia to finance a renewable energy project with support from the Green Climate Fund, and later became the first private Mongolian bank to help finance a large-scale solar plant through a GCF-backed partnership. These early deals showed that local banks could take a stronger role in renewable energy and climate finance.
XacBank then expanded its approach beyond large projects. Its MSME Business Loan Program for GHG Emissions Reduction supported energy-efficient investments by smaller businesses, while its green consumption lending helped households invest in cleaner heating, insulation, and more energy-efficient homes. The bank also linked lending to carbon finance, reporting cumulative sales of about 1.3 million carbon credits by the end of 2024. In the same year, the bank launched an ISO Standard Implementation Program for SMEs to support quality improvement and competitiveness.
As its track record grew, XacBank attracted larger financing partnerships. In December 2024, ADB and XacBank signed a $50 million financing package to support climate action and MSME lending in Mongolia . In February 2026, XacBank secured a $150 million financing package led by FMO and supported by other international partners, helping expand green lending alongside inclusive finance for women-led businesses, youth, and agricultural SMEs.
Outcome and Impact
By the end of 2024, XacBank reported close to 2.9 million tons of cumulative emissions reductions through its green financing activities. It also supported housing that uses at least 20 percent less energy than Mongolia’s baseline building norm, an important contribution in a country where household heating remains closely tied to air pollution and energy demand. In 2024, XacBank became the first Mongolian institution to receive the Global Climate Partnership Award for its long-term commitment to energy-efficient construction lending.
Lessons Learned
XacBank’s experience shows that green finance grows more effectively when partnerships, tailored financial products, and strong internal systems reinforce one another. It also highlights the importance of internal capacity to screen, manage, and implement sustainable finance activities over time. The case also underscores the value of building step by step: early renewable energy and energy-efficiency transactions helped establish the track record needed to attract larger financing partnerships over time. For other emerging markets, XacBank offers a practical example of how a local financial institution can move from piloting green solutions to building a more established green finance business line.
Key links/documents:
1. XacBank. 2024. Sustainability Report 2024.
2. Asian Development Bank. 2024. ADB and XacBank Sign $50 Million Deal to Boost Climate and MSME Financing in Mongolia.
3. Global Climate Partnership Fund. 2026. GCPF Participates in USD 150 Million Syndicated Facility to Support Green and Inclusive Finance in Mongolia.