Group 2

Systemic: XacBank


4 January 2022

Beyond serving their own customer, values-based banks believe in the need for a positive systemic change in the banking system itself. For that reason, values-based banks work with others to change finance so it is better able to serve people and the environment. This means they engage actively and selectively with regulators, government and other banks that are genuinely committed to transitioning to a sustainable future.


Mongolia’s capital of Ulaanbaatar, home to half of all Mongolians, is both the coldest capital and the most polluted city in the world. More than half of Ulaanbaatar’s population lives in slum areas.  With no access to running water, basic infrastructure, or the city’s heating grid, these residents burn coal to stay warm. Acrid coal smoke from 200 thousand ‘ger’ stoves and nitrogen dioxide from 400 thousand cars in Ulaanbaatar are blamed for air pollution. 

Partnering with several public and private agents, like the Millennium Challenge Account Corporation, the Mongolian government, and World Bank’s “Clean Air Project”, XacBank has distributed hundreds of thousands of energy-efficient stoves and over 20,000 insulated coverings since 2010 to these residents. 

These technologies have helped lower the families’ monthly expenditure on fuel by 40%-50% and improved the quality of air in Mongolia’s capital city. With this program, XacBank was able to reduce over 280,000 tonnes of CO2 annually, generating verified carbon credits and selling them through a partner, Micro Energy Credits.

In May 2017, XacBank met with a team from the Climate and Clean Air Coalition and the Frankfurt School of Finance and Management to investigate setting up cheap household loans for ger residents to purchase cleaner household heating appliances to replace the inefficient traditional heat-stoves they currently use.

Working with ger residents, local and national government, academics, engineers, and technology suppliers, the team assessed a feasibility study that showed a viable market for energy-efficient heating appliances. This study helped XacBank design an Energy Efficient Consumption Loan Programme, a financial product to help poor families purchase clean heating options, reduce air pollution, and provide environmental and health benefits.

To implement this product, XacBank submitted a proposal to the UN Green Climate Fund (GCF) for funds. The combination of GCF funds with the XacBank commercial funds led to an $18 million loan programme for energy-efficient households in the country.

XacBank’s experiences in sustainable financing to date have allowed the Bank to learn two valuable lessons. Firstly, although sustainable financing reduces clients’ costs in the long term, the initial investment amount for sustainable projects is higher than their alternatives. Secondly, because sustainable financing tends to be more expensive than the regular solution, the payback period of the projects is much longer than average. As a result of these two lessons, XacBank learned that the best way to support and promote sustainable financing is to offer its clients the most concessionary terms possible, with regard to both interest rates and loan tenors.

XacBank recognizes the crucial role it has in slowing climate change, an epidemic that is already having effects on Mongolia in terms of more extreme weather conditions, desertification, and the most polluted capital city in the world: Ulaanbaatar. XacBank has the power to contribute to the fight against climate change by crowding capital into the sustainable energy market, with the help of other financial institutions and in cooperation with local and international initiatives in order to create a systemic change for generations to come.

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