LocationsMeeting the challenges of landlocked nations
How Mongolia can leverage sustainable financing for development
July 10, 2025
Mongolia faces severe environmental challenges, from droughts desertification and wildfires, to the harsh winter known as dzud.
Photo: UNDP Mongolia
In a world where borders define both opportunity and limitation, landlocked developing countries (LLDCs) like Mongolia face unique challenges in financing their national development priorities and Sustainable Development Goals (SDGs). Mongolia needs approximately 17 percent of its GDP annually until 2030 to reach these goals, a gap too large for its state budget to fill. The private sector will help to reduce the pressure on public funds, but Mongolia and other LLDCs still struggle with limited financial resources, capacity issues, and the lack of large-scale funding needed for infrastructure to support sustainable growth. This is where sustainable financing—a strategic approach that promotes environmental resilience, social inclusiveness and long-term sustainability—becomes essential.
Building resilient value chains
Geographic constraints and limited market access present Mongolia with a distinct challenge; diversifying its economy and reducing its dependence on mining exports. As the demand for commodities is highly volatile, price shocks impact export earnings. While Mongolia may not have the cost competitiveness, advantage in scale or pricing that other exporters possess, it has a unique asset; a brand that can be built around sustainability.
As global markets and investors increasingly value low carbon footprints by adopting green standards and showcasing the environmental benefits of its production processes from raw material to processing, Mongolia can strengthen its reputation as a provider of sustainable and responsibly sourced commodities.
Mongolian products can have a price premium and access to niche markets that prioritize sustainability over the cheap but harmful products. These industries can simultaneously serve as revenue-generating export models and attractive targets for sustainable financing.
A new national initiative aims to strengthen Mongolia's light industry by processing raw materials such as cashmere, leather and wool.
Photo: UNDP Mongolia
The “White Gold” National Programme, launched by the President of Mongolia, Ukhnaagyn Khurelsukh, exemplifies this effort. It aims to strengthen the country’s light industry by enhancing the processing of raw materials like cashmere, leather, and wool, expanding the range of value-added products and boosting exports. Building on years of close collaboration with Mongolia to promote sustainable cashmere and these value chains, UNDP is now supporting the initiative. In addition to sustainable value chains, securing climate-specific funds is essential for Mongolia’s climate resilience.
Another crucial linkage is regional integration. It offers Mongolia a path to improve trade efficiency, economic resilience, and inclusive development by connecting more closely with neighbouring economies and regional supply chains. This helps reduce costs tied to Mongolia’s landlocked status, supports trade diversification and opens opportunities in greening key industries such as agriculture and renewable energy.
Addressing Mongolia’s vulnerabilities
Financing is essential to tackle global climate challenges, especially for vulnerable nations like Mongolia. Due to elevated debt levels, constrained domestic budgets and limited financial resources, developing and landlocked countries and those vulnerable to climate change face financial risks in successfully fulfilling their obligations and commitments under the Paris Agreement to keep global warming below 1.5C.
Mongolia faces severe environmental challenges, from droughts, wildfires, and desertification to the harsh winters known as dzud. Climate financing offers a crucial path forward. By securing climate-specific funds, Mongolia can develop climate-resilient infrastructure, adopt sustainable practices and protect communities and ecosystems.
Carbon credits present a promising financing mechanism, where initiatives like reforestation, renewable energy, and sustainable agriculture can offset emissions and generate revenue. Mongolia’s grasslands and forests serve as natural carbon sinks, while renewable energy projects lower greenhouse gas emissions. Carbon credits not only support economic development but also enhance Mongolia’s global contribution to climate action, aligning with its commitments under the Paris Agreement. This mechanism can serve as vital tool for advancing Mongolia's commitment to reducing emissions under its Nationally Determined Contributions (NDCs).
To turn development goals into reality, Mongolia must have the financial architecture to address climate change with the tools needed to leverage its unique strengths.
The Integrated National Financing Framework and Strategy (INFF), supported by UNDP, can be an important tool for mobilizing public and private resources. While Mongolia’s development strategy outlines its financing needs, the INFF provides a clear, structured plan on how to achieve these priorities, enabling Mongolia to leverage all its resources effectively, from public and private sector, national and international.
Renewable energy solutions for air pollution as well as carbon sequestration pilots for pasturelands are amongst Mongolia's climate financing options.
Photo: UNDP Mongolia
To be successful climate financing principles need to be integrated, as climate change impacts every facet of development from agriculture and infrastructure to health and economic stability. While climate financing is vital to addressing Mongolia’s environmental vulnerabilities, a robust and high integrity system, including monitoring, reporting and verification is equally essential to mobilize resources effectively and ensure sustainable growth. Integration of climate budgeting into the public budget and investment programmes is yet another building block of a climate responsive financing system, and an area of UNDP engagement.
UNDP is exploring new mechanisms to expand Mongolia’s climate financing options. These include developing a carbon credit market framework and supporting Mongolia’s carbon market readiness along with pilot projects with strong potential to generate high integrity credits, such as renewable energy solutions to address air pollution and carbon sequestration pilots for pasturelands. UNDP is supporting Mongolia in preparing to access other climate finance instruments, such as the global ‘Fund for responding to Loss and Damage’.
The International Think Tank for Landlocked Developing Countries (ITTLLDC) plays a critical role by advocating for Mongolia and other LLDCs. Through research, policy analysis, and partnerships, it helps Mongolia adopt global best practices and showcase the country as a reliable, sustainable investment destination.
A call to action
We are hopeful that the Third UN Conference on Landlocked Developing Countries (LLDC3), being held in Awaza, Turkmenistan in August will spark new partnerships and greater investment to help landlocked countries like Mongolia overcome barriers to trade, development, and connectivity as well as crucial platform to turn the new Programme of Action for 2024–2034 into real, tangible progress. With the right support and follow-through, this global commitment can open new pathways for sustainable growth. Now is the time to move from promises to action for a more connected, resilient, and inclusive future.
We urge international investors donors, and global leaders to recognize Mongolia’s path to sustainability is the one we all have a stake in. The challenges Mongolia faces—climate vulnerability, limited market access, and sustainable financing gaps—require a concerted global response.
They are part of a global landscape where climate change, economic instability, and environmental degradation know no borders. Sustainable development in Mongolia and other landlocked developing countries contributes directly to global stability, environmental health, and economic resilience.
As the first and only intergovernmental analytical institution dedicated to LLDCs, ITTLLDC is uniquely positioned to provide valuable insights and expertise to advance their socioeconomic development.
Only by working together, sharing experiences, conducting research, and addressing our collective challenges can we drive transformative change, ensuring that Mongolia—and all landlocked developing countries—stand tall on the world stage resilient, sustainable and thriving for generations to come.
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