Responsible Business Conduct for Sustainable Infrastructure in Kazakhstan, Mongolia and Uzbekistan

3. Mongolia

Abstract

This chapter analyses how Mongolia is encouraging responsible business conduct (RBC) for sustainable infrastructure. It considers the country’s legal and policy framework in a range of policy areas as well as the state’s economic role and commercial activities. It highlights progress and challenges and identifies opportunities for how Mongolia can strengthen the integration of RBC in infrastructure development and operations.

3.1. Overview of infrastructure development in Mongolia

Mongolia is a large landlocked middle-income country. It shares borders with the People’s Republic of China (China) in the south and the Russian Federation (Russia) in the north. Both countries are also its main trading partners (Observatory of Economic Complexity (OEC), n.d.[1])1. The country has achieved a status of high human development in UNDP’s Human Development Index, ranking 96 out of 193 in 2022 (UNDP, 2024[2]). With a 2023 GNI per capita of USD 4 950 (World Bank, 2024[3]) Mongolia is in the midst of moving from lower- to upper-middle-income status. While almost half of the population lives in the capital, Ulaanbaatar, Mongolia’s extremely low population density (3.4 million people for a land surface of 1.6 million km2, the lowest in the world (World Bank, 2024[4])) has implications for infrastructure development, including higher costs to connect citizens to and through infrastructure.

To achieve its development objectives, in particular, for economic and regional development, the country has identified the need for significant infrastructure investments (World Bank, 2021[5]). Its long-term development policy, Vision 2050, foresees a significant expansion of the road and rail network; investments in energy production and transmission to achieve self-sufficiency in terms of electricity; and the development of mining, which is expected to continue as a key sector of the economy (Mongolia, 2020[6]). These sectors feature prominently in the country’s New Recovery Policy 2021-2030 and action plan adopted in response to the COVID-19 pandemic (Mongolia, 2021[7]). In September 2024, the new government coalition adopted its Government Action Plan 2024-2028, with infrastructure investments at the very centre: almost all 14 mega-projects are linked to transport, energy and industrial infrastructure (Government of Mongolia, 2024[8]).

Transport is a policy priority due to the vast geographical expanse, location of mineral resources, and low population density. Connectivity is essential also for Mongolia’s exports. While Mongolia has already heavily invested in transport infrastructure over the past years, needs remain high (OECD, 2019[9]): many roads are unpaved, maintenance is a challenge, and transport costs are high (World Bank, 2021[10]). The country ranks 108^th in the 2023 Logistics Performance Index in terms of infrastructure (World Bank, 2023[11]). The concentration of population and economic activities in a few areas means that value for money of transport infrastructure needs to be closely considered (ITF, 2019[12]). The Government Action Plan 2024-2028 focuses on railway development (3 200 km), highways and roads (4 400 km planned2), and freight and port infrastructure (Government of Mongolia, 2024[8]).

Mining remains central to the economy. Ever since the opening of the economy in the 1990s, the mining sector – mainly coal and minerals – has been the main engine of GDP growth and trade. It accounted for 93% of exports in 2022 and 56% of domestic and foreign investment in 2021, and 60% of GDP growth in 2023 (Government of Mongolia, 2023[13]; World Bank, 2024[14]). For instance, the underground expansion of the Oyu Tolgoi copper and gold mine represents an estimated investment volume of USD 7 billion (Rio Tinto, 2023[15]). Artisanal mining is an important source of employment for rural populations (Lahiri-Dutt et al., 2021[16]). The vast majority of Mongolia’s exports is directed to China, in particular, coal. Chinese companies are expected to adhere to the Chinese Due Diligence Guidelines for Mineral Supply Chains, which have been developed building on OECD standards (China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters (CCCMC), 2020[17]). The global energy transition creates additional demand for extractives such as copper, lithium, and uranium, and presents opportunities for Mongolia. The New Recovery Policy and 2024-2028 Action Plan foresee an expansion of mining and investments in industrial transformation of copper, gold, and coal to capture more value-added before export (Mongolia, 2021[7]; 2024[8]). Expanding the mining sector is also at the origin of substantial investments in infrastructures for transport (to access mining sites and export goods) and power for operations. Moreover, revenue from mining is expected to finance Mongolia’s Sovereign Wealth Fund, created in 2024 (Montsame, 2024[18]). The Fund’s objective is to support the country’s development investments and long-term financial stability.

Mongolia’s energy sector remains heavily reliant on fossil fuels, with renewables slowly gaining traction. A particularity of Mongolia in this regard is the importance of heating needs and the central role of coal, with outdated thermal power plants producing the vast majority of both heat and electricity (World Bank, 2021[5]). The New Recovery Policy, reaffirmed under the Action Plan 2024-2028, foresaw creating an additional capacity of 3 400 MW and a heating capacity of 1 536 MW (Mongolia, 2021[7]; 2024[8]). While Mongolia exports energy resources from mining, its domestic electricity production is insufficient to meet growing needs: around 20% of electricity consumption stems from imports (Government of Mongolia, 2023[13]). Wind and solar energy production has increased but it constitutes, together with hydropower, only 10% of energy production (Government of Mongolia, 2023[13]). Compared to the New Recovery Policy3, the 2024-2028 Action Plan recognises the vast potential of renewable energy and puts greater attention on renewable energy sources (RES), including through large and mega-scale solar wind projects and hydropower stations (Government of Mongolia, 2024[8]). This aligns with Vision 2050’s objective to bring the share of renewable energy to 30% by 2030 (Mongolia, 2020[6]).

3.2. Opportunities for promoting RBC in infrastructure development in Mongolia

3.2.1. Consolidating legal and policy frameworks relevant for RBC and applicable to infrastructure development

RBC principles and standards set out that all businesses – regardless of their legal status, size, ownership structure or sector – address adverse impacts of their operations on people, planet and society, and contribute to sustainable development where they operate, including throughout their investments and supply chains. Due to their size and nature, infrastructure development and operations can affect the human rights of local communities such as their land rights and livelihoods. They can impact the rights of workers, notably their health and safety, and create significant harm to the environment and contribute to climate change. The large financial amounts involved can also give rise to corruption. As governments seek greater levels of private sector involvement in financing, delivering, operating, maintaining, and decommissioning infrastructure, promoting and enabling a positive business contribution while minimising adverse impacts on people, planet, society is critical (see Chapter 1).

Overarching framework for responsible business conduct

Vision 2050 expresses a clear concern for the adverse impacts of economic activity, in particular, impacts on the environment and the natural resource base (Mongolia, 2020[6]). A dedicated goal focuses on green development, notably greater resource efficiency, protection of water and decreased climate emissions. Vision 2050 also sets objectives to promote sustainable agriculture, responsible mining, and renewable energy, as well as the promotion of a healthy urban environment. These aspects are taken up again in the New Recovery Policy and the 2024-2028 Action Plan (Mongolia, 2021[7]; 2024[8]).

A policy dynamic in favour of promoting and enabling responsible business conduct has gained significant traction in recent years. Already in 2018, the government developed a State Policy on Corporate Social Responsibility (CSR) even if not adopted (Balzhinnyam, 2021[19]). In 2023, Mongolia adopted a National Action Plan for Business and Human Rights (NAP BHR) (Government of Mongolia, 2023[20]), becoming the fourth country in Asia to do so. Key proposed actions include: adjustments to the regulatory framework to clarify businesses’ obligations; reinforcing the state’s role in monitoring and enforcing standards; awareness-raising and support to businesses; and improved access to remedies through courts and non-judicial mechanisms. In addition to the NAP BHR, significant regulatory and policy efforts on sustainable finance and non-financial reporting can encourage businesses to enhance their management of environmental, social, and governance risks (see below).

Many measures in the NAP BHR are highly relevant for sustainable infrastructure (Government of Mongolia, 2023[20]). Under the NAP BHR, government monitoring would focus on sectors with high risks for occupational safety and the environment. The action plan explicitly mentions mining, extraction, transport, construction, and energy. The government also committed to strengthening environmental impact assessments (EIAs) and public participation in the assessments. Under the NAP BHR, particular attention would be given to land rights and the rights of herders and citizens especially affected by infrastructure, again highlighting mining, transport, and energy. Moreover, regarding the role of the state in infrastructure investments, the following actions would also be highly relevant: integration of human rights criteria in public procurement; integration of human rights and environmental obligations in the legal framework for public-private partnerships (PPP); the application of measures to state-owned enterprises (SOEs) and piloting human rights due diligence and disclosure in SOEs.

The government undertakes progress monitoring of the NAP BHR. This is good practice. The Secretariat of the National Committee on State Productivity (NCSP) co-ordinates the monitoring process across public institutions, bringing together experts and civil society. NCSP will submit an assessment of implementation and recommendations for further actions to government in December 2025. NCPS indicates that preliminary feedback from the end of 2024 shows progress, for instance, on access to remedy, consideration for persons with disabilities in infrastructure development, and integration of RBC-related considerations in frameworks for public-private-partnerships and investments. But it also highlights need for further action in rural areas, in particular, the implementation of environmental assessments and consideration of stakeholder contributions. Progress monitoring and public discussion of results are an important contribution to translating the NAP BHR into practice.

The business sector is increasingly aware of responsible business practices. The mining sector has led this dynamic, with an initiative for responsible mining already launched in 2006 that ultimately led to a Voluntary Code and Guidelines for Responsible Mining in 2019 (Mongolian National Mining Association, n.d.[21]). Moreover, the Bank of Mongolia is one of four central banks to have adhered to the London Principles on Central Bank Artisanal Small-scale Gold Mining Domestic Purchase Programmes (World Gold Council, n.d.[22]). Regarding the wider economy, in 2019, the Mongolian Employers Federation adopted a code of conduct that encompasses human rights, labour rights, environmental protection and anti-corruption (Mongolian Employers Federation, 2019[23]). The financial sector is increasingly adopting environmental, social, and governance (ESG) standards (see below). A United Nations Global Compact network was created in 2010 but the second out of a total of 12 members only joined in 2018 and, as of October 2024, no industry association has joined (UN Global Compact, 2024[24]). Interview partners highlighted the need for more specific guidance for small and medium-sized enterprises (SMEs), and raising the awareness of the wider public to build consumer demand for good RBC practices.

Human rights

Land rights are an important concern when developing infrastructure projects in Mongolia. While many transport investments contain the upkeep or improvement of existing structures, expansions of the network and new mining operations often lead to resettlements and affect land usage of neighbouring communities, with herders and their livestock frequently concerned (UNDP, 2022[25]). Environmental impacts of infrastructure can significantly affect livestock (animal health, dust pollution of wool) and, thus, the livelihood of herders as well as their cultural practice4. However, the legal framework on land rights and its practical application are insufficient to fully protect the rights of persons affected by such resettlements. Gaps include the absence of a requirement for a resettlement plan, consideration for persons without formal title, lack of compensation for loss of livelihood, and absence of project grievance procedures (Ministry of Roads and Transport, 2022[26]; UNDP, 2022[25]),. As a result, depending on their settling practice, not all herders in an area may be considered as affected under the law. UN human rights bodies voiced concerns for the protection of rights of herders, notably “the inadequacy of the legal framework to protect nomadic herders from the adverse impact of mining activities on their pastures, hay lands, water resources and ancient nomadic pastoralist culture” (Committee for Economic, Social and Cultural Rights, 2022[27]). Some stakeholders suggested requiring free, prior, and informed consent in legislation on land and minerals, similar to the principle developed for the protection of rights of Indigenous Peoples (UNDP, 2022[25]).

The recent introduction of a mandatory assessment of social impacts provides an important opportunity to better reflect human rights in infrastructure projects. Following a multi-year process (Sternberg and Ahearn, 2023[28]), in 2023 the government added requirements to assess and address social impacts, such as on livelihoods, as part of environmental impact assessments (see Box ‎3.1) (Government of Mongolia, 2023[29]). Effective implementation and monitoring of the new regulation in practice will be critical. Some lessons might be drawn from the country’s largest coal mining company that conducted a human rights due diligence in 2022 (UNDP, 2024[30]).

Box 3.1. Mongolia’s framework for social impact assessments

From 2020 to 2023, government, civil society, and researchers collaborated on the development of a framework for social impact assessments. The process included on-site research and wide stakeholder consultations to bring in international and domestic expertise. In 2023, the government then adopted a new Regulation under the Law on Environmental Impact Assessments (EIAs).

The scope of social impacts to be considered is defined in a broad manner, including impacts on: the quality of life of local citizens, employment, industry, income, assets, health, safety, human rights, gender equality, culture, and cultural heritage.

The regulation foresees a number of concrete measures to adequately address impacts. These include:

• an overall social action plan that sets out how impacts identified will be limited and foresees measurable objectives and financial resources

• an action plan for resettlement and compensation, with a clear provision to minimise resettlement and take decisions together with affected communities

• an action plan for cultural rights, including physical sites and cultural heritage

• an action plan for public consultation

• an action plan to address grievances.

In the past, companies’ engagement on EIAs suffered from shortcomings. The obligation to compensate owners and users of land for damages from mining operations was not fully applied in practice. To ensure that companies dedicate sufficient attention and resources to assess and address social impacts, it will be important that the government closely monitors how companies apply new requirements on social impacts and actively promotes uptake of the revised regulation.

Government of Mongolia (2023[29]), Regulation on Environmental Impact Assessment Procedures – Annex 2, https://legalinfo.mn/mn/detail?lawId=16758850156191&showType=1; Sternberg and Ahern (2023[28]), Mongolian mining engagement with SIA and ESG initiatives, https://doi.org/10.1016/j.eiar.2023.107269.

Labour rights

Mongolia has improved the legal framework on labour rights. Mongolia is party to most fundamental International Labour Organization (ILO) Conventions5, including ILO Convention No 187 on Occupational Safety and Health (OSH). It also acceded to the ILO conventions on Safety and Health in Mines in 2015 and on Safety and Health in Construction in 2020. The 2021 revision of the Law on Labour (Mongolia, 2021[31]) enhanced worker protection, including that of informal workers. This covered working hours, contractual matters, non-discrimination, and migrant workers (Betcherman et al., 2022[32]; ILO, 2025[33]).

Enhancing the effectiveness of labour inspections will be important. Practical enforcement of legal protections faces challenges (UNDP, 2022[25]). Discrepancies in legislation still impede unannounced inspections despite an amendment of the Law on Labour. Lack of human and financial resources, and absence of confidentiality of complaints are further concerns (Betcherman et al., 2022[32]). It should also be noted that Mongolia is not yet a party to the ILO Labour Inspection Convention No. 81. The NAP BHR plans inspections in sectors with high risks for occupational health and foresees strengthening inspectors’ capacity to receive complaints (Government of Mongolia, 2023[20]).

Occupational safety and health (OSH) are important concerns in Mongolia’s infrastructure sectors. Mining, industry, transport and construction are among sectors responsible for most accidents and acute poisonings in Mongolia’s economy (with 103 out 405 cases in 2023 in mining and quarrying), including due to inadequate internal controls by companies (UNDP, 2022[25]; National Statistics Office of Mongolia, 2024[34]). Informal employment is frequent in construction and transport, the latter closely associated with the export of mining products (ILO, 2021[35]). Excessive working hours are reported to be common: nearly 35% of persons work over 48 hours a week; 26% in manufacturing (National Statistics Office of Mongolia, 2024[36]). Mongolia is not a party to the ILO Occupational Health Services Convention nor the 2006 Convention on a Promotional Framework for Occupational Safety and Health. Artisanal mining increases the risks of hazardous working conditions (UNDP, 2022[25]).

There are some concerns around child labour and forced labour. According to the studies, around 16% of children are affected by child labour (ILO, 2024[37]). Though concentrated in agriculture, around 2 000 children were active in hazardous work in construction in 2022. There are incidents of forced labour, particularly affecting migrant workers in mining and construction (ILO, 2023[38]). Mongolia is not a party to the UN International Convention on the Protection of the Rights of All Migrant Workers and Members of Their Families. Regarding the prohibition of forced labour, the ILO raised concerns regarding the use of military conscripts for public infrastructure projects such as railways (ILO, 2024[39]).

Infrastructure sectors show a strong gender disparity. Male employees dominate mining, transport, and construction, with more than 80% of male employees in each sector (National Statistics Office of Mongolia, 2024[40]). The relatively higher wages in these sectors contributed to a significant pay gap of 20.6% in 2022 (National Statistics Office of Mongolia, 2024[40]). It also increases risks of harassment. To fight stereotypes, the government launched a “gender-sensitive workplace policy” and encouraged companies to develop gender equality action plans (ILO, 2025[33]).

Limited concerns relate to freedom of association. Workers express less concerns about freedom of association compared to, for example, wage payment and discrimination (UNDP, 2022[25]). The rights to freely create and enter unions and collective bargaining, and strike are explicitly recognised in the Law on Labour. Workers regularly exercise their right to strike. However, interpretation of the law and companies’ actions sometimes impede these rights in practice (European Commission, 2023[41]). Concerns have been raised, in particular, regarding SMEs (UNDP, 2022[25]) and the mining sector (Committee for Economic, Social and Cultural Rights, 2022[27]).

Environment

Mongolia’s legal and policy framework contains multiple measures to address environmental impacts of business activities. The legal framework for environmental protection is extensive (UNECE, 2018[42]). Since a revision in 2012, the Law on Environmental Protection stipulates environmental impact assessments (EIAs) and regular environmental audits, and sets out damage payments in line with the “polluter pays” principle (Mongolia, 1995[43]). This is complemented by laws and standards on natural resource protection, and explicit requirements for environmental protection in the Law on Minerals, including planning for and setting aside funds for rehabilitation (Mongolia, 2006[44]). At policy level, the New Recovery Policy includes objectives related to reforestation, waste management, protection of water resources, and green investments, and reaffirms commitments on climate change and land degradation (Mongolia, 2021[7]). It also calls for investments in strengthening environmental monitoring. The Government Action Plan 2024-2028 similarly includes measures on waste management, pollution, water protection, and land rehabilitation, including in mining projects (Government of Mongolia, 2024[8]).

Mongolia's existing infrastructure emits high levels of greenhouse gases and pollutants. Thermal energy and mining contribute to high levels of air pollution, affecting public health (OECD, 2019[9]) (Committee for Economic, Social and Cultural Rights, 2022[27]; UNDP, 2024[45]). Mining also carries significant risks of water pollution and land degradation, with particularly high risks of poor practices (albeit at much smaller scale) around artisanal mining. Water scarcity is an important challenge in Mongolia and a factor to be considered in investments in renewable hydrogen (OECD, 2025[46]). CO2 emissions per unit of value-added have increased (Government of Mongolia, 2023[13]). Climate change considerations are also relevant for infrastructure planning. For example, transport infrastructure and its usage exacerbate the thawing of permafrost soil brought on by climate change, which, in turn, damages infrastructure and releases additional climate emissions (Government of Mongolia, 2024[47]) (Batbold, Adiya and Gansukh, 2023[48]). The government has therefore worked with scientists and international partners to improve infrastructure design to prevent thawing (Government of Mongolia, 2024[47]).

Implementation and enforcement of standards continues to be an important challenge. Under the Law on EIAs (Mongolia, 2012[49]), companies in Mongolia are required to avoid and mitigate negative impacts, with a baseline and detailed assessment, and action plan subject to review by a Professional Council of experts. As a good practice, Mongolia conducted a review of how EIAs are implemented (see Box ‎3.2). This confirmed earlier findings on weaknesses in the effectiveness of the assessments and subsequent monitoring (UNECE, 2018[42]). Additional human and financial resources, capacity of inspectors, and higher fines could strengthen environmental inspections. In line with its Action Plan 2024-2028, the government intends to monitor rehabilitation of mining sites more closely to ensure companies comply (Government of Mongolia, 2024[8]). Under the action plan, the government will also invest in raising broader environmental awareness. The Ministry of Environment and Climate Change indicates it is already promoting awareness of relevant legislation with companies while the Ministry of Roads and Transport is sensitising engineering companies to more responsible road and railway network design.

Box 3.2. Verifying the effectiveness of Environmental Impact Assessments (EIAs)

In 2022, the Secretariat of Mongolia’s Parliament conducted a review of the implementation of the 2012 Law on Environmental Impact Assessments (EIA) based on written information from, and exchanges with, government, civil society, and businesses.

Select findings include:

• Available human and financial resources do not allow the government to conduct the assessments in time and impede more frequent inspections.

• Companies do not reserve contingency funding to remedy damages and fines are not sufficiently high to deter poor implementation of environment management plans.

• Public participation in EIA processes is not fully effective due to weaknesses in the legal framework and lack of clarity on the process.

In 2023, the government issued new procedures providing detail on strategic EIAs, expectations of businesses, and the need to include social impacts. It is currently reviewing the EIA law with a view to clarifying responsibilities and better differentiating expectations of EIAs depending on risks. It will be important that the classification of projects ensure that scrutiny is proportionate to risk. Civil society experts warn that some changes could negatively affect stakeholder participation.

Source: Secretariat of the Parliament of Mongolia (2022[50]), Review of the implementation of the Environmental Impact Assessment Act (in Mongolian), https://www.parliament.mn/nn/16729/; Enhtsetseg (2024[51])(2024), Draft Law on Environmental Impact Assessment and Mongolia's Compliance with International Agreements (in Mongolian), https://forum.mn/product/418055.

Co-ordination across government has helped enhance standards for biodiversity protection. Cross-country transport and energy transmission infrastructure cuts through wildlife habitats. Monitoring has documented effects on terrestrial animals and birds in Mongolia (Government of Mongolia, 2022[52]). To address these effects, the Ministries of Environment and Transport have successfully worked together for over 10 years. They have jointly developed a set of new transport infrastructure standards for different terrains in Mongolia, the latest on barrier fences (WWF, 2024[53]). Similar collaboration exists also with the Ministry of Energy on energy transmission.

Formalisation of small-scale mining has also been important from the perspective of mining infrastructure. There is much artisanal and small-scale gold mining in Mongolia and, at times, it has sustained a significant part of the rural population (Lahiri-Dutt et al., 2021[16]). However, the practice can cause damage to the environment and health of miners. Small-scale mining can lead to conflicts between companies and small mining communities around land use and can make verification of responsible gold production more challenging. To address these challenges, Mongolia, with international support, has sought to formalise the mining sector and engage with mining communities on responsible practices to reduce impacts on the environment and social tensions (Swiss Development Cooperation, 2020[54]). However, reflections to remove small-scale mining from the Law on Minerals could push more of the sector into illegality, with risks of greater adverse impacts (Altangerel et al., 2023[55]).

Incentives for environmental investments clash with fossil fuel subsidies. The Law on Environmental Protection explicitly foresees incentives to encourage businesses to adopt green technologies and practices (Mongolia, 1995[43]). This has translated into tax incentives for environmental protection measures. The Government Action Plan 2024-2028 stipulates incentives for recycling and energy efficiency, and support for the production and use of renewable energy. The Mongolian Green Finance Corporation, meanwhile, is set to facilitate access to loans for green buildings (Government of Mongolia, 2024[8]). Pilots for commercial bank loans for energy efficiency have been successful. However, a recent study by the International Renewable Energy Agency (IRENA) for the heating sector found that the subsidised energy supply and low price of coal in Mongolia acts as a disincentive to invest in energy efficiency and renewable energy (IRENA, 2024[56]).

Corruption and business integrity

Mongolia is strengthening its framework for anti-corruption and business integrity. Since 2006-2007, Mongolia has had a dedicated law on anti-corruption and its oversight agency, the Independent Authority Against Corruption (IAAC). In 2023, the government adopted a new anti-corruption strategy 2023-2030, followed by an action plan in 2024 (Mongolia, 2023[57]; 2024[58]). Business integrity is one of the strategy’s 10 objectives. Planned measures include the development of guidelines for corruption risk assessments, training, and support for private sector actors to foster a culture of anti-corruption, all of which is implemented under the leadership of the Mongolia Chamber of Commerce and IAAC. The programme also includes a provision to promote corporate social responsibility. Mobilising sufficient resources for implementation of the action plan will be critical (OECD, 2024[59]). Mongolia has also significantly improved transparency in public activities and public procurement through e-governance and digitisation (OECD, 2024[59]).

Incidents of corruption in the mining sector highlight the importance of the fight against corruption in infrastructure investments. Since 2007, Mongolia has been participating in the Extractives Industries Transparency Initiative (EITI). This has improved transparency through the publication of licenses, production, export, and contract data (EITI, 2024[60]). However, significant challenges in the quality of EITI reporting and implementation of monitoring recommendations persist, leading to an overall “moderate” engagement. High-profile cases and investigations of corruption have implicated officials and businesses in the coal mining and transport sector (Dashpurev, 2024[61]) (US Department of Justice, 2024[62]).

Important gaps in the anti-corruption framework still need to be addressed as recent monitoring under the Istanbul Anti-Corruption Action Plan has highlighted. The adoption of a law on beneficial ownership in 2022 and a law on mineral commodity trade in 2023, and the introduction of a portal on beneficial ownership shows important progress (Vera, 2024[63]). However, application of beneficial ownership rule in practice is not sufficiently verified (OECD, 2024[59]). There is also no legal protection for whistle-blowers. Unlike Kazakhstan and Uzbekistan, Mongolia has no ombuds-institution that can support businesses facing corruption in their dealings with public sector entities (OECD, 2024[59]). The law on public procurement can be improved to prevent conflicts of interest (OECD, 2024[59]). A Law on Transparency of Mineral Resources is still not approved.

The framework for state-owned enterprises needs improvement. Gaps include the stipulation of transparent and merit-based appointments of board members and management; programmes for corruption prevention and corruption risk-assessments, and due diligence of business partners; and public disclosure of relevant information (OECD, 2024[59]). In the mining sector, the government has not adopted standards to ensure SOEs disclose contracts in line with EITI standards (Namkhaijantsan and Naranbaatar, 2024[64]).

3.2.2. Encouraging RBC in infrastructure development through finance and investment

Sustainable finance and non-financial disclosure can set important incentives for companies in infrastructure sectors to strengthen their observance of RBC-related standards. Through investment promotion and facilitation, the government can help attract sustainable investment.

Sustainable finance and non-financial disclosure

Mongolia has created a strong framework for sustainable finance. In 2013, the Mongolian Bankers Association initiated the Sustainable Finance Initiative, which in 2017 evolved into the Mongolian Sustainable Finance Association (MSFA)6. Building on Sustainable Finance Principles, launched in 2014, MSFA has supported the development of a broad range of guidelines and tools to promote sustainable finance (Mongolian Bankers Association, 2014[65]). A Green Taxonomy adopted in 2019 helps financial institutions identify, classify, and track progress of their green investments (Financial Stability Council of Mongolia, 2019[66]). In 2023, the framework was updated to become the Sustainable Development Goal (SDG) Finance Taxonomy, incorporating social impact considerations such as access to infrastructure-related services and affordability for vulnerable groups7 (MSFA, 2023[67]).  The MSFA also developed sector guidelines for mining as well as construction and infrastructure (MSFA, 2022[68]; 2022[69]). In 2022, the government also adopted a Sustainable Finance Roadmap (Financial Stability Council of Mongolia, 2022[70]). This roadmap sets sector-specific targets for 2030 for green loan portfolios of 10% for the banking sector and 5% for non-bank financial institutions. MSFA indicates that portfolios are growing and by the end of 2024 ratios stood at 3.4% and 2.4%, respectively.

Non-financial disclosure requirements apply to a growing segment of the economy. Since 2022, the Corporate Governance Code includes a mandatory requirement to disclose how environmental, and social risks are managed (Financial Regulatory Commission, 2022[71]). Initially limited to public companies, the code was extended in its application, notably to insurance companies and investment funds. Dedicated ESG and sustainability reporting guidance exists as well, approved by the Mongolian Stock Exchange and Financial Regulatory Commission (Financial Regulatory Commission, 2022[72]). Practice of voluntary non-financial reporting by private companies is limited (EBRD, 2023[73]). Following a period of voluntary application, the Mongolian Stock Exchange introduced mandatory sustainability reporting for listed Tier 1 companies. This has further expanded the scope of companies subject to non-financial disclosure expectations, and more than half of tier 1 listed companies already submitted their reports in early 2025 (Mongolian Stock Exchange, 2025[74]).

A growing number of banks and non-banking financial institutions are moving towards sustainable finance but translation into the real economy remains a work in progress. The state-owned Development Bank of Mongolia, an important actor for infrastructure financing, adopted a sustainability policy in 2023 and started issuing loans with a greater focus on managing adverse impacts, such as water usage of a cement plant (Development Bank of Mongolia, 2024[75]). As positive examples in the commercial sector, Golomt Bank adheres to the Principles for Responsible Banking, applies ESG assessments, and issues sustainability reports (Golomt Bank, n.d.[76]). In 2023, the first green bond was launched by commercial Khan Bank (IFC, 2023[77]). XacBank financed a building project responding to the highest LEED (Leadership in Energy and Environmental Design) standards (XacBank, 2023[78]). However, for many banks, the application of green loans is still focused on consumer loans. Connecting small and medium-sized enterprises (SMEs) to sustainable finance is also a challenge. The MSFA is stepping up its efforts on measuring, reporting, and verification of sustainable finance through tools such as an ESG assessment and verification platform, impact assessment, and SDG finance taxonomy navigators. A dedicated ESG toolkit guides companies in the mining sector on financial institutions’ ESG expectations (Adam Smith International, 2023[79]).

Investment promotion and facilitation

Sustainability plays a small but growing part in Mongolia’s investment promotion and facilitation. The 2013 Law on Investment makes no reference to sustainability or RBC-related issues (Mongolia, 2013[80]). In contrast, the more recent guidebook for investors puts forward Mongolia’s commitment to sustainable development and climate emissions reductions (Government of Mongolia, 2023[81]). For investors, it highlights, in particular, the green taxonomy and non-financial disclosure requirements under the corporate governance codex (see previous section). An investment guide for the mining sector indicates responsible mining as a factor through which Mongolia aims to gain a competitive advantage (Ministry of Industry and Mineral Resources, 2024[82]).

Agreements between Mongolia and the EU and Canada touch upon RBC-related issues. EU countries were by far the most important source of foreign direct investment (FDI) in 2022 (Government of Mongolia, 2023[81]). The Framework Agreement on Partnership and Cooperation between the EU and Mongolia contains RBC-related provisions, notably the commitment to respect core labour standards as well as co-operation on labour rights, climate and environment, and anti-corruption (European Union, 2017[83]). Moreover, both parties agreed to promote “decent work, corporate social responsibility (CSR) and accountability, and encouraging responsible business practices, including sustainable consumption and production”. Like Uzbekistan, Mongolia’s exports to the EU8 can benefit from the Generalised Scheme of Preferences Plus (GSP+) scheme, which encompasses a monitoring process on the respect of international human rights, labour and environmental standards (European Commission, 2023[41]). The investment agreement with Canada, which entered into force in 2017, similarly includes provisions on CSR, and health, safety, and environmental measures (Government of Canada, 2017[84]).9

3.2.3. Exemplifying RBC in infrastructure development via the state’s economic role and commercial activities

The state plays a major role in infrastructure development and operations. Frameworks for public procurement, public-private partnerships and corporate governance of state-owned enterprises can therefore incentivise and support responsible business conduct for sustainable infrastructure.

Public procurement

Efforts to adopt RBC-related considerations in public procurement in Mongolia are not yet delivering. Mongolia had developed a guideline for sustainable public procurement and draft actions plans for sustainable procurement, both in collaboration with international partners (Bauer and Erdenechimeg, 2022[85]; Ministry of Finance of Mongolia and United Nations Environment, 2017[86]). The 2019 Revision of the Law on Procurement introduced a definition of green procurement, notably aiming at efficient resource use and avoiding adverse impacts on the environment and human health (Mongolia, 2005[87]). However, the most recent legislation on public procurement that entered into force in 2023 does not mention green procurement (Mongolia, 2023[88]). The law allows considering the impact on the environment and total life cycle cost on a voluntary basis, but implementation in practice is reportedly lagging (US Department of State, 2024[89]). There are no references to green or sustainable procurement in the 2024-2028 Government Action Plan either (Government of Mongolia, 2024[8]). This constitutes a missed opportunity of using public procurement as a lever for more responsible business practices, also at odds with the revised Law on Public-Private Partnerships (see below). Implementing the National Action Plan for Business and Human Rights could help renew discussions on RBC in public procurement. Under the plan, the government has committed to “include provisions on human rights criteria in the basic requirements and criteria for suppliers and contractors” (Government of Mongolia, 2023[20]). Implementing this commitment and continuing earlier efforts on sustainable public procurement could allow Mongolia to use procurement as a tool to promote RBC.

Public-private partnerships (PPPs)

A new law on Public-Private Partnerships (PPPs) anchors sustainability considerations in project selection (Mongolia, 2022[90]). The Government’s 2024-2028 Action explicitly mentions PPPs in the context of industrial parks, power plants, and housing (Government of Mongolia, 2024[8]). As a principle under the law, a PPP project “should reduce climate change, introduce environmentally friendly technologies, and support the development of green economy”. Green economy is defined beyond environmental aspects as aiming “to improve human well-being and social equity while reducing environmental risks and degradation”. Not having a negative impact on the environment is a project requirement. Importantly, the law also requires that projects be assessed from a value-for-money perspective that includes a life cycle perspective and consideration for legal, environmental, and social impacts. A checklist including mitigation measures must be submitted prior to approval. Public participation is not compulsory, however. Drafting of regulations under the law is ongoing and is an opportunity to ensure that intention behind the law translates into practice.

State-owned enterprises

RBC of state-owned enterprises would be highly relevant in Mongolia. SOEs play a very significant role in the country’s infrastructure sectors, notably energy production, mining, and rail transportation (US Department of State, 2024[89]). SOE governance in the mining sector was assessed as poor in the 2021 Resource Governance Index (Natural Resource Governance Institute, 2022[91]), particularly regarding transparency and financial disclosure. Corruption cases involving SOEs in the mining sector highlight the importance of RBC (see above).

At present, the Law on State and Local Property contains no specific expectations of SOEs as regards managing adverse impacts of their operations (Mongolia, 2024[92]). It should be noted, however, that the Corporate Governance Code and its clauses on ESG risk management and annual reporting also apply to SOEs. Under its 2024-2028 Action Plan, the government plans to enhance the performance of state-owned enterprises, in particular, with a view to greater transparency, independence, and efficiency (Government of Mongolia, 2024[8]). Work on legislation on corporate governance of SOEs is ongoing (Sambuunyam, 2024[93]). This is an opportunity to integrate more specific expectations of state-owned enterprises so they can lead by example on RBC – in line with international good practice set out in the OECD Recommendation on Guidelines on Corporate Governance of State-Owned Enterprises [ (OECD, 2024[94])and the OECD Recommendation on the Role of Government in Promoting RBC [ (OECD, 2022[95]).

3.2.4. Promoting stakeholder participation and access to remedy

As infrastructure can create significant beneficial and adverse impacts for local communities, enterprises’ meaningful engagement with stakeholders throughout the infrastructure life cycle is essential.

Stakeholder engagement

At the level of policy design, the National Action Plan on Business and Human Rights (NAP BHR) sets a valuable example for stakeholder engagement. The NAP BHR was developed based on 23 stakeholder consultations (Government of Mongolia, 2023[20]). It also benefitted from a baseline study that identified risks and illustrated the need for action across a range of areas to enhance businesses’ respect for human rights and the State’s duty to protect these rights, including by creating an enabling environment (UNDP, 2022[25]). The actions itself commit a broad range of government institutions. Ensuring the involvement of all key stakeholders in the NAP BHR’s implementation would be essential for its success.

At the level of business operations, standards for stakeholder engagement exist. The Corporate Governance Code expects companies to have a stakeholder engagement policy (Financial Regulatory Commission, 2022[71]). The Law on Environmental Impact Assessments (EIAs) requires publication of information and consultation of local authorities, affected communities, and residents (Mongolia, 2012[49]). Specifically for the mining sector, the Law on Minerals foresees the conclusion of a development agreement with local authorities, with citizens consulted in the process (Mongolia, 2006[44]). Since 2020 an online information system for land planning and management10 allows citizens to consult plans and submit suggestions (Batchimeg, 2020[96]). This can help identify concerns ahead of actual infrastructure project design in these areas.

Tensions between local communities and businesses underline the need for and benefits of meaningful stakeholder engagement. This has been particularly visible in the mining sector (Ariuntuya, 2022[97]). Practical experience with co-operation agreements between mining companies and local authorities has shown that these are not always conducted in a way that generate local buy-in (Dalaibuyan, 2022[98]). In some cases, it has been reported that mitigating negative impacts of mining projects is not even considered (UNDP, 2022[25]). Issues particularly with the lack of clarity on citizens’ participations and weak capacity to implement and verify public consultations have been reported (Mongolian Council for Sustainable Development and Social Responsibility, 2022[99]; Secretariat of the Parliament of Mongolia, 2022[50]). The UN Committee for Economic, Social and Cultural Rights raised similar concerns and recommended that the Government of Mongolia “[e]nsure that effective human rights and environmental impact assessments and meaningful consultations with affected local communities are carried out in the process of granting permits for all energy, mining, heavy industry, transportation and infrastructure projects” (Committee for Economic, Social and Cultural Rights, 2022[27]).

Practical examples exist of facilitating stakeholder engagement. With support from Australia, a dedicated manual for local participation in the mining sector was developed (Adam Smith International, 2023[100]). Some mines such as Oyu Tolgoi involve local communities and civil society organisations in monitoring activities. Other mining companies have engaged in participatory environmental monitoring in a project that also provided training and developed guidance (Oyu Tolgoi, n.d.[101]; UNDP, 2024[30]). In turn, the government is reviewing annual monitoring reports and seeks engagement with companies. Where there are significant disagreements, the Ministry of Industry and Mineral Resources indicates that it tries to mediate between communities and companies. Some concerns have been raised about the protection of civic space and environmental and human rights defenders from harassment (UN Special Rapporteur on Human Rights Defenders, 2023[102]; European Commission, 2023[41]; Committee for Economic, Social and Cultural Rights, 2022[27]). As the first country in Asia to have adopted a law to protect human rights defenders, full implementation of this framework would be important.

Access to remedy

Access to remedy is not fully effective. Wider challenges in the justice system such as case backlog, and a low level of awareness and sensitivity in addressing human rights violations limit access to remedy (UNDP, 2022[25]). The baseline assessment for the NAP BHR also highlighted that courts focus on individual responsibility rather than corporate or management practice when assessing violations of occupational safety and health expectations. As an obstacle to obtain financial compensation, stakeholders indicated the lack of a methodology to determine loss of livelihoods from damages to livestock of herders (UNDP, 2022[25]). The Committee for Economic, Social and Cultural Rights (CESCR) has recommended that businesses are held accountable and that victims have access to affordable and effective remedy (Committee for Economic, Social and Cultural Rights, 2022[27]).

Non-judicial remedies are not yet sufficiently developed. The National Human Rights Commission of Mongolia (NHRCM) resolves individual complaints and conducts inquiries into possible violations of infrastructure companies, notably regarding labour rights (NHRCM, 2023[103]). NHRCM also participates in dialogue on human rights impacts of the mining sector (NHRCM, 2023[104]). However, additional capacity and resources would be needed to fully implement its mandate (Committee for Economic, Social and Cultural Rights, 2022[27]). With few exceptions, companies have no mechanisms to address complaints and no sector initiatives exist. Complaints mechanisms by development finance institutions (DFIs) offer a potential remedy and have been solicited several times on issues around infrastructure projects (Compliance Advisor Ombudsman, 2021[105]; ADB, 2023[106]). Expectations by DFIs and other international lenders also lead to enhanced oversight. For instance, to inform its lenders, Oyu Tolgoi has put in place independent monitoring of its environmental and social impact management (Strength GEC, 2024[107]). This includes reviews of stakeholder engagement, the grievance mechanism, and oversight by a tripartite council, and identifies non-conformance issues. As the new procedures for EIAs require establishing a grievance procedure for social impacts, tracking its implementation through public monitoring would be useful.

Implementation of the National Action Plan for Business and Human Rights (NAP BHR) aims to improve access to remedies (Government of Mongolia, 2023[20]). Thirty actions cover, in particular, labour disputes, more efficient court proceedings, and better access to dispute resolution through private-sector mechanisms and the National Human Rights Commission. Preliminary progress monitoring under the NAP BHR suggests benefits from digitisation in court proceedings as well as improvements in labour disputes. The government has also trained prosecutors and law enforcement officials on business and human rights. With a focus on infrastructure-related issues, the NAP BHR explores easier access to legal assistance. It also aims to promote the possibility of class action and public interest litigation (which is already possible in administrative court proceedings). Both measures could support citizens’ access to remedy when in legal proceedings against companies. Finally, the NAP BHR also foresees enhancing access to compensation of damages.

3.3. Conclusions

Mongolia has important strengths that it can build on in advancing responsible business conduct for sustainable infrastructure development. It also has opportunities to address gaps in its policy framework and further promote responsible business conduct in the infrastructure life cycle. To contribute to an enabling regulatory and policy environment for RBC in infrastructure development, the Government of Mongolia could consider the following actions:

• Implement the National Action Plan on Business and Human Rights: Mongolia is one of few countries in Asia to have adopted a NAP BHR. The action plan explicitly highlights numerous measures to promote companies’ responsible business conduct and strengthen an enabling environment for RBC in infrastructure sectors. Mongolia should use ongoing progress monitoring to identify gaps in implementation and ensure that all relevant ministries, public institutions, and stakeholders, including in rural areas, are closely involved in defining and taking forward actions for full implementation of the NAP BHR.

• Press forward with social impact assessments: The government should ensure that the integration of social impacts in environmental impact assessments is fully put into practice and encourage engagement with local stakeholders throughout the life cycle of infrastructure projects, especially in the mining sector.

• Promote compliance with existing standards: The government should ensure that monitoring and enforcement institutions are sufficiently mandated and resourced to carry out labour and environmental inspections. This would spur stronger observance of RBC-related legal standards and promote a level playing field for businesses in Mongolia. The OECD Monitoring under the Istanbul Anti-corruption Action Plan provides Mongolia with clear recommendations to strengthen anti-corruption and business integrity.

As a key economic player, and especially in its roles as investor, sponsor, and operator of infrastructure, the Government of Mongolia could also consider mainstreaming specific tools to address RBC-related risks and impacts at the infrastructure project-level.

• Link sustainable finance to infrastructure investments: With the momentum towards sustainable finance in Mongolia and greater attention to sustainability in public-private partnerships, the government and the financial sector should encourage sustainable financing for infrastructure projects. This would also strengthen the focus on managing adverse impacts in projects not financed in partnership with international financial institutions.

• Strengthen RBC expectations for state-owned enterprises: SOEs play a significant role in the Mongolian economy and could positively influence commercial businesses by setting an example. The government should take advantage of the current and ongoing revision of the legal framework to set clear expectations for responsible business conduct in SOEs’ corporate governance framework.

Enhance the consideration of RBC aspects and RBC due diligence in public procurement: Building on earlier efforts on sustainable procurement, the government should explore ways to align procurement with RBC objectives. For example, the government could develop guidelines for infrastructure-related procurement so that procurement authorities make full use of existing provisions (notably on environmental effects and total life cycle cost) to promote RBC. To encourage the consideration for social impacts, the government could take forward its commitment under the NAP BHR to integrate human rights criteria in public procurement.

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Notes

← 1.  To note that gold exports to Switzerland with almost USD 2 billion in 2022 are very substantial (OEC).

← 2.  https://mongolia.gov.mn/news/view/27054.

← 3.  The New Recovery Policy foresaw creating 1 200 MW of new thermal power capacity, in contrast to 90 MW for hydropower and no target for wind and solar (Mongolia, 2021[7]).

← 4.  Herders in Mongolia are not considered Indigenous People to whom the international principle of Free, Prior and Informed Consent (FPIC) would apply.

← 5.  It is not a party to Convention No. 187 on the Promotional Framework for Occupational Safety and Health Conventionand the Protocol to the Forced Labour Convention.

← 6.  See https://www.toc.mn/en.

← 7.  Earlier, MSFA had already developed dedicated guidance on gender equality (MSFA, 2021[108]).

← 8.  The share of exports to the EU relative to Mongolia’s total exports is very small, around 1.3% on average (European Commission, 2023[41]).

← 9.  Article 14 of the agreement provides that “each Party should encourage enterprises operating within its territory or subject to its jurisdiction to voluntarily incorporate internationally recognized standards of corporate social responsibility in their practices and internal policies, such as statements of principle that have been endorsed or are supported by the Parties. These principles address issues such as labour, the environment, human rights, community relations and anti-corruption. The Parties should remind those enterprises of the importance of incorporating such corporate social responsibility standards in their internal policies.” Article 15 states that “the Parties recognize that it is inappropriate to encourage investment by relaxing domestic health, safety, or environmental measures. Accordingly, a Party should not waive or otherwise derogate from, or offer to waive or otherwise derogate from, such measures as an encouragement for the establishment, acquisition, expansion, or retention in its territory of an investment of an investor. If a Party considers that the other Party has offered such an encouragement, it may request consultations with the other Party and the two Parties shall consult with a view to avoiding any such encouragement.”

← 10.  See at https://www.egazar.gov.mn/.