The Asian Development Bank (ADB) has provided a US$30mn loan to Mongolian cashmere producer Gobi, which the company will use to buy raw cashmere from herders and for processing the wool in a new facility to be built near Ulaanbaatar.

Raw cashmere is Mongolia’s third-biggest export, and growing demand for the product – used for upmarket clothing – is having a significant environmental impact in the country.

Herds have swelled to keep pace with demand, leading to overgrazing, desertification and soil degradation, according to the European Bank for Reconstruction and Development (EBRD).

The ADB says the loan will help make the cashmere supply chain more sustainable by providing a reliable income to some 1,200 herders and promoting pasture and ecology management. The loan is linked to more direct procurement from herders, water conservation and reductions in emissions.

The development bank is also providing a US$1mn technical grant to support “scalable sustainable pasture and herd management”, which will include capacity-building on “sustainable pasture management, basic pasture ecology, financial literacy, and budget management” for some 200 nomadic herders.

“With our partnership with ADB, Gobi JSC will produce more finished goods with value-add, which will increase foreign currency revenue inflow into the country’s economy, as well as create more jobs,” says Gobi JSC chief executive officer Baatarsaikhan Tsagaach.

Gobi has also formed a three-year partnership with the EBRD and Sustainable Fibre Alliance to improve sustainability in the cashmere value chain, including through practical guidance for herders and identifying possible models for supply chain traceability.