In a concerted effort to combat the escalating impacts of climate change and cultivate an environment conducive to the adoption of green finance, the National Bank of Cambodia (NBC) and the International Finance Corporation (IFC) have inked a cooperation agreement. This landmark pact aims to amplify funding for climate-friendly projects, steering Cambodia’s transition toward a green economy.
Presently ranked 62nd among 191 nations on the 2022 Inform Risk Index, Cambodia faces substantial vulnerability to flooding and recurrent droughts, exacerbating environmental challenges. A recently unveiled World Bank-IFC Country Climate and Development Report (CCDR) paints a grim picture, projecting that without effective adaptation and mitigation measures, Cambodia could witness climate change impacts potentially costing up to nine percent of its gross domestic product by 2050. Moreover, it might elevate the poverty rate by up to six percentage points by 2040.
According to Yim Leat, Deputy Governor of the National Bank of Cambodia, the financial sector plays a pivotal role in unlocking capital for climate-friendly projects. He emphasized the necessity for robust green finance policies to foster a conducive financial landscape, channeling investments into green projects aligned with the country’s climate objectives under the Paris Agreement’s Nationally Determined Contribution.
The current impediments to Cambodia’s green finance trajectory encompass the absence of clear guidelines defining green finance and limited sustainable finance initiatives among local financial institutions.
This partnership endeavors to fortify the regulatory framework by devising a national taxonomy, aligning it with global best practices. This classification system will delineate green assets eligible for investment. Additionally, it aims to enhance the capacity of financial institutions, establish pertinent guidelines encompassing green lending, and outline reporting and disclosure requirements for environmental, social, and governance (ESG) risks.
Asad Yaqub, IFC Resident Representative for Cambodia, highlighted their role in mobilizing critical climate financing to bolster Cambodia’s resilient green and inclusive growth strategies.
With a three-year implementation timeline and backing from the Facility for Investment Climate Advisory Services (FIAS), this initiative aims to solidify Cambodia’s national taxonomy by 2025, laying the groundwork for a robust green finance market.