To help Cambodia address climate change impacts and create a conducive environment for the uptake of green finance, the National Bank of Cambodia (NBC) and the International Finance Cooperation (IFC) have reached a cooperation agreement to boost financing for climate-friendly projects, supporting the country’s transition towards a green economy.
The agreement was signed here on Dec. 19 by H.E. Yim Leat, NBC Deputy Governor, and Asad Yaqub, IFC Resident Representative for Cambodia, according to a press release.
Cambodia is currently ranked 62 out of 191 countries on the 2022 Inform Risk Index-a global, open-source risk assessment for humanitarian crises and disasters. The country is highly exposed to flooding and recurrent droughts that have worsened over the years.
Without proper adaptation and mitigation measures, climate change could cost up to nine percent of Cambodia’s gross domestic product by 2050 while increasing the poverty rate by up to six percentage points by 2040, pointed out the World Bank-IFC newly launched Country Climate and Development Report (CCDR).
The report estimates the country would need up to US$36 billion in additional investment from both public and private sectors over the next three decades to achieve its climate goal of carbon neutrality by 2050.
‘The financial sector plays a pivotal role, helping unlock capital for climate-friendly projects, but this will require the right policies and creation of an enabling environment,’ said H.E. Yim Leat.
‘We are committed to crafting a robust green finance policy framework to create a supportive financial ecosystem to channel and incentivise investment into green projects in Cambodia in support of the government’s climate ambition as outlined in the Nationally Determined Contribution under the Paris agreement,’ he said.
Currently, several factors hinder Cambodia’s green finance potential, including a lack of guidance on what qualifies as green finance and limited green policies amongst local financial institutions to innovate and introduce sustainable finance practices and products.
The partnership is expected to help strengthen the regulatory framework by developing a national taxonomy in line with best international practices, which will help define green assets qualifying for green investment. Additionally, the partnership will help improve capacity for financial institutions and prepare relevant guidelines including reporting and disclosure requirements on green lending and environmental, social, and governance (ESG) risks.
‘This agreement supports Cambodia’s ambitious plans to address climate change risks and foster a strong green finance market. As leaders in global green finance, we are uniquely positioned to help the nation mobilise essential climate financing, contributing to the country’s green and inclusive growth map for future resilience,’ said Asad Yaqub.
With support from the Facility for Investment Climate Advisory Services (FIAS), the project will be implemented in three years and the national taxonomy is expected to be in place by 2025.
Source: Agence Kampuchea Presse