NBC, IFC approve green MoU
May Kunmakara
THE National Bank of Cambodia (NBC) and the International Finance Corporation (IFC), a member of the World Bank Group, have joined forces to promote a green finance scheme. The initiative aims to address climate change and create a conducive environment in Cambodia for sustainability.
After signing a cooperation agreement on December 19, both institutions committed to boost financing for climate-friendly projects.
Cambodia’s environmental finance potential faces several obstacles currently, including the absence of clear guidelines on what constitutes green finance and a limited number of eco-friendly policies among local financial institutions.
These limitations hamper the ability to innovate and introduce sustainable finance practices and products, according to the NBC.
The central bank said the partnership is expected to strengthen the regulatory framework by developing a national taxonomy in line with international best practices, which will define green assets eligible for sustainable investment.
The bank believes the collaboration will enhance the capacity of financial institutions and prepare relevant guidelines, including reporting and disclosure requirements on green lending, as well as environmental, social and governance (ESG) risks.
Yim Leat, deputy governor of NBC, stated during the signing ceremony that the financial sector plays a crucial role in unlocking capital for climate-friendly projects. However, this requires the right policies and the creation of an enabling environment.
“We are committed to crafting a robust green finance policy framework to create a supportive financial ecosystem. This will channel and incentivise investment into green projects in Cambodia, supporting the government’s climate ambition as outlined in the Nationally Determined Contribution [NDC] under the Paris Agreement,” he said.
Asad Yaqub, resident representative for IFC, noted that the agreement supports the country’s ambitious plans to address climate change risks and foster a strong renewable finance market.
“As leaders in global green finance, we are uniquely positioned to help the nation mobilise essential climate financing. This contributes to the country’s green and inclusive growth map for future resilience,” he said.
With support from the Facility for Investment Climate Advisory Services (FIAS), the project is set to be implemented over three years, with the national taxonomy expected to be in place by 2025, according to IFC.
The NBC and the UN Economic and Social Commission for Asia and the Pacific (UNESCAP) signed a memorandum of understanding (MoU) recently to promote sustainable finance. The initiative aligns with the government’s Pentagonal Strategy-Phase I, as noted by the organisations.
Cambodia is currently ranked 62nd out of 191 countries on the 2022 Inform Risk Index, a global, open-source risk assessment for humanitarian crises and disasters.
According to the World Bank and IFC’s recently released Country Climate and Development Report (CCDR), the country is highly susceptible to flooding and recurrent droughts, which have been intensifying over the years.
It said that without appropriate adaptation and mitigation measures, climate change could reduce the country’s gross domestic product (GDP) by up to nine per cent by 2050, while potentially increasing the poverty rate by as much as six percentage points by 2040.
The report estimates that the Kingdom will need approximately $36 billion in additional investment from both the public and private sectors over the next 30 years to achieve its climate goal of carbon neutrality by 2050.