Cambodia urged to develop green finance ecosystem

Cambodia needs to cultivate a conducive ecosystem for the development of its green finance market and make it sustainable and attractive for potential investors, experts said at a forum yesterday while calling upon both the government and the private sector to take the initiatives in view of the urgent need to align future infrastructure and energy projects with climate goals.

The call came at the Second Green Finance Forum, jointly hosted by the European Chamber of Commerce (EuroCham) and the Global Green Growth Institute (GGGI) at Oakwood Premier Phnom Penh.

The forum, titled ‘Green Energy Finance: Challenges and Opportunities’ showcased the avenues available in Cambodia to facilitate a green energy transition while looking at case studies from abroad for inspiration.

It also outlined the challenges being faced by the country in the development of a green financing market. The barriers to debt financing include the banks remaining risk-averse, insisting on 100 percent tangible security and strong pre-existing cash flow for green project financing.

The longest commercial loan period is five years and for green projects, this is relatively short, it was pointed out. Commercial banks also do not have adequate experience in green financing and the required structure, such as project finance.

Presenting a paper, Sochinda Chan, Head of Business Development at the Association of Banks in Cambodia (ABC), said it has been working with member banks for implementing Cambodian Sustainable Finance (CSF) principles since its official launch in September 2019.

“This includes training with the support of USAID Green Invest Asia with the aim of enhancing the capacity of member banks in CSF principles,” Chan said.

Paolo Dalla Stella, Environment Policy Specialist, UNDP, underscored the benefits of green bonds including the longer-term financing of projects. “Green bonds are also an excellent way to secure large amounts of capital to support environmental investments that may not otherwise be available,” he said.

Kasintr Puongsophol, Financial Sector Specialist at ADB, said Asean countries require $200 billion per year to finance climate-adjusted infrastructure investments for achieving 2030 goals. “Despite the impressive growth of the sustainable bond market in Asean, it is still only a fraction ($37 billion as of June 2022 or 1.5 percent) of the total bond market in the region,” he said.

Butchaiah Gadde, Technical Advisor on Energy, UNDP, urged the government to adopt a green procurement policy with regard to the procurement of equipment and construction of public buildings and infrastructure facilities.

The day-long event was split into three sessions. The first focussed on sustainable finance principles, methods to catalyse green finance, and green bonds for sustainable financing. The second session covered Vietnam’s experience issuing green bonds, green investment certifications, and green financing options.

The third session focussed on financing energy efficiency (EE) projects in Cambodia.