Cambodia’s Path to Sustainable Finance: A Collaborative Effort to Combat Climate Change
Phnom Penh, Cambodia, October 17, 2024—In a significant move to address the pressing impacts of climate change and foster a sustainable financial ecosystem, the International Finance Corporation (IFC) has joined forces with the Association of Banks in Cambodia (ABC). This collaboration aims to enhance the capacity of local financial institutions in the climate finance arena, a crucial step for a nation striving for carbon neutrality by 2050.
The Financial Challenge Ahead
According to the World Bank-IFC Cambodia Country Climate and Development Report (CCDR), the country will require an estimated $36 billion in investments from both public and private sectors between 2023 and 2050 to meet its ambitious climate goals. This staggering figure underscores the urgent need for a robust financial framework that can support climate-friendly projects and initiatives.
Training for Transformation
On October 17, a pivotal training program was organized to equip over a hundred bankers with essential knowledge and tools to drive sustainable finance initiatives. This event is part of a broader cooperation between the IFC and the National Bank of Cambodia (NBC), aimed at enhancing green finance through the development of capital markets in the country. The training sessions, facilitated by IFC experts and key stakeholders, covered a wide range of topics, including Cambodia’s Sustainable Finance Taxonomy and Environmental and Social Risk Management Guidelines, both of which are currently in development.
The Importance of Sustainable Finance
Towfiqua Hoque, the newly appointed IFC Resident Representative for Cambodia, emphasized the critical role of sustainable finance in today’s economic landscape. “The importance of sustainable finance cannot be overstated,” she remarked. “It is not just about mitigating risks associated with climate change, but also about seizing opportunities that come with the green transition.” By integrating environmental, social, and governance (ESG) considerations into financial systems, Cambodia can cultivate a more resilient and inclusive economy.
Overcoming Barriers to Green Finance
Despite the clear need for sustainable finance, several challenges hinder Cambodia’s potential in this area. A lack of guidance on what qualifies as green finance and limited green policies among local financial institutions have stymied innovation and the introduction of sustainable finance practices and products. Dith Sochal, a Council Member of the Association of Banks in Cambodia and Chairperson of its Sustainable Finance Committee, highlighted the urgency of building capacity within the financial sector. “The training provided participants with valuable insights and practical strategies that they will take back to their respective institutions,” he stated.
The Urgency of Climate Action
Cambodia is particularly vulnerable to the adverse effects of climate change, including floods, droughts, and rising sea levels. The CCDR warns that without proper adaptation and mitigation measures, climate change could cost the country up to 9 percent of its gross domestic product (GDP) by 2050. This stark reality amplifies the need for immediate action and investment in sustainable practices.
A Comprehensive Framework for the Future
In a related development, the World Bank Group recently approved its Country Partnership Framework for Cambodia for 2025-2029, which emphasizes promoting human capital to enhance competitiveness and resilience. Hoque reiterated the IFC’s commitment to supporting a strong and competitive private sector, which is essential for driving Cambodia’s next phase of low-carbon and sustainable economic development.
Conclusion
The collaboration between the IFC and the Association of Banks in Cambodia marks a significant step towards building a sustainable financial ecosystem capable of addressing the challenges posed by climate change. As Cambodia embarks on this journey, the integration of sustainable finance into its economic framework will be crucial for achieving its climate goals and ensuring a resilient future for its citizens. With continued investment, training, and commitment from both public and private sectors, Cambodia can pave the way for a greener, more sustainable economy.