Experts highlight Cambodia's need for developing green finance system

The Global Green Growth Institute (GGGI) and the European Chamber of Commerce (EuroCham) hosted the forum where they had invited industry experts to discuss the way forward for Cambodian green investments, according to a joint press release. The full-day session tackled several topics revolving around financing green projects, issuing green bonds, and incentivising green investments in Cambodia.

A key takeaway was that the interest rates currently charged by banks and the collateral requirements demanded often make the long-term commercial loans required for green projects unviable. Measuring metrics for green impact was also cited as a concern for green financing.

Among the challenges regarding the expansion of a green financing market discussed at the forum included the risk-averse status of banks that stress on robust pre-existing cash flow for green project financing and 100 per cent tangible security.

It was also brought to attention at the forum that the longest commercial loan period—five years—is relatively short for green projects, according to several Cambodian media reports. Moreover, commercial banks do not possess the required experience and framework for green financing, for instance project finance.

“A low share of renewable energy in the energy mix, and high energy costs could cause Cambodia to lose its competitive edge comparatively to Bangladesh and Vietnam. Capitalising on green energy financing and sustainable financing can help combat climate change and improve competitiveness,” said EuroCham’s treasurer David Marshal.

“Building leases in the garment sector are typically five years, and the average payback time for solar is currently eight years and most common lease-finance contracts for solar are 15 years, making long-term green investments currently untenable,” said project lead for GGGI’s Switch Garment project Rogier Van Mansvelt, adding that the GGGI had performed 50 energy efficiency audits at factories across Cambodia.

As described later in the event by his colleague Mahfuzur Rahman, the audits provided a blueprint for factories to reconsider their energy use, and found $231 million in investment potential across 650 factories in Cambodia, added the release.

According to the Bloomberg Barclay’s Index, green bonds outperformed non-green bounds globally from 2017-2020.

“Eighty-six companies in the country could upgrade to ESCO status with appropriate guidance. Supporting the ESCO business model in Cambodia is currently a priority for EuroCham’s Green Energy-Finance Sub-Committee, as an ESCO network could help generate more green financing opportunities in Cambodia,” said technical advisor on energy at UNDP Butchaiah Gadde concerning a network of energy service companies (ESCO) in Cambodia.

“A message from today was that sustainability is becoming more than just a marketing choice. TAFTAC showcased its Sustainability Charter, and it is clearly a consideration of the country’s leading financial institutes, with 47 banks agreeing to the Association of Banks in Cambodia (ABC) Sustainable Finance Principles,” said executive director Tom Hesketh.

Fibre2Fashion News Desk (NB)