The Association of Banks in Cambodia together with USAID (United States Agency for International Development) and the WCS (Wildlife Conservation Society) on August 24, 2021 organized the 2nd Sustainable Finance Forum on the topic “Green Credit Guidelines Discussion for Cambodia”.
The forum presided over by Mr. Dith Sochal, Chairman of the Sustainable Committee of the Association of Banks in Cambodia and CEO of Foreign Trade Bank (FTB) and invited guest speakers from Mekong Strategic Partners’ such as Managing Partner, Mr. John McGinley and Olivia Snow, Senior Financial Analyst. The forum attracted 85 participants from Member Banks of the Association of Banks in Cambodia.
The 2nd Sustainable Finance Forum discussed the green credit definition and guidelines for Cambodia and the opportunity to develop a tailored Cambodian Green Loan definition as well as a potential roadmap.
The discussion on green loans included key benefits and practical impacts for banks and the financial sector, global trends, including what is happening with green loan definitions in Europe (European Taxonomy Regulation) and ASEAN, and the opportunity for Cambodia to define its own green loan and what might be different for Cambodia vs. other countries.
Speaking at the forum, Mr. Sochal said that the forum aims to support and promote the adoption and implementation of the Sustainable Finance Principles and to raise awareness and understanding of the opportunities that sustainable finance could provide to member banks.
“I would like to highlight that in April 2016, the ABC took a significant step to brace for climate change. With the support by the Ministry of Environment and the National Bank of Cambodia (NBC), ABC agreed to embark on a new initiative called the Cambodian Sustainable Finance Initiative (CSFI),” said Mr. Sochal. He added that the main objective of the initiative is to develop and strengthen the financial sector and to safeguard and manage risk standards related to social and environmental impacts, which are potentially caused by financial transactions. In 2019, there were 47 banks, who have voluntarily adopted the Cambodian Sustainable Finance Principles.
He continued that, “With these principles, our aim is to create a level playing field and raise standards across the sector. It is about how the banking industry will assess and manage environmental risks related to climate change, risks that could potentially have negative impacts on our people and communities, and that could potentially have negative impacts on our cultural heritage.”
According to John, green loans have the following characteristics: (1) loan proceeds are allocated exclusively to green projects, (2) the use of loan proceeds is tracked and managed in a reliable manner, (3) transparency is ensured through reporting over the life of the loan.
John stressed that the benefits for the green loans to the bank is that banks and financial institutions will increase business opportunities and potentially increase customer demand for sustainable finance products, reduced uncertainty and reputational risk, and improved corporate data available and quality. He added that in March 2021, ASEAN’s meeting of Finance Ministers and Central Bank Governors announced their support for an ASEAN Taxonomy of Sustainable Finance to serve as ASEAN’s common language for sustainable finance and account for international goals and ASEAN’s specific need. An ASEAN Taxonomy Board has been established to develop, maintain and promote the ASEAN Taxonomy. An announcement on the progress of this Taxonomy is expected by the end of 2021.
At the end of the forum, Mr. Sochal thanked the speakers and ABC’s secretariat for hosting the event. He added the forum has been insightful and a lot of new concepts were brought through which the member banks can see the benefits and understand more about Sustainable Finance.