Green Energy Finance Forum: Challenges and Opportunities
- 23 November, 2022
- Posted by: EuroCham Cambodia
EuroCham and GGGI Host Second Green Finance Forum on 22 November
PHNOM PENH, 22 NOV – The Global Green Growth Institute (GGGI) and the European Chamber of Commerce hosted the “Green Energy Finance: Challenges and Opportunities” forum on 22 November, inviting industry experts to discuss the way forward for Cambodian green investments. The event was sponsored by AMK Microfinance, and the Association of Banks in Cambodia.
The full-day session tackled several topics revolving around financing green projects, issuing green bonds, and incentivizing 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.
It was clear, however, that strides were being made to make green financing a reality in Cambodia, something that’s essential on multiple fronts – especially to preserve Cambodia’s competitiveness as a sourcing destination, and to pave the way for Cambodia’s transition to a greener economy.
EuroCham’s treasurer David Marshal, said: “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. Capitalizing on green energy financing and sustainable financing can help combat climate change and improve competitiveness.”
During the morning sessions, Rogier van Mansvelt, the project lead for GGGI’s Switch Garment project, said 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.
Van Mansvelt said building leases in the garment sector are typically five years, and a the average payback time for solar is currently 8 years and most common lease-finance contracts for solar are 15 years, making long-term green investments currently untenable.
Outside of the garment sector, improvements are being made to enable green financing.
Environment Policy Specialist at the UNDP Palo Dalla Stella, said diversifying the financial base with green bonds could be an opportunity for Cambodia to access investors who have not traditionally invested in Cambodia. According to the Bloomberg Barclay’s Index, green bonds outperformed non-green bounds globally from 2017-2020.
As finance sector specialist at Asian Development Bank (ADB) Kosintr Purongsophol noted, once the first green bond in Cambodia is issued, more will follow. The problem, he said, is that Cambodia currently lacks any substantial amount of green assets, making them hard to quantify and assess.
Speaking on behalf of the International Finance Corporation, Cambodia resident representative Asad Yaqub said the private sector should be the ultimate champion of a green finance revolution, as traditional private sector investments were more sustainable than incentivised schemes and grants. For this to happen, he said the government had to implement appropriate requirements and refine regulations to entice the private sector to invest.
Concerning a network of energy service companies (ESCO) in Cambodia, technical advisor on Energy at UNDP Butchaiah Gadde said that 86 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.
Executive Director Tom Hesketh said, “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. We look forward to continuing to work with such partners and members to help unlock green investment opportunities across Cambodia”.