Cambodian Sustainable Finance Ini3a3ve. Building a sustainable finance sector together

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1 Cambodian Sustainable Finance Ini3a3ve Building a sustainable finance sector together

2 What is sustainable finance? Sustainable finance integra3ng environmental, social and governance (ESG) criteria into the business or investment decisions for the las3ng benefit of both clients and society at large

3 Mekong Sustainable Finance Working Group Resources have been made available to the Cambodian banking sector, via a USAID funded ini3a3ve called the Mekong Partnership for the Environment (MPE) which is being managed by the organiza3on PACT. MPE has established a separate en3ty to work on the financial sector called the Mekong Sustainable Finance Working Group (MSFWG), which is being led by Mekong Strategic Partners in partnership with Wildlife Conserva3on Society (WCS). The core objec3ve of the MSFWG is to provide na3onal financial ins3tu3ons within the Mekong Region with access to the necessary tools and resources to assist them in developing a sustainable finance plaporm, as well as manage social and environmental risk in their porpolios.

4 Developing a Cambodian solu@on Cambodia s banks play a major role in Cambodia s economic development. The concept is that together Cambodian banks, under the guidance and management of the Associa3on of Banks Cambodia (ABC), develop a set of social and environmental industry standards which are robust as well as appropriate for the local Cambodian context. Over a period of 3me the Cambodian banks will develop a statement of commitment as well as a set of appropriate financing principles which all banks will work towards adop3ng and implemen3ng into their day to day opera3ons Senior leaders of the NBC have been fully briefed on several occasions regarding this ini3a3ve and our suppor3ve and see the ABC as the appropriate vehicle to manage this process. The goal is to develop a principles that are appropriate for a developing country like Cambodia, not imposing ill-fivng developed market standards.

5 Why are we proposing this Sustainable Finance is an opportunity for the Banking Industry to build on its posi3ve role in Cambodia's Development. By doing so, banks are not just doing the right thing to help preserve Cambodia's environment and support Cambodia's communi3es, but can also seize the opportunity for a first mover advantage to expand into new markets such as low carbon financing. Globally, sustainable financing principles have been developed by different local banking sectors. This ini3a3ve presents an opportunity for Cambodia to take the lead and act as an example of banking best prac3ce across the region. An opportunity for Cambodian banks to collaborate and together determine themselves which ac3ons and steps are most appropriate for Cambodian banks to undertake when developing sustainable financing standards.

6 Who are the key stakeholders? Cambodian Banks The Associa3on of Banks Cambodia The Na3onal Bank of Cambodia Government Ministries, par3cularly Ministry of Environment The Business Sector & Cambodian Society Cambodian Ci3zens Society IFC ( Via Membership of Sustainable Banking Network) & FMO

7 Considering environmental and social in a banks decision-making process Loan Applica3on Credit review and decision making Loan Supervision Client Bank Review to determine if clients proposed project lies under the excluded ac3vi3es list Review and analyze the risk of impact on the environment, people and the communi3es by client s ac3vi3es. Monitor if the client implements measures to mi3gate nega3ve environmental and social impacts Benefits of considering environmental and social responsibili3es Increased business, investment and market opportuni3es Reduced credit and market risk Significant contribu3on to Cambodia s environmental development goals

8 The Proposed Key & Flow Ministry of Environment ABC NBC USAID Support Financial Resources & Technical Assistance Technical Assistance & Financial Resources IFC & FMO Technical Assistance Banks Banks Banks Banks Banks Concessional Bank funding facility available for qualifying banks. Green Fund Credit Guarantee Mechanism Par3al Credit guarantee provided for qualifying

9 A Roadmap for achieving sustainable development through sustainable finance Mid 2016 Introduc3on and general discussion of the Cambodian sustainable finance ini3a3ve to the ABC Exco commi]ee Agreement by Exco to undertake a process of designing implemen3ng a Cambodian Sustainable finance ini3a3ve All Cambodian banks declare their commitment to the implementa3on of the Cambodian Sustainable Finance Ini3a3ve Cambodian Banks approve the Cambodian Sustainable Finance Principles Late 2016 The Na3onal Bank of Cambodia and The Ministry of Environment endorse and support the Cambodian Sustainable Finance Principles 2017 All Cambodian Banks start to implement the Cambodian Sustainable Finance Principles into their day to day opera3ons 2017 Cambodia and its banks becomes the regional role model for sustainable finance Cambodian business sectors develop their own E&S risk management principles and opera3onally integrate them Through joint efforts Cambodia creates sustainable finance an E&S friendly systems and a sustainable future for Cambodia