The International Monetary Fund (IMF) has highlighted the Cambodian central bank’s leading regional role in the exploding world market for green finance.

In an annex to its annual assessment of Cambodia released in Washington on Thursday, the IMF noted that the National Bank of Cambodia (NBC) had set policy on guidelines related to environmental, social and governance investment.

“NBC was the first one to invest in green bond(s) among ASEAN member states,” it said.

Moreover, the IMF highlighted the National Bank of Cambodia’s active role in an open-ended fund for central bank investments in green bonds launched by the Bank for International Settlements (BIS) in 2019. “NBC is a member of the Advisory Committee and one of the first members of the bond,” it said.

The IMF noted that the central bank had also been urging banks and financial institutions to adopt policies to promote green finance and environment-friendly investments.

For example, it has been applying lower risk weights for loans to the environmental, social and governance sector. It is also looking at setting some policies along the lines of ASEAN’s policy towards the sector — especially in the area of sustainable finance.

At the same time, banks and financial institutions in Cambodia have a code of conduct for the sector and loans will be granted to activities with mitigating pollution, climate change, deforestation and so on, the report said.

In recent years, Paris has emerged as the world’s leading marketplace for green finance, with the Banque de France hosting the secretariat if the Network of Central Banks and Supervisors for Greening the Financial System whose members include NBC.

The network was set up by eight mostly European and Asian central banks and supervisors in 2017 including the People’s Bank of China and the Monetary Authority of Singapore.

Under the highest greenhouse gas emissions scenario, Cambodia is projected to experience warming of 3.1 degrees by the 2090s compared with temperatures between 1986 and 2005.

“In addition, increases in annual maximum and minimum temperatures are expected to be larger than the rise in average temperature, increasing pressures on human health, livelihoods, and ecosystems,” the IMF report said.

It also highlighted climate change risks to Cambodia’s agriculture, industry and tourism sectors. At the same time, “fluctuations in Mekong river flows affect irrigation, fishing, and transportation for industry and land tourism.

“Without action, the population exposed to an extreme river flood could grow by around 4 million by the 2040s, while the damming of the Mekong River as well as the large-scale dams built on its tributaries may alter future flood dynamics,” the IMF warned, citing a report by the World Bank and the Asian Development Bank in August this year.

“Climate change trends indicate more severe floods and droughts, which is projected to reduce absolute GDP by 9.8 percent in 2050.”

Source: Agency Kampuchea Press

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