Vientiane Capital, Lao PDR, September 26, 2022—As Lao PDR needs resources to address climate impacts and achieve net zero emissions by 2050, IFC and the Bank of Lao PDR signed a memorandum of understanding (MoU) to boost financing for climate-friendly projects. The move will help create a green finance market, unlock funding for climate-smart business activities, and enable Lao to achieve a more sustainable and carbon-neutral growth trajectory.
The impacts of climate change have been particularly significant to Lao PDR's economy due to its dependence on climate-sensitive natural resources including water, forestry, and agriculture. To mitigate the impacts and achieve carbon neutral status in three decades, the nation aims to reduce greenhouse-gas (GHG) emissions by 60 percent by 2030 primarily through increasing the share of renewable energy in its energy mix and expanding forest cover. According to Lao PDR's National Determined Contribution 2021, efforts to mitigate the impacts of climate change could require around $4.7 billion in financing by 2030, which is expected to come mostly from the private sector given public budget constraints.
"The financial sector could play a key role in channeling financing to climate-friendly projects, and it is critical to create the right policies and conditions to unlock this capital source," said Bounleua Sinxayvoravong, Governor, Bank of Lao PDR. "With IFC's support, we will establish a green finance policy framework, creating an enabling environment for financial institutions to develop their green finance products that are widely accessible in the local market."
The MoU was signed in the presence of the Governor of the Bank of Lao PDR and IFC Vice President for Economics and Private Sector Development, Susan Lund, who is visiting the country this week to discuss with senior government officials and business representatives on how IFC can best support the country's efforts to recover from COVID-19 while tackling the ongoing global compounding crises and promoting private sector participation in the nation's climate agenda.
"We know Lao PDR has great ambitions to increase the share of renewable energy in the country's energy mix and do more to address the risks of climate change," said Susan Lund, IFC Vice President for Economics and Private Sector Development. "Today's agreement helps pave the way for Lao PDR to achieve their climate goals by catalyzing critical financing to deliver real environmental benefits and foster green and inclusive growth. As one of the first movers in the green finance space globally, IFC is well positioned to help the Lao financial sector implement its sustainability agenda while developing a robust green finance market in line with international standards."
The partnership will start with a market readiness assessment to review the current framework for green finance and identify market opportunities for potential green financing products. This will allow Lao PDR's central bank to improve the enabling environment for green finance through development of a sustainable finance roadmap, a climate risk assessment framework for the financial system, and a harmonized green taxonomy, which is a nationally agreed classification framework of activities that helps mitigate climate change, as well as regulations and guidelines on green finance and bonds.
Working in Lao PDR since 1998, IFC is committed to supporting the country's development agenda by assisting private sector development, promoting sustainability, and creating job opportunities.
About IFC
IFC—a member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2022, IFC committed a record $32.8 billion to private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity as economies grapple with the impacts of global compounding crises. For more information, visit www.ifc.org.
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