Sustainable Financing Could Help Develop Lao PDR’s Key Industries


 

Lao PDR’s economic growth averaged 7.8% over the last decade. Around one third of this growth was driven by natural resources, including hydropower and mining. As the country prepares its Green Growth Strategy, introducing sustainable finance principles in this long-term plan could help establish sustainable financial markets and attract more private sector investments in green technology and renewable energy. This could help Lao PDR achieve sustainable management of its natural resources and help maintain economic growth.


“Sustainable financing has a vital role in protecting the environment during this period of Lao PDR’s rapid economic growth,” said Oth Phonhxiengdy, Bank of Lao PDR’s Director General of International Relations Department. He was speaking at a recent workshop that was held in Vientiane last week.

 

The workshop, which was organized by IFC’s Hydro Advisory Program in partnership with the Australian Government, was attended by around 40 policymakers and technical staff from the central bank, domestic commercial banks and the Ministry of Finance. While the workshop gave participants an opportunity to learn how other emerging markets approach sustainable financing, it also underlined how sustainable financing for effective risk management could be relevant to the hydropower sector in Lao PDR. Participants also gained a perspective on the emergence of sustainable finance as a key policy instrument for risk management.

 

As Kate Lazarus, IFC Senior Operation Officer and Team Leader, Hydro E&S Advisory Project pointed out, "Sustainable financing can address long-term environmental and social impacts of development projects.” She added, “The hydropower sector is one key area in Lao PDR that can benefit from sustainable financing to ensure that high environmental and social standards are met."

 

Since 2012, IFC has been working to advance sustainability in Lao PDR’s hydropower sector. This effort aims to increase the shares of sustainable private sector investments that adhere to good international industry practices. Additionally, IFC works with commercial banks to raise their lending standards for hydropower projects in Lao PDR.

 

In 2012, Lao PDR was one of 10 founding members of the Sustainable Banking Network (SBN), an IFC-supported network of banking regulators and associations from emerging markets. Today, the network has expanded to 35 countries representing $42.6 trillion in banking assets, accounting for more than 85 percent of total banking assets in emerging markets. 16 countries have developed and launched sustainable finance policies and guidelines.

 

Wei Yuan, IFC’s Asia Program Co-lead, Environmental and Social Risk Management (ESRM) for Financial Institutions outlined the business case for ESRM and shared IFC’s expertise in advising and supporting SBN members since its inception. Shouqing Zhu from Tsinghua University’s Centre of Finance and Development offered insights into China’s rapid adoption and implementation of sustainable financing policies over the past decade. 

 

“Sustainable financing makes financial sense, reduces risks and ensures environmental and social benefits,” emphasized Jean-Bernard Carrasco, Australian Ambassador to Lao PDR. He added, “Lao PDR’s recent high-level forum on Green Growth is clear evidence of the government of Lao PDR strong policy commitment and the government of Australia is pleased to partner with IFC and support Lao PDR on this journey.”