Green Finance Market Assessment in Lao PDR

Development Finance Institutions, GBRW Consulting, GBRW Group, Green Finance, Green Finance, Strategic and Financial Planning, Sustainable & Development Finance

GBRW was engaged by the International Finance Corporation (IFC) to work with the Bank of Lao PDR to assess the readiness of the local market for green finance.

The project was focused on reviewing Lao PDR’s current regulatory and institutional framework, identifying market barriers and opportunities for potential green finance market development, and providing a list of recommendations to enable green finance in the country.

Lao PDR is one of the most vulnerable countries to the impacts of climate change as its economy highly depends on climate-sensitive natural resources, including forestry and agriculture, and water for its hydro-heavy energy mix. Climate change has resulted in more severe and frequent floods and droughts, at significant cost to the Lao economy.

As the country needs increased investments to build resilience and accelerate decarbonisation across all sectors of economy to achieve its Paris commitments of net zero emissions by 2050, participation in a green economy is crucial for Lao PDR to mobilise resources, knowledge, and technologies to address climate change, promote green growth and create green jobs.

To meet its interim 2030 Paris commitments, Lao PDR has estimated climate mitigation financing needs of approximately US$ 4.762 billion, with opportunities primarily focused on increased forest cover, solar, wind and biomass projects and electric vehicle (EV) penetration for 2-wheel and 4-wheel vehicles. Addressing the climate challenges faced by Lao PDR requires increased investment from various sources to finance low carbon and climate resilient business activities across the financial sector.

As green finance will become increasingly important for the Lao government in establishing the right policy settings and in mobilising resources into green investments or enabling the private sector to develop green businesses, developing a market for green finance is one of the critical steps for the country in achieving its targets.

Deliverables included:

- Assessment of the status of climate-related and environmental disclosure and reporting standards of financial institutions and large corporates

- Evaluation of the level of readiness of capital markets regulators to support green, social, sustainability and sustainability-linked financing instruments

- Analysis of the level of readiness to implement a sustainable finance taxonomy, as part of its ASEAN-level activities

- Assessment of the potential market capacity for verification of green projects and green bonds/lending

- Undertaking of stakeholder mapping in terms of key decision-making agencies

- Evaluation of capacity gaps in the market and support market level awareness and capacity building on green financing

- A comprehensive assessment of the market readiness/suitability and potential for green finance

- Identification of potential green finance opportunities, including specific sectors, projects, and assets (guided by Nationally Determined Contributions) that should be targeted and prioritised. Focus areas to cover sustainable agriculture including agroforestry, renewable energy, energy efficiency, e-mobility, LNG, rooftop solar, among other sectors

Blue photovoltaic solar panels mounted on building roof for prod