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ADB and SERC address key challenges for ‘GSS bonds’ issuance in Cambodia

Harrison White

The Asian Development Bank and the Non-Banking Regulator have hosted a workshop for the sector to overcome key supply and demand challenges limiting Green, Social and Sustainable (GSS) Bond issuance in Cambodia’s developing capital market.

The workshop was co-organized by the Securities and Exchange Regulator of Cambodia (SERC), the Co-chair of the ASEAN Capital Markets Forum (ACMF) Market Development Program (AMDP), and the Asian Development Bank (ADB).

Under the ACMF, the ASEAN Green, Social, and Sustainability (GSS) Bond standards were introduced in 2017 and to date, a total of $25.07 billion of ASEAN-labelled GSS Bonds have been issued.

Ms. Jyotsana Varma, Country Director, Cambodia Resident Mission of ADB.

No GSS bond has been issued in Cambodia’s capital markets or any sovereign bonds yet, seven corporate bonds have listed mostly for tax incentives.

GSS Bonds have traditionally been fixed-income financial instruments that are used to fund projects that have positive environmental and climate benefits.

An alternative approach, links sustainability outcomes for the bond issuer to the amount of interest that is paid to investors. This usually involves a step-up or step down in coupon rates triggered by the achievement (or not) of specific sustainability targets.

To read more about the ADB framework for GSS Bonds in ASEAN+3 click here.

People, planet, and profit

Speaking at the launch of the workshop SERC Director-General H.E. So Socheat said he considered the balance of three pillars: people, planet, and profits, a balance he firmly believed could be achieved through a collective vision.

“Cambodia, with steadfast commitment and determination, has adopted Rectangular Strategy IV (2018-2023), our national policy which embraces three priority areas, including low carbon resilience, resource efficiency, and sustainability.

To achieve this vision, we are committed to promoting sustainable bond standards and the issuance process in Cambodia. With the support of ADB, we have managed to release green bond issuance guidelines in the Khmer language,” he said.

Also attending the workshop was Ms. Jyotsana Varma, Country Director, Cambodia Resident Mission (ADB), Mr. Kosintr Puongsophol, Financial Sector Specialist of ADB. H.E Sum Thy, Deputy Director General, Ministry of Environment.

H.E. Sou Socheat, Delegate of the Royal Government in charge as the Director General of the SERC

Cambodia is the 2022 Chair of the ACMF a high-level grouping of capital market regulators from all 10 ASEAN jurisdictions and was established in 2004 under the ASEAN Finance Ministers.

Ms. Jyotsana Varma, Country Director, Cambodia Resident Mission said in her keynote that Cambodia was still at an early stage of capital market development, and we have not yet seen a GSS bond issuance in Cambodia under the ASEAN GSS bond standards.

“To assist Cambodia in meeting these objectives, ADB is currently providing technical assistance to selected issuers wishing to issue sustainable bonds in Cambodia. We are also collaborating closely with the SERC to create an enabling ecosystem to support the development of a sustainable finance market in Cambodia,” Ms. Varma said.

“After the workshop we will release the Khmer version of the green bond issuance handbook to help bond issuers and advisors understand the process and key considerations for successful green bond issuance,” she added.

Supply and demand challenges

In a recent opinion article the ADB stated Cambodia’s Non-Banking Regulators should make it clear that financial institutions and securities issuers are expected to incorporate ESG considerations into their lending practices and business operations.

“SERC should also encourage institutional investors, particularly pension funds and insurance companies, to prioritize investments in GSS bonds. It should also encourage the mobilization of savings and private capital from a broader local investor base,” they said.

“Capital market intermediaries in Cambodia need more training on GSS bonds from regulators, securities exchanges, and development partners. While these intermediaries may understand the bond market, they often lack experience with the principles and standards governing GSS bonds,” they added.

To read more about the ADB vision to improve Cambodia’s capital markets click here.

Senior members of the ADB and SERC discuss GSS Bonds in Cambodia.

Earlier this year, the UN Development Programme released its Social Development Goal Impact Standards designed to steer the world’s business and investment community toward a more sustainable path.

The SDG Impact Standards provide sustainable guidelines and best practices for four categories: private equity funds, enterprises, bond issuers, and the financing of sustainable development.

To read more about the SDG Impact Standards click here.

The Cambodian government is currently in the process of launching its first sovereign bond aimed to be with this year at a value of $300 million.

The Law on Government Securities was signed into law by King Norodom Sihamoni on Dec 31, 2020, after the legislation was passed by the country’s Senate.

The law allows the government to issue bonds in Cambodian and foreign currency locally or abroad to finance development needs.

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