Kathmandu, Jun 1
The United
Nations Development Programme (UNDP) in Nepal has said that a lack of common
definition and understanding on the definition of 'green' has become the major
barrier to adopt green financing measures.
"In
addition, lack of capacity and awareness on green finance along the value
chain, shortage of long-term finance, lack of pipeline of bankable green
projects, limited credit information and lack of transparency on climate
related disclosure and data are some specific barriers to green finance in
Nepal," it said in its publication 'A background policy paper on green
financing in Nepal'.
Small and Medium
Enterprises (SMEs) face additional barriers as the current lending model is
largely collateral based financing with the banks and financial institutions
hesitant to take the risks resulting from project-based financing, noted the
report.
According to it,
in the absence of government level regulations and policy, there is a lack of
incentive in going green and aligning with industry best practices, which
limits BFIs as well as industries from being the first mover in going green in
the fear of unequal playing field.
The book is jointly
launched by Governor of the Nepal Rastra Bank, Maha Prasad Adhikari and Resident
Representative of UNDP Nepal, Ayshanie Medagangoda-Labe on Wednesday.
Governor Adhikari said that creating
awareness about green financing is a continuous process and the central bank
has been putting its efforts to promote it.
He said that the issue of green financing
has been at the core of the NRB's priorities. According to him, the NRB has
made several regulatory policy provisions to promote green financing in Nepal,
which includes issuance of Environment and Social Risk Management (ESRM)
guidelines in 2018 and directives for the BFIs to ensure assessment of
environment risks as required by national laws before extending credit
facilities to industries.
Likewise, to give priority to promote clean
energy and minimise environmental impacts of development projects, NRB has been
making policy provisions of direct lending to renewable energy projects with
single obligor limit up to 50 per cent of the core capital of the BFIs.
Medagangoda-Labe said that the UNDP is
ready to help Nepal to minimise the financial gaps, particularly, by
identifying non-traditional sources of funding, including the private sector,
through innovative financial instruments.
Nepal has expressed commitment to achieve a
carbon-neutral economy by 2050. It plans to mobilise Us$ 28.4 billion to
fulfill the mitigation targets under the Nationally Determined Contributions.
Dr. Bishwas Gauchan, Executive Director and
Director of Centre for Economic Policy at the Institute for Integrated
Development Studies (IIDS), said that sectoral financing strategies are
important for green financing. He stressed on innovative policies as well as
incentives in order to promote 'green financing'.
Likewise, Ritu Pradhan Malla, Senior
Manager of Business Oxygen, brick kilns need to be incentivised to transit from
coal to the cleaner energy. "We need to show them the options that are
economically viable," she said.
According to her, lack of access to expert,
technology and finance has created hurdles to the adoption of green
technologies.
An IFC study from 2017 estimates a total
climate-smart investment opportunity of USD 46 billion in Nepal from 2018 to
2030 which can be unlocked through green finance. It has the potential to fill
the investment gap of about 15 per cent of the Gross Domestic Product (GDP) of
the country through the attraction of new finance, primarily 'green'.
IFC has noted that there is an immediate
need to realise the progress already made in green financing while assessing
existing challenges and gaps before developing strategies, priorities and
action plans for the future.
Published in The Rising Nepal daily on 2 June 2022.
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