CrossBoundary engages with investors in Laos on unlocking climate finance into the country to support the government’s NDC priorities
A recent NDC Partnership and CrossBoundary initiative convened experts from the private and public sectors to explore strategies for mobilizing climate finance in Laos. The discussion emphasized the need for innovative financing mechanisms and targeted investments to address the country's vulnerabilities to climate change, particularly in critical sectors like renewable energy, agriculture, and infrastructure.
A recent NDC Partnership and CrossBoundary initiative convened experts from the private and public sectors to explore strategies for mobilizing climate finance in Laos. The discussion emphasized the need for innovative financing mechanisms and targeted investments to address the country's vulnerabilities to climate change, particularly in critical sectors like renewable energy, agriculture, and infrastructure.
Panelists highlighted the evolving climate investment landscape, sharing insights on successful projects and the immense potential of sectors like hydropower and solar energy. They emphasized the significance of developing bankable projects that not only meet national climate goals but also attract diverse investment opportunities, ensuring a sustainable and resilient future for Laos.
The discussion was centered around the Nationally Determined Contributions (NDCs), which provide a framework for climate action and serve as a roadmap for aligning climate finance efforts with national goals.
Speakers included:
- Nandini Chaudhury, Moderator, Head of South and Southeast Asia Advisory at CrossBoundary Advisory;
- Rowan Fraser, Country Representative for GGGI Lao PDR;
- Sophie Taing from Emerging Markets Investment Advisers;
- Phongsavanh Phomkong, Head of the International Finance Corporation (IFC) Office in Lao PDR;
- Michael Rattinger, Senior Climate Change Specialist for Asian Development Bank
Read on for their takes on the challenges and opportunities unlocking finance for critical sectors like renewable energy, sustainable agriculture, and infrastructure.
Q: Why is climate finance critical for Laos?
Nandini Chaudhury (CrossBoundary Advisory): “Climate finance plays a crucial role in addressing the impacts of climate change in Laos, particularly in developing bankable projects aligned with the country’s climate goals. Many regions in Laos are highly vulnerable to environmental changes, with significant economic sectors such as agriculture and energy being at risk. Mobilizing climate finance ensures the country can pursue sustainable development and achieve its Nationally Determined Contributions (NDCs).”
Nandini underscored the importance of integrating climate finance into national planning, emphasizing that it not only helps mitigate climate risks but also fosters resilience in communities dependent on agriculture and energy.
Aditya Garg (NDCP Checklist Pilot Program Team Member – CrossBoundary Advisory): “The NDC Partnership supports Laos by helping the government implement its NDCs through projects that attract climate finance. It has initiated a checklist pilot program to develop a pipeline of bankable projects, facilitating connections between climate finance providers and project developers. This program builds capacity in sectors like agriculture, energy, and water management while identifying financing windows for sustainable development projects.”
The pilot program was highlighted as a critical step in building a structured approach to identifying viable projects, which will enhance Laos’s ability to attract international funding.
Q: What sectors hold the most promise for climate investment in Laos?
Phongsavanh Phomkong (International Finance Corporation, Lao PDR): “The renewable energy sector, particularly hydropower, solar, and wind, has immense potential in Laos. For example, solar energy has a projected capacity of 10,000 to 15,000 MW, and wind power has around 3,000 MW. These sectors provide opportunities for both large-scale and smaller projects, making them attractive to foreign and domestic investors.” Phongsavanh pointed out that the diverse energy portfolio not only provides investment opportunities but also strengthens energy security, which is vital for economic growth.
Q: Are there examples of successful climate projects in Laos?
Michael Rattinger (Asian Development Bank): The Monsoon Wind Power Project is a great example. It secured nearly $700 million in financing, which involved a combination of equity, concessional funding, and grants from institutions like the ADB. This project shows that large-scale renewable energy investments can be structured with diverse financing sources, setting a precedent for future climate finance initiatives in Laos.” Michael emphasized that this project serves as a model for structuring future climate finance initiatives, demonstrating the importance of leveraging multiple funding sources.
Q: What challenges does Laos face in making its climate projects investment-ready?
Sophie Taing (Emerging Markets Investment Advisors): “Laos faces several challenges, including macroeconomic instability, high public debt, and a limited domestic financial sector. Additionally, regulatory issues, unclear government procedures, and a lack of consistent policies make it harder for investors to assess project viability.” Sophie noted that addressing these challenges is critical for enhancing investor confidence and that consistent policies would pave the way for more predictable investment returns.
Q: What needs to be done to further unlock climate finance in Laos?
Rowan Fraser (GGGI Lao PDR): “The government needs to streamline regulations, increase transparency, and enhance procedural clarity to attract more investors. We’re working with ministries on carbon market strategies, for example, helping to create sector-specific regulations for energy and agriculture. This clarity will attract more private investors and ensure projects are aligned with the country’s climate goals.”
“One of the areas we’re focusing on is improving the investment climate by providing technical assistance and helping structure opportunities in line with international standards.” Rowan highlighted that regulatory reforms would not only attract investment but also facilitate the implementation of innovative financing mechanisms, such as carbon credits.
Q: How has the Asian Development Bank supported climate finance in Laos?
Michael Rattinger (Asian Development Bank): “ADB has been involved in climate finance from the very beginning. We’ve supported projects in renewable energy, particularly hydropower and wind, while also facilitating climate finance strategies through carbon markets and project pipelines. For instance, our Frontier platform allows us to make small investments in green SMEs in Laos, enabling growth in sectors that are traditionally underserved by domestic banks.” Michael pointed out that ADB’s support is vital for encouraging private sector investment, particularly in areas where access to funding is limited.
Q: How can the private sector contribute to advancing climate finance in Laos?
Sophie Taing (Emerging Markets Investment Advisors): “We’ve seen that contract farming and partnerships with local communities are effective in sectors like agriculture. By working directly with farmers and ensuring that sustainability and ESG practices are incorporated, private companies can attract climate finance and deliver positive impacts on the ground. More private-sector engagement in these areas will help bridge the gap in funding.” Sophie emphasized that integrating local communities in project development not only enhances project viability but also ensures social equity in the benefits derived from climate investments.
Q: What innovative financing mechanisms could be explored to support climate projects in Laos?
Innovative financing mechanisms are vital for mobilizing climate finance and creating sustainable funding pathways. The panel discussed several potential solutions:
- Green bonds: Nandini Chaudhury highlighted the potential of green bonds, stating, “Green bonds can mobilize significant capital from both domestic and international investors, enabling funding for environmentally sustainable projects that align with Laos’s climate goals.”
- Blended Finance: Phongsavanh Phomkong from the IFC emphasized the advantages of blended finance: “Blended finance can help de-risk investments by combining public and philanthropic funding with private capital, making climate projects more attractive to investors.”
- Carbon credit markets: Rowan Fraser from GGGI discussed the role of carbon credit markets, saying, “Developing a robust carbon credit system can create financial incentives for companies to invest in sustainability, driving investment towards projects that benefit both the environment and local communities.”
- Climate insurance products: Michael Rattinger from the ADB pointed out the importance of climate insurance, explaining, “Climate insurance can provide a safety net for investors, ensuring compensation in the event of climate-related losses, which can encourage more investment in vulnerable sectors.”
- Crowdfunding platforms: Sophie Taing suggested crowdfunding as a way to mobilize support for climate projects: “Crowdfunding can empower local communities by allowing them to invest in projects that directly impact their lives, democratizing access to finance.”
These innovative financing mechanisms can significantly enhance the funding landscape for climate projects in Laos, enabling the country to address its climate vulnerabilities and achieve its sustainability goals.
The way forward: surfacing more climate finance opportunities for Laos
The evolving climate investment landscape in Laos is a testament to the country’s commitment to addressing climate change and fostering sustainable development.
“As CrossBoundary and NDC Partnership implement the Pilot Checklist Program over the next few months in Laos, the aim would be to connect with the ecosystem comprehensively and onboard the most impactful projects to match them to capital providers and resources they need, thereby accelerating the country towards NDC commitments. The program will onboard not only projects, but also NDC impact-oriented enterprises, funds, and other initiatives, who can reach out to the program team directly to get themselves onboarded,” said Aditya, part of the NDCP Checklist Pilot Program Team from CrossBoundary.
“Finding climate finance opportunities is not just about financing climate but ensuring countries and population have a resilient future ahead. Initiatives like the NDC Partnership’s pilot checklist program are crucial in mobilizing the resources and support needed to drive impactful projects forward as Laos continues to navigate its climate journey,” said Nandini.
Looking ahead, CrossBoundary, alongside NDC partnership, government, and other development partners and the Government, aims to play a pivotal role in facilitating further dialogue among stakeholders, providing technical assistance to project developers, and helping structure financial instruments and bankable projects that align with both national priorities and international standards.
“We are excited to be providing tangible support to governments to achieve their NDCs by helping mobilize funds into priority sectors in Climate. Importantly, this is part of a pilot project to support six countries in this ambitious and important goal, including Colombia, Nigeria, Uganda, Morocco, and Vietnam, alongside this work in Laos. We look forward to partnering with other stakeholders engaged in the space as we roll out this project in the pilot countries today and broader geographies in the future,” said Kirtika Challa, Managing Director and Head of the Power and Infrastructure team.
The panel discussion made it clear that while Laos faces significant challenges in mobilizing climate finance, there are also major opportunities, particularly in the renewable energy and agricultural sectors. With the right regulatory reforms, public-private partnerships, and innovative financing tools like green bonds and carbon credits, Laos can attract the investments it needs to achieve its climate goals.
Read more about the engagement of NDC Partnership and Lao PDR here.