UNCDF in Cambodia

De-risking investments in climate-resilient water infrastructure

PWOs provide piped water services to more than 3.5 million people, primarily in rural and peri-urban areas that are underserved by public utilities. Despite their central role in achieving SDG 6, PWOs face persistent barriers to finance that include high interest rates, rigid collateral requirements and an amortization structure that does not align with cashflows.

The United Nations Capital Development Fund (UNCDF), together with UNICEF, is implementing the Water Infrastructure and Smart Energy (WISE) Joint Program to respond to these constraints, by establishing a revolving blended finance facility that combines concessional capital from the UN Joint SDG Fund with commercial co-financing from local financial institutions. By lowering the cost of capital and extending repayment terms, the program enables PWOs to invest in climate-resilient water systems, including the integration of renewable energy solutions, while supporting Cambodia’s national objectives on water access and climate resilience.

UNCDF is responsible for the design and deployment of the blended finance facility under the WISE Joint Program. The facility provides concessional capital to participating financial institutions, which match these funds on at least a 1:1 basis and on-lend to eligible PWOs.

The financing structure is supported by portfolio-level credit guarantees provided by a national credit guarantee institution, covering up to 80% of loan portfolios. This risk-sharing mechanism reduces risk-weighted assets for lenders and enables expansion of lending to PWOs that have historically lacked access to commercial finance.

The facility is revolving, with loan repayments recycled into new lending, supporting long-term sustainability. Alongside financing from UNCDF, UNICEF supports PWOs on investment readiness and technical capacity, including renewable energy integration. Phase I of the facility will be piloted from 2025 to 2027.

Advancing locally led adaptation through performance-based grants

In 2011, Cambodia became a global pioneer of the Performance-Based Climate Resilient Grants (PBCRG) mechanism. The pilot began in three districts of Takeo Province under the stewardship of the National Committee for Sub-National Democratic Development Secretariat (NCDD-S) within the Ministry of Interior (MoI). It was implemented as part of the Local Governments and Climate Change (LGCC) project, under the broader framework of national decentralization and de-concentration reforms. By December 2023, with support from the International Fund for Agricultural Development’s (IFAD) ASPIRE programme, the Global Environment Facility (GEF) and UNDP, the initiative had expanded to 32 districts across eight provinces. Between 2011 and 2024, a total of 538 investments were completed.

With support from UNCDF, the NCDD-S was accredited in 2019 by the Green Climate Fund as the first national implementing entity focusing on local governments. UNCDF also assisted the NCDD-S in submitting a $10 million LGCC Phase III proposal to the GCF to expand the PBCRG mechanism to another 25 districts. In 2024, GCF approved a $446,345 readiness grant to support climate finance mobilization for vulnerable communities through a sub-national climate fund.

During the LGCC II phase, UNCDF provided technical and financial support to local governments to develop and operate small-scale schemes under the Innovative Decentralized Water Solutions to Provide Safety and Resilience for Residential Water Systems (LGCC-WRP), financed by the Ministry of Environment of the Republic of Korea.

Accelerating energy efficiency in Cambodia’s building sector

Cambodia is scaling up energy efficiency to promote sustainable growth and reduce emissions. In partnership with UNDP, the country is implementing the Joint Programme “Accelerating Energy Efficiency in Cambodia’s Building Sector,” to reduce building sector energy use by 25% by 2030, while expanding access to green finance and advancing its climate commitments.

To unlock investment, the programme facilitates the development of green financial derisking instruments, which may include guarantees, concessional loans or repayable grants. These instruments encompass guarantee facilities for energy efficient loans; tailored financing for women-led SMEs and low-income households; fiscal incentives and impact standards for building retrofits; and risk management tools for financial institutions.

By working with the Cambodia Credit Guarantee Corporation and other partners in the financial sector, the programme aims to catalyse at least $10 million in investments.

The initiative strengthens Cambodia’s regulatory and financial ecosystem, promotes energy savings in commercial and public buildings, and supports inclusive economic growth.