Cambodia Urged to Boost Green Investment in Non-Infrastructure Sectors

A new joint study by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) and the Securities and Exchange Regulator of Cambodia (SERC) has called on Cambodia to urgently scale up climate finance in agriculture, forestry, and other non-infrastructure sectors to safeguard long-term economic resilience.

The report, released in September 2025, titled ‘Building Bankable Green Project Pipelines in the Non-Infrastructure Sectors of Cambodia’, warns that despite ambitious government climate commitments, the country faces fragmented strategies, underdeveloped project pipelines, and a heavy reliance on external financing. Without decisive reforms, Cambodia risks both climate-driven economic losses and missed opportunities to attract green capital.

Climate Risks Rising

Cambodia is among the most climate-vulnerable countries in Asia, exposed to floods, droughts, storms, and seawater intrusion. The report states that more than 2.5 million people have been affected by severe droughts over the past decade, while extreme rainfall in 2022 displaced 5,000 households across 14 provinces.

Greenhouse gas emissions surged by nearly 50 per cent between 2010 and 2023, with agriculture remaining the largest contributor, followed by transport and power generation. The World Bank estimates that unchecked climate change could shave up to 9.8 per cent off Cambodia’s GDP by 2050 and increase poverty by 6 per cent, delaying the country’s goal of reaching upper-middle-income status by 2030.

Ambitious Goals, Fragmented Action

The Royal Government has committed to reducing emissions by 41.7 per cent by 2030 compared to business-as-usual, requiring USD 7.8 billion in investments. Yet, the report points out that most of these targets are conditional on international funding. Only five out of 187 specific actions under the Nationally Determined Contribution (NDC) are achievable through domestic budgets alone.

Cambodia’s Pentagonal Strategy, Long-Term Strategy for Carbon Neutrality 2050, and National Adaptation Plan, all set out climate ambitions, but the report highlights a lack of coordinated pipelines of projects to attract finance. In 2022, just USD 272 million was allocated towards the NDC, leaving a 38 per cent financing gap for that year.

ESCAP recommends linking national climate strategies directly to concrete, bankable projects—particularly in agriculture, water, and forestry—and embedding targets into law to improve accountability.

Financing Gaps in Non-Infrastructure Sectors

Although government spending on climate projects rose by 41.6 per cent between 2022 and 2023, most of this went to infrastructure ministries such as transport and water. Non-infrastructure sectors, including agriculture, accounted for just 13.4 per cent of climate spending—largely funded by development partners rather than domestic budgets.

Out of 38 projects planned by the Ministry of Agriculture, Forestry and Fisheries, only five are climate-relevant, yet they represent nearly half of the ministry’s financing needs. Agriculture alone requires an additional USD 453 million for planned projects, according to the report.

Development partners have, so far, filled much of the gap. Between 2022 and 2024, they committed USD 1 billion to climate programs in Cambodia, led by institutions such as the Green Climate Fund (GCF), Asian Development Bank (ADB), and World Bank. Notable initiatives include the USD 42.9 million PEARL project in the Northern Tonle Sap Basin, aimed at strengthening climate-resilient agriculture for 1.45 million people.

Early Steps in Green Bonds

The report notes that Cambodia’s nascent green bond market has shown encouraging results. Companies such as Royal Group Phnom Penh Special Economic Zone (RGPPSEZ), Golden Tree Co., Ltd., and CamGSM (Cellcard), issued pioneering green bonds with support from development partners. While these early issuances demonstrate appetite among investors, capacity-building and regulatory guidance remain critical to ensuring standards and investor confidence.

The report recommends accelerating the release of a national green taxonomy and revising credit risk rules to reduce capital charges for banks investing in green projects. These steps could help de-risk green finance and expand participation from domestic lenders.

The Role of Banks

Cambodia’s domestic banking sector is viewed as a crucial lever for mobilising climate finance. While many banks have adopted environmental and social (E&S) risk management policies and sustainability reporting, gaps remain in climate-specific lending products and project assessment frameworks.

Targeted reforms, such as mandating climate disclosure standards and offering financial incentives, could strengthen banks’ ability to channel capital into green sectors. Updating the Prakas on Credit Risk Management to lower risk weightings for green investments is also seen as a vital step.

Opportunities and Recommendations

The report identifies several opportunities for Cambodia to seize:

• Solar energy expansion: Rooftop photovoltaic (PV) systems in garment factories, hospitals, and offices could deliver strong returns if current regulatory barriers are lifted. Removing compensation tariffs and allowing net metering or feed-in tariffs would make rooftop solar highly attractive.
• Climate-smart agriculture: Investments in drought-resistant crops, irrigation, and sustainable farming can cut emissions while safeguarding food security.
• Blended finance: Leveraging concessional loans and guarantees from development banks to crowd in private capital.
• Policy reforms: Embedding climate targets in law, finalising a national green taxonomy, and aligning fiscal incentives with green priorities.

“Cambodia is at a critical moment,” the report concludes. “Strategic action today can shape the country’s climate finance pathway and accelerate progress towards realising the Sustainable Development Goals.”

Strengthened collaboration among government, banks, investors, and development partners will be essential to closing financing gaps. By fostering an enabling environment for climate investments—particularly in non-infrastructure sectors—Cambodia can both reduce its climate risks and unlock new avenues for resilient, inclusive growth.