The National Bank of Cambodia ( NBC ) has launched its sustainable finance taxonomy for the banking and other related financial sectors.

Under development for more than two years, the framework, NBC governor Chea Serey says, “is essential for the sustainable development agenda in Cambodia and clearly reflects the strong commitment of all stakeholders.”

The taxonomy – launched in Phnom Penh on Monday and developed with support from the International Finance Corporation ( IFC ) – is consistent with the finance taxonomy of both the Association of Southeast Asian Nations ( Asean ) and the European Union.

“Cambodia is moving from goal-setting to practical application, clearly structured in alignment with the financial sector,” the governor notes. “Our sustainable financial taxonomy can not only contribute to addressing the impacts of climate change, but also meet the environmental standards required by our trading partners to maintain competitiveness in the global market.”

Cambodia, she adds, could lose as much as 9% of its gross domestic product by 2050 without measures to address climate change.

Under its latest nationally determined contribution, Cambodia is committed to cutting greenhouse gas emissions by up to 55% by 2035.

“Achieving this goal will require both public and private investments in climate change mitigation, adaptation and enabling activities,” the governor points out. “Public funding alone is not sufficient to meet these enormous financial needs. Cambodia must attract private capital, both domestically and internationally to bridge the funding gap.

“This will help attract green investment projects. The engagement of the private sector and development partners can support sustainable finance for necessary climate activities.”

Cambodia is highly vulnerable to floods, droughts and extreme heatwaves.

“These natural disasters directly threaten public health and significantly reduce labour productivity,” Chea Serey states,.“which can lead to falls in output, lower household incomes and higher inflation.”

Advanced economies, she shares, have begun to implement strict trade controls based on environmental concerns, notably the EU with its cross border adjustment mechanism, which is designed to level the playing field between EU companies paying high carbon and energy prices and cheaper products imported from countries with no emissions costs.

“These measures not only raise the standards of production and exports, but also force exporters to consider and be responsible for the greenhouse gas emissions or carbon footprint of their products,” she says. “As a result, businesses need to implement sustainable production systems, reduce emissions and ensure that their supply chains comply with global environmental regulations to effectively compete in international markets.”