cambodia

A. ESG Reporting

1. Are there legal or regulatory requirements for companies to make ESG disclosures in your jurisdiction?

To the best of our knowledge, there is presently no specific mandatory legislation or regulation focusing on ESG / sustainability disclosures.

Legislative requirements on ESG disclosure in Cambodia are limited and the understanding of ESG and its focus is varied, but there are various voluntary initiatives and upcoming developments.

In addition, there are some regulatory frameworks that appear to support or can be deemed as supporting ESG practices as described in section A.2 below for enterprises generally and for the securities and banking sectors.

2. What are the key legislative and regulatory sources for ESG disclosure requirements and to whom do they apply?

From a corporate governance perspective

(a) For all enterprises regardless of sector:

All commercial enterprises incorporated in Cambodia are required to file Annual Declarations of Commercial Enterprise (ADCE) pursuant to the Prakas on ADCE^[1] to inform the Ministry of Commerce, among other things, about any changes to management, directors and shareholding of the company.

(b) For the securities sector:

(i) Disclosure requirements in respect of corporate governance are primarily aimed at public limited companies or permitted entities (being a legal entity, other than a public limited company, incorporated in Cambodia that is permitted in accordance with the provision of the Law on the Issuance and Trading of Non-Government Securities (Securities Law) and other regulation to offer and issue securities to members of the public in Cambodia) which are or have been approved as an issuer or a listed company.

(ii) Issuers and listed companies must disclose information on corporate governance and its corporate structure in public disclosure documents prior to issuing debt and equity securities. Listed companies are also required to notify investors of any change to directors or the key management of the company and publish an annual report which must include, amongst other things, information on corporate governance.

(iii) The Securities Exchange Regulator of Cambodia (SERC, formerly the Security and Exchange Commission of Cambodia) has issued the Detailed Guidance for Issuing Green Bonds in Cambodia and Guidance on the Issuance of Green Bonds, Social Bonds, and Sustainability Bonds, under which an issuer of green bonds is expected to report and provide updates regarding the allocation of bond proceeds on green assets and projects, and performance and implementation of such green assets and projects. However, the guidance is of a non-legally binding nature and is pending implementing regulations.  

(c) For the banking sector:

(i) The corporate governance for banks and financial institutions is set forth in the Prakas on Governance in Banks and Financial Institutions, Prakas on Fit and Proper Regulatory Requirements for Applying Entities and Licensed Banks and Financial Institutions, and Prakas on the Internal Control of Bank and Financial Institutions.

(ii) Any change to the corporate governance (i.e., shareholders, directors, senior managements, branch managers of foreign bank branches, head of internal audit and head of compliance) of a bank or financial institution is subject to approval from or notification to the National Bank of Cambodia (which is not a disclosure to the public unless they are listed companies as discussed in item (b) above).

(iii) The Association of Banks in Cambodia, the official organization representing the country’s private banking sector, has developed the Cambodian Sustainable Finance Initiative (CSFI) with support from the National Bank of Cambodia and USAID. Currently, there are 47 private banks and financial institutions who have voluntarily adopted the CSFI and pledged to abide by CSFI Implementation Guidelines, which covers environmental and social (E&S) reporting (internal and external) that may include reporting on E&S performance of business activities and operations (including climate reporting), the implementation of relevant standards, and fulfilling other E&S objectives/commitments as stated in the member’s E&S policies.

From a social perspective

(d) For all enterprises regardless of sector:

Under the Prakas on Labor Self Inspection, enterprises registered with the Ministry of Labor and Vocational Training must make a self-declaration twice a year to inform the ministry of, among other things, the working conditions and benefits provided to employees, occupational health and safety framework in place and social security registration of the employees.^[2]

From an environmental perspective

(e) For development projects regardless of sector which involves pollution sources, industrial zones, or natural resource development activities, e.g. mining, petroleum treatment, fuel storage, cement factory, battery manufacturing, and landfill:

(i) Environmental and social impact reporting requirements apply to an owner or person in charge of such projects, including periodic update reports to the Ministry of Environment.

(ii) An initial or full environmental and social impact assessment also has to be conducted and submitted as a report to the Ministry of Environment for projects falling under certain categories and thresholds^[3], e.g. projects developed in a tourism area of more than fifty hectares.

(f) Requirements under the Code of Environment and Natural Resources^[4]

(i) Certain reporting and disclosure requirements in respect of a full or initial environmental impact assessment report:

o The Ministry in charge of environment and natural resources must ensure that information on a full or initial environmental impact assessment report are made public and stakeholders and local communities affected by the project can obtain sufficient and clear information.

o The project owners shall publish at least a copy of the full or initial environmental impact assessment report as well as mitigation measures for the project.

o There will be procedures issued for public participation and the right to access information related to the project implementation, except for confidential information.

(ii) Climate change reporting requirement for development projects:

o Under the Code of Environment and Natural Resources, regulation will be developed on how data and information on climate change may be produced and managed, one of which could be data/information on GHG emission reduction by project owners although the code does not expressly provide so.

o Project owners will be required to report on “financing used for activities related to climate change” upon request by the Ministry in charge of environment and natural resources.

o The code does not define the term “project owner” nor specify any sector, category and/or threshold for the project.

(iii) Environmental disclosures for sites owners of production, commercialization, or services that discharge waste at high risk of environmental pollution:

o Under the Code of Environment and Natural Resources, site owners of production, commercialization, or services that discharge waste at high risk of environmental pollution (hazardous substances and hazardous waste) are required to provide immediate data reports on pollutant release or transfer to the environment. There will be regulation on the types of entities that are subject to this immediate data report obligation.

o An environment pollution control register will be created by the ministry responsible for environment and natural resources and be accessible to the public in downloadable form.

3. Are the requirements mandatory or do they apply on a comply-or-explain basis?

All requirements described in section A.2 above are mandatory, except the disclosure requirements under the CFSI Implementation Guidelines and the SERC guidance related to green bonds, which are non-binding in nature.

4. Which aspects of ESG do the requirements focus upon?

In light of our answer to section A.2 above:

(a) In general for any sector — the focus is primarily on the disclosure of corporate governance and social aspects.

(b) For securities sector — the focus is on the disclosure of corporate governance.

(c) For banking sector — the focus is on the disclosure of corporate governance. For the banks and financial institutions who are part of CFSI, the focus is also on environmental and social aspects.

(d) For infrastructure projects and businesses with operations that may adversely affect the environment and natural resources — the focus is on the disclosure of environmental and social impact. It is also anticipated that the focus will expand to climate change.

5. Are the disclosure requirements based on international standards? If so, which one(s)?

There is no information available to the public to confirm whether any of the requirements mentioned in section A.2 above are based on any international standards.

6. How do the disclosure requirements approach materiality (e.g. single or double materiality)?

There is no information available to the public to confirm the materiality approach under the requirements mentioned in section A.2 above.

7. Are there requirements for the disclosure of GHG emissions? If so, please specify the scope (e.g. Scope 1, Scope 2 and/or Scope 3), to whom they apply and whether there are requirements on the measurement methodology.

To the best of our knowledge, the current regime, including, the Code of Environment and Natural Resources does not expressly provide for requirements for the disclosure of GHG emissions. However, as mentioned in section A.2(f), as part of a climate change reporting requirement, data and information on climate may be further regulated, which could include information on GHG emissions.  

8. Are there requirements to obtain independent assurance of any ESG disclosures? If so, what is the scope of such requirements?

Current laws/regulations do not impose requirements on independent assurance of any ESG disclosure. However, in order to fulfil certain requirements described in section A.2(e) above, an accredited service provider has to be retained, e.g. to conduct “a full environmental and social impact assessment” and prepare a report on such for submission to the Ministry of Environment.

9. For companies not subject to mandatory or comply-or-explain ESG reporting, are voluntary ESG disclosures customary?

It is common practice for a number of multinational companies which have subsidiaries in Cambodia to report their ESG commitments. Corporates such as Heineken Cambodia and Smart Axiata are at the forefront of implementing a reporting structure based on the GRI Standards.

10. Has your jurisdiction issued or adopted a taxonomy on sustainable activities? Is it mandatory and what is its scope of application?

The ASEAN Taxonomy on Sustainable Finance is a legally non-binding guide developed by the ASEAN Taxonomy Board (ATB), with Cambodia, being an ASEAN member state (AMS), represented in the ATB.

The two core elements of the taxonomy are:

(a) The foundation framework (applicable to all AMS) that provides for a qualitative assessment of activities, and the Plus Standard with metrics and thresholds to further qualify and benchmark eligible green activities and investments; and

(b) The environmental objectives (universal and applicable to all AMS), that are to be implemented in alignment with national environmental laws and to include climate change and adaptation, protection of healthy ecosystem and biodiversity, and promotion of resource resilience and transition to circular economy.

Each AMS is expected to develop their own taxonomy based on the ASEAN Taxonomy on Sustainable Finance, as the aim is to develop a harmonized system and practice of sustainable finance across ASEAN.

11. Are there plans to adopt or incorporate the ISSB’s IFRS S1 and/or S2 standards? If so, please indicate the extent of alignment, to what extent the standards will be mandatory, to whom they will apply and the timeline

To the best of our knowledge, we are not aware of any upcoming plans to adopt the ISSB Standards or require reports to be prepared in compliance with such standards.

12. Other upcoming developments / direction of travel

We are aware that there is a draft Prakas (ministerial directive) on Environmental, Social, and Governance Disclosure, under the jurisdictions of the Ministry of Economy and Finance, and Non-Banking Financial Service Authority. A public consultation was initiated earlier this year; however, it is pending further clarity and inputs from relevant stakeholders, including the standard(s) to be adapted / implemented.