This study is an examination of cross-border agricultural investments in Cambodia, foreign direct investment (FDI) in the country’s agribusiness sector, as well as reviewing the best practices in the financial sector, particularly with respect to the promotion of sustainable practices in agricultural investments.
It contains four main sections. The first section provides an overview of Foreign Direct Investment (FDI) in the country’s agribusiness sector, while the second breaks down the nature of Cambodian agribusiness investments. The third is a case study involving a foreign agribusiness company investing in Cambodia. Finally, we review good practices in the financial sector, particularly regarding sustainable practices in agricultural investments.
Findings from each section indicate that Cambodian FDI has steadily increased in the past ten years. The bulk of FDI in Cambodian agriculture is directed into the agribusiness sector and rubber plantations, with the most significant share of investments coming from Cambodia itself, China, and Vietnam.
Despite its infancy, sustainable finance is being steadily adopted into mainstream practices by stakeholders (including financing agricultural investments) worldwide and in Cambodia, this research suggested that companies are increasingly aware of the benefits of sustainable finance, partly because green loans are becoming more competitive globally, improving the business case for companies to use them. This is a trend that is likely to continue. In Cambodia, a particularly promising finding was the increasing momentum reported by the Association of Banks in Cambodia regarding the launch of their “Sustainable Finance Principles” in 2019 and their members’ positive uptake of these principles.
Overall, the research found several international best practices that could be applied to Cambodia. The final section of the study provides ten recommendations to improve the sustainability of Cambodia’s financial sector, particularly regarding the management of its exposure to Environmental and Social (E&S) risks when financing agricultural and agribusiness investments. Our study identifies local stakeholder capacity building as a critical tool to leverage the global trend towards green finance and accelerate its uptake within Cambodia.
Disclaimer: The content of this publication is the sole responsibility of Fair Finance Cambodia and can in no way be taken to reflect the views of the Fair Finance Asia/ Fair Finance International network.
About Fair Finance Cambodia
The Fair Finance Cambodia (FFC) coalition aims to reduce the negative impacts of cross-border investments on human rights, the environment and climate change, particularly those made by multinational financial institutions, banks and insurers while increasing inclusive economic development. FFC is operational in Cambodia – wherein the Fair Finance Cambodia Civil Society Organization (CSO) coalition leads research and engagement with key stakeholders, including financial regulatory and policymaking institutions, banking and investment associations, multilateral development banks and academia. FFC is a member of Fair Finance Asia, a regional network of CSOs committed to ensuring that financial institutions’ funding decisions in the region respect local communities’ social and environmental well-being.