PHNOM PENH — The National Bank of Cambodia has published its first Sustainable Finance Taxonomy, a 110-page regulatory framework that for the first time sets out binding criteria for what qualifies as a green investment in the country’s banking sector — and, critically, what does not.
Released in April 2026 and developed with the International Finance Corporation (IFC) and the Climate Bonds Initiative (CBI), the document establishes a classification system covering three sectors: energy, transport, and buildings and construction. It introduces emissions thresholds, a traffic light rating system, and a “Do No Significant Harm” compliance requirement that banks must apply before labelling any loan or financial product as green.
The taxonomy is Cambodia’s most significant step to date toward aligning its financial system with international sustainability standards, and its publication arrives as the country targets a 55% reduction in greenhouse gas emissions by 2035 and carbon neutrality by 2050.
The Traffic Light System: Green, Amber, and Red
At the core of the framework is a three-tier traffic light classification that banks must apply to every project seeking green financing.
Green (aligned) activities are those operating at or near net-zero — including solar PV, wind power, electric vehicle fleets, and qualifying hydropower projects. These are automatically eligible for green finance without emissions verification.
Amber (transitional) activities are those not yet at net-zero but on a credible decarbonisation pathway, subject to specific performance thresholds and “sunset dates.” Critically, the Amber classification applies only to retrofitting or upgrading existing infrastructure — not new projects. All Amber classifications expire by end-2040, after which only Green criteria apply. A project failing to meet Green standards after its sunset date becomes ineligible.
Red (ineligible) activities are those incompatible with Cambodia’s net-zero trajectory — most notably, unabated coal-fired power generation.
The document is explicit: Amber status is not a permanent pass. “At the sunset date, the Amber classification within this Taxonomy will cease to exist,” the NBC states. Any activity that fails to reach Green thresholds by then loses access to sustainable finance.
What Banks Are Now Required to Do
For a loan or financial product to be considered taxonomy-aligned, the NBC requires banks to verify compliance across three layers:
1. Substantial Contribution Criteria Banks must confirm that the financed activity meets the sector-specific technical screening criteria (TSC) — including quantitative emissions thresholds — for a substantial contribution to climate change mitigation.
2. Do No Significant Harm (DNSH) Even a project that meets Green thresholds can be disqualified if it causes significant harm to other environmental objectives, including water sustainability, biodiversity, pollution prevention, or the circular economy. Banks must conduct DNSH screening for each project.
3. Minimum Social Safeguards (MSS) Borrowers must adhere to minimum social and governance standards aligned with IFC Performance Standards and the UN Guiding Principles on Business and Human Rights.
The taxonomy also requires third-party verification for taxonomy-aligned products. Verifiers must meet minimum qualification standards — either local or international — and follow a defined verification process set out in Annex 5 of the document.
Sector-by-Sector Breakdown
Energy
The energy sector accounts for approximately 29% of Cambodia’s total GHG emissions as of 2016, a share projected to rise to 43.7% by 2030 under a business-as-usual scenario. The taxonomy addresses this through strict thresholds calibrated against a 1.5°C decarbonisation pathway.
Green thresholds for energy generation are set at 100 grams of CO₂ equivalent per kilowatt-hour (gCO₂e/kWh) from 2025 through 2040, tightening to 50 gCO₂e/kWh from 2041 onward.
Amber thresholds — applicable only to transitional activities — decline from 286 gCO₂e/kWh in 2025–2029 to 134 gCO₂e/kWh by 2035–2040, after which the Amber category ceases.
Solar PV and wind power are automatically Green — all electricity generation from these sources qualifies without threshold verification, as their lifecycle emissions are well below 100 gCO₂e/kWh.
Hydropower is eligible under specific conditions. Facilities built before 2026 qualify if they are run-of-river plants with no artificial reservoir, or if power density exceeds 5W/m² or emissions intensity is below 100 gCO₂e/kWh. New hydropower projects from 2026 onward face tighter criteria: power density above 10W/m² or emissions below 50 gCO₂e/kWh.
Coal is classified as ineligible (Red). The taxonomy enshrines Cambodia’s “no-new-coal” policy, and Annex 2 provides criteria for the early and managed phase-out of existing coal-fired plants.
To meet NDC 3.0 targets, the NBC estimates Cambodia requires US$20.37 billion in clean energy investment by 2050.
Transport
The transport sector’s decarbonisation strategy relies on replacing internal combustion engines with zero-emission alternatives. As a result, most transport activities under the taxonomy have no Amber category — zero-emission alternatives are considered commercially available.
Green thresholds for road transport and rail are set at zero direct (tailpipe) emissions, covering electric vehicles and hydrogen fuel cell vehicles.
Aviation is treated as a special case. Full electrification of commercial flights is not yet technically feasible, so the taxonomy provides an Amber pathway for Sustainable Aviation Fuels (SAF) that meet international GHG reduction standards.
Shipping uses the Annual Efficiency Ratio (AER) metric. Vessels under 5,000 gross tonnage with zero emissions qualify automatically. Larger vessels must report under the IMO Data Collection System. Crude oil tankers, LNG carriers, and vessels supporting fossil fuel exploration are explicitly ineligible.
Buildings and Construction
For buildings, the taxonomy uses carbon emissions per square metre (CO₂/m²) as the primary metric — replacing the commonly used Energy Use Intensity (EUI) metric, which the document notes is insufficient for measuring actual climate impact.
New buildings can qualify as Green through two pathways. The first is alignment with a Cambodia-specific decarbonisation pathway based on operational emissions data, though the NBC notes this pathway will only be fully operational once national data collection is complete. The second pathway — available now — is obtaining an internationally recognised green building certification. Accepted labels include EDGE (three-star certified), LEED Gold or Platinum with a 30% improvement above ASHRAE 90.1 standards, IGBC Net-Zero, and Singapore’s BCA Green Mark (Gold or above).
Renovation of existing buildings can qualify under the Amber category if the works demonstrably reduce energy consumption or emissions intensity.
Greenwashing Controls
The taxonomy introduces two specific safeguards against greenwashing that go beyond typical disclosure requirements.
First, any activity classified as Amber has a hard expiry. Banks cannot continue marketing loans to transitional projects as green indefinitely — the classification ends when the sunset date arrives.
Second, the framework specifies that the Amber category does not apply to new construction or new project development, only to the upgrading of existing assets. A bank that extends a green loan for a new fossil-fuel-intensive building or power plant on the basis of transition plans — rather than actual performance — would not be taxonomy-aligned.
Regional and International Alignment
The Cambodia taxonomy has been explicitly benchmarked against the EU Taxonomy, ASEAN Taxonomy Version 3, Singapore Green Finance Taxonomy, Australia’s Sustainable Finance Taxonomy, and the Multi-Jurisdiction Common Ground Taxonomy (China, EU, Singapore). For each activity listed, the document cross-references the equivalent classification in each of these frameworks.
This alignment is designed to reduce friction for international ESG investors evaluating Cambodia-based projects against their own reporting requirements — a key consideration as the country prepares for its graduation from Least Developed Country status in December 2029.
What Comes Next
The NBC describes the current taxonomy as a “living document” and “Version 1.” Future phases are expected to expand coverage beyond the initial three sectors, incorporate climate adaptation and resilience criteria (currently addressed only under DNSH), and develop a Cambodia-specific decarbonisation pathway for buildings once national emissions data becomes available.
The central bank has also signalled it will issue supplementary guidelines to assist financial institutions with practical implementation — an acknowledgement that applying the technical screening criteria will require significant capacity-building across Cambodia’s banking sector, particularly among smaller institutions.
Whether that support arrives quickly enough to drive a meaningful increase in green lending — rather than simply adding a compliance layer to existing loan processes — will determine how much of the framework’s ambition translates into capital allocation on the ground.
❓ FAQ
Is the taxonomy mandatory for all Cambodian banks? The taxonomy is currently designed as a classification framework for the banking sector. The NBC has not yet published mandatory green lending requirements, but adoption is actively encouraged and the framework is expected to underpin future regulatory guidance.
What happens if a bank labels a loan as green but the project does not comply with the taxonomy? The taxonomy establishes third-party verification requirements, but enforcement mechanisms for non-compliant labelling are addressed through broader NBC regulatory oversight and are expected to be elaborated in supplementary guidelines.
When will agriculture, manufacturing, and other sectors be covered? The taxonomy does not specify a timeline for expansion beyond the initial three sectors. The NBC has committed to developing additional sectors in future phases, prioritising areas where emissions data and decarbonisation pathways are available.