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ESG Framework for FDIs: Catalyzing Inclusive Growth in Cambodia

by Surya Narayan
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The implementation of an Environmental, Social, and Corporate Governance (ESG) framework for Foreign Direct Investments (FDIs) holds immense importance for Cambodia as it paves the way for a harmonious blend of social development and economic progress. This perspective was underscored by David Van, Senior Advisor for Public Private Partnership at PLATFORM-Impact, during the ‘ESG Talk: Building Investment-Ready Impact-Driven Ventures in Cambodia’ event.

Organized by the Singapore Investment and Business Forum (SBIF) at the Singapore Cambodia International Academy (SCIA), this gathering brought together ESG experts, industry representatives, and SBIF officials, shedding light on the pivotal role ESG frameworks play in shaping responsible investment.

David Van emphasized that ESG frameworks are gaining prominence in FDI origin countries, particularly in Europe. This trend necessitates similar developments in Cambodia, where FDI plays a pivotal role in fostering economic growth and development. To ensure that FDIs contribute to sustainable and responsible development, the establishment of a comprehensive ESG compliance framework becomes imperative. Such a framework would align with internationally recognized standards and guidelines, encompassing various dimensions of ESG.

This approach enables investors to uphold responsible business practices while simultaneously promoting transparency and accountability in their operations. Importantly, a robust ESG compliance framework holds the potential to boost Cambodia’s exports, especially to European Union (EU) countries. Compliance with the Corporate Sustainability Reporting Directive (CSRD) is crucial, as non-compliant firms may face significant penalties, according to the EU Commission’s requirements within the Directive.

David Van highlighted the distinction between ESG and Corporate Social Responsibility (CSR). While CSR often involves businesses engaging their staff and providing resources for community betterment, ESG places “G for Governance” at the forefront of a company’s environmental and social strategies.

The scope of ESG criteria spans various sectors, encompassing agriculture, waste recycling, healthcare, clean water access, education, and affordable housing. These criteria empower businesses to integrate sustainability into their core operations, promoting holistic development.

Hassan Hajam, Executive Director and Chief Impact Officer at PLATFORM-Impact, elucidated the concept of an “impact-driven enterprise.” Such enterprises are financially self-sustaining organizations with a well-defined social and environmental mission. Unlike traditional profit-driven businesses, impact-driven enterprises prioritize addressing societal issues over maximizing shareholder profits.

Hassan Hajam noted that the surplus generated by impact-driven enterprises is primarily reinvested to amplify social and environmental impact, rather than being distributed for private financial gain. He cited examples of impact-driven organizations in Cambodia, including an inclusive school in Siem Reap that seeks to accommodate children from lower-income groups and those with learning disabilities.

Seet Li Lian Melissa, Business Development at Swan & MacLaren Consultant PTE Ltd, offered insights into the Sentosa Sustainability Plan in Singapore. She emphasized the importance of sustainable tourism practices in mitigating environmental damage caused by tourism activities. The tourism sector contributes significantly to global carbon emissions, underscoring the need for responsible tourism management.

Understanding that leisure-related activities, such as flights, coach tours, and lodging, contribute to tourism’s carbon footprint is essential. Sustainable tourism practices are crucial in managing the sector’s negative environmental impacts, including its contribution to climate change.

In conclusion, the establishment of an ESG framework for FDIs in Cambodia represents a pivotal step toward achieving inclusive growth, responsible investment, and sustainable development. By aligning with global ESG standards, Cambodia can position itself as an attractive destination for socially and environmentally responsible investments, fostering prosperity for its people and the planet.

Source: Khmer Times

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