In the evolving landscape of sustainable finance, Thailand is actively integrating environmental, social, and governance (ESG) factors into its financial sector. Authorities and market players are making strides to align with global trends and regional standards.
The 2024 Global Progress Brief by the Sustainable Banking and Finance Network (SBFN), a platform for knowledge sharing on sustainable financing, highlights Thailand's significant progress in establishing a national sustainable finance framework. The Thailand Public Debt Management Office (PDMO) initiated this framework in 2020, emphasizing ESG risk management and disclosure.
In 2021, the Bank of Thailand and the Securities and Exchange Commission (SEC), along with other agencies, formed the Working Group on Sustainable Finance. This group aims to implement five key pillars of a sustainable finance ecosystem: taxonomy, data, products and services, incentives, and human capital. In 2023, the Bank of Thailand issued a Policy Statement on Environmental and Climate Change Aspects and collaborated with the World Bank to model financial risks from flooding.
A notable milestone was achieved in July 2023 with the introduction of Thailand Taxonomy Phase 1 for energy and transport sectors. This taxonomy uses a traffic light approach to categorize activities as fully ‘green’, transitioning ‘amber’, or ‘red’. However, challenges remain in defining transition activities for various sectors and linking taxonomy to disclosures and green financial products.
Sustainability reporting has also advanced in Thailand. A study by the World Bank and SEC found that large listed companies performed well in governance indicators but highlighted room for improvement in climate issue reporting by smaller firms.
Thailand ranks second among SBFN countries in Asia for green bond issuance. Since issuing its first Sustainability Bond in 2020, milestones include Thai Union's Sustainability-Linked Bond in 2022 and Thai Foods Group's social bond totaling 1 billion Thai baht ($30.5 million) in 2021.
Looking ahead, experts recommend that financial institutions adopt standardized reporting practices to enhance transparency within the sector. Rigorous implementation of climate risk management frameworks is also essential. Challenges such as capacity building within institutions need addressing to keep pace with regional peers.
With its natural capital, developed markets, credit enhancement tools, and supportive policies, Thailand is poised to excel in green finance alongside its renowned cuisine. The World Bank team remains committed to supporting Thailand’s green potential.