Thailand pressured to strengthen disclosure and taxonomy literacy as it plays catch-up on green finance

The majority of Thai banks have been trying to account for climate risk but say they need more supportive government policies, with clearer definitions and standards on reporting emissions, said Sarinee Achavanuntakul, director at Climate Finance Network Thailand.

“If we look around the region, Singapore, for example, has already announced mandatory Scope 1 and 2 carbon accounting for listed companies in the 2025 fiscal year,” said Sarinee, who is also managing director of sustainable business accelerator Sal Forest. Scope 1 refers to direct emissions from a business’s operations, while Scope 2 emissions are from energy use. 

“[Mandatory reporting] sends a very clear signal that is going to help banks tremendously in verifying data, as well as implementing and designing their transition plans away from fossil fuels,” she said at the recent Unlocking capital for sustainability Thailand forum, organised by Eco-Business. 

Chow Wong Yuen, chief sustainability officer at the Thai arm of the United Overseas Bank (UOB) echoed Sarinee’s views. Emissions data is crucial in helping banks accurately measure their financed emissions and will improve transparency in capital markets, he said.

“I think [Thailand] needs to have a greenhouse gas emissions inventory,” said Chow. “We need to start reporting Scope 1 and 2 emissions and [impose] certain penalties if companies do not comply.”  Apart from Singapore, he highlighted that Malaysia has taken mandatory disclosures a step further by requiring even large non-listed firms to disclose their emissions by 2030. 

Thailand has made progress on growing sustainable finance in recent years by introducing the first phase of the country’s climate-related taxonomy for the financial sector in June 2023. The Thailand Taxonomy Phase 1 focuses on activities in the energy and transportation sectors, while Phase 2 – which is currently open for public feedback – will cover agriculture, manufacturing, real estate and waste.

However, more needs to be done to improve competency and literacy towards the taxonomy, said the World Bank’s senior financial sector specialist Dr Ornsaran Pomme Manuamorn. Research by the World Bank indicates that Thailand appears to be at the “implementation stage” of sustainable finance, along with around 60 per cent of countries globally. 

“When it comes to whether money is actually flowing into green projects, we need to do much more,” said Ornsaran. “There needs to be more guidance and capacity building for voluntary users, both in the corporate and financial sectors.” Only then, she said, can the private sector figure out how to use the taxonomy, such as linking it to green financial products or disclosures.

Adaptation finance needed

Sarinee cautioned that the taxonomy must be implemented with justice in mind, even though the concept of a just transition is still new in Thailand. “Having a taxonomy in place doesn’t guarantee a just transition – on the contrary, it could accelerate an unjust transition if, for example, a coal-fired power plant or coal mines are shut down without any plan in place for the workers involved,” she said.

In the meantime, Thailand is already suffering the effects of climate change, highlighting the need for climate adaptation. The country saw recently recorded the heaviest rainfall in decades for the month of October, leading to more severe flash floods, said Bangkok’s chief sustainability officer Pornphrom Vikitsreth, who is also advisor to the city’s governor. 

At the same time, Thailand is experiencing rising urban heat levels, affecting not only vulnerable people but those who are healthy and have to be outside for work, he said.

Impacts are also being felt in the agricultural sector, which contributes about 9 per cent to Thailand’s gross domestic product. Extreme weather events such as severe flooding or water scarcity have resulted in smaller harvests, said Friberg-Storey.

“We need a lot of investment in Bangkok [to adapt to climate change],” said Pornphrom. Thailand’s current use of balanced budgeting – in which the government only spends what it receives in taxes and other revenues – is insufficient to fund climate adaptation measures.

“Mitigation is easier because public-private partnerships can be used to fund, for example, waste-to-energy or wastewater treatment plants,” he said. “But for adaptation projects, like building seawalls to protect the Bang Khun Thian district, we have to use our own budget – it is very difficult and costs a lot.”

The Bang Khun Thian district sits at the gates of the Gulf of Thailand and communities living there bear the brunt of any severe flooding that occurs. In September this year, a plan was floated by Thaksin Shinawatra, the father and advisor of current prime minister Paetongtarn Shinawatra, to construct a mega artificial island project in the coastal expanse beyond the district, for protective sea walls to act as a barrier to the rising seas. 

In 2024, Thailand expereinced deadly floods across various regions due to increased rainfall. Image: Soi Buakhao /Flickr CC BY-SA 2.0

On financing such adaptation projects, Pornphrom said that in the future, the government might have to issue municipal bonds to raise funds. “We haven’t done it before but it is something we have to do [while also] looking at other innovative solutions,” he said.

Another way to address negative externalities is by putting a price on carbon and pollution, said Sarinee. “Imagine if nature sends us a bill and says, pay up for all the damage you’ve done – then we wouldn’t need to talk about these different financing mechanisms. But since we don’t have that, we have to find proxies and price them,” she said. Thailand has already announced that it would introduce a carbon tax next year.

The trick to doing this well, however, is to ensure that existing brown industries, which still rely on fossil fuels or are high emitters, are not left out of the picture, added Sarinee. “It is also important to create disincentives for more brown projects,” she said. “To me, that’s key to unlocking capital.”

Financial sector collaboration

Another crucial step is for Thailand’s financial institutions to collaborate on accelerating sustainable finance across the industry, said UOB’s Wong.

“There are banks with big oil and gas loan portfolios that [have not divested from fossil fuels], not because they are unwilling but because they do not even know where to start,” he said. Addressing this would require collaboration across sectors as well as among financial institutions.

Wong acknowledged remarks from audience members that in the meantime, small and medium-sized businesses have struggled to secure green finance. “A business in sustainability doesn’t mean it is a sustainable business… The company must be a credit worthy company,” he said.

Commercial banks will have to work with other financial institutions, such as smaller banks or larger multinational banks, that may have different credit risk profiles or lending priorities which allow them to finance smaller companies, suggested Wong.

“We activate the whole ecosystem to enable the money to go towards the stakeholders,” said Wong.

At the Unlocking capital for sustainability Thailand event, panellists agreed that Thailand needs to make sustainability-related disclsoures mandatory in order to boost green finance. The speakers were: (from left) Sarinee Achavanuntakul, director of Climate Finance Network Thailand; Chow Wong Yuen, chief sustainability officer of United Overseas Bank (Thai); Dr Ornsaran Pomme Manuamorn, senior financial sector specialist at the World Bank. Image: Eco-Business

Sarinee observed that Thai banks have been historically conservative, partly because of the 1997 Asian financial crisis. While this has made it more difficult for smaller companies to obtain green financing, she recommended that companies take advantage of “derisking mechanisms” offered by multilateral development finance institutions (DFIs).

Although the US$300 billion annual target for climate finance agreed on at COP29 was disappointing, it is still triple the previous US$100 billion amount, Sarinee said. “So there is already an increase in the commitments, and I think the multilateral DFIs know that they now have to deliver,” she said.

In the meantime,  the Thai government has chosen not to wait for international climate finance handouts. Last month, Thailand became the first country in Asia to issue sovereign sustainability-linked bonds, which received overwhelming demand from investors. Indonesia and Singapore have issued sovereign green bonds. The bonds are tied to two national climate targets: reducing greenhouse gas emissions by 30 per cent by 2030 and increasing the annual registration of zero-emission road vehicles to 440,000 vehicles by the same year.

The issuance was increased to 30 billion baht (US$871 million) after the original 20 billion baht (US$581 million) amount was oversubscribed by nearly three times. The country plans to issue even more of such bonds next year, totalling 130 billion baht (US$3.8 billion).

“We need to make sure that these bonds are de facto green, de facto sustainable, and that they will lead to impact on the ground,” said the UN’s Friberg-Storey.

The next edition of Eco-Business’ flagship forum Unlocking capital for sustainability finance will be held in Hong Kong, on 28 February 2025. Find out more details here.