Deloitte spotlights Thailand as a stand-out example in ESG business practices

Among Asian nations, Thailand is one of a few leading the way in environmental, social, and governance (ESG) initiatives, sustainability reporting, and sustainable finance. That is according to a new report from Deloitte, which dives into how progressive policy frameworks and market incentives have worked to tie sustainability into the country’s economic growth.

In the past few decades, immense economic growth in Asia has created a lot of wealth and increased standards of living quite dramatically. But the flip side to this growth has been the negative impact on the environment. Asia now produces the largest share of global emissions, in large part because of a widespread reliance on fossil fuels.

But as the world increasingly moves to embrace the transition to clean energy, development in Asia has largely mirrored the significant progress made in Europe. Regulation has been focused on improving ESG disclosures, addressing climate risk, and pushing for decarbonization.

Thailand pushes ESG

When it comes to sustainability initiatives in Asia, Thailand has been a stand-out example. The Thai government has committed to achieving net zero by 2050. In order to reach this goal, Thai economic authorities (including the Bank of Thailand and the Thailand Board of Investment) have been developing policy in sustainable finance, carbon tax, and incentives aimed at reducing greenhouse gas emissions.

Thai authorities have been setting ESG disclosure standards and a common reference standard for classifying and categorizing Thailand’s green economic activities (Thailand Taxonomy), and introducing tax incentives for investments in sustainable finance.

Sustainable finance

Investments in ESG are the main vehicle for putting private sector resources towards benefiting both the environment and the overall social good. But, in order to make this private funding really have an impact on sustainability goals, it needs to be accompanied by sound policies and regulations.

Sustainable finance in Thailand has also taken the form of green bonds, which are issued by companies to fund projects that meet environmental criteria. These can be aimed at building infrastructure for renewable energy, clean transportation, and water and waste management, among other projects that are positive for the environment.

There are also sustainability-linked bonds that tie economic returns to the achievement of sustainability goals; sustainable mutual funds that invest exclusively in companies with outstanding ESG performance; and even ‘sustainability tokens‘, which use blockchain technology to create digital assets representing the value of projects or assets related to sustainability, such as renewable energy projects or forest conservation projects.

Collaborating with global regulatory bodies will also help Thailand gain a wealth of knowledge, experiences, and best practices in developing sustainable finance innovations.

An initiative for electric vehicles

The Deloitte report gives the example of Thai energy company Bangchak, which has taken on a variety of socio-environmental responsibilities. The conglomerate has a mandate to drive business while meeting the goal of net-zero greenhouse gas emissions by 2050.

As part of that mandate, Bangchak backed a start-up called Winnonie, which aims to help motorcycle taxi drivers, who earn very little and use motorcycles that consume a lot of fuel. Winnonie has helped many motorcycle taxi drivers switch to electric vehicles by offering rentals and setting up 120 automatic battery swapping stations around Bangkok and the surrounding areas.

This is just one of many examples of how the private sector has been involved with the green energy transition in Thailand. The work regulators have put into sustainable finance has been aimed at making more initiatives like this possible.

ESG risks in Thailand

The report notes various risks that affect ESG initiatives in different sectors. For example, in consumer and industrial goods, pollution and waste are big issues. As for the solution, compliance is difficult with a complex regulatory landscape across different regions.

As for the energy sector, the continued use of fossil fuels, pollution, and battery e-waste are all major problems. Here, too, regulatory compliance is not exactly easy. Meanwhile inequality in energy access and the presence of refineries and mines near communities is a health and safety risk.

Various sectors have different sets of risks related to continuing with the status quo and with shifting to a more sustainable system. Organizations will need to find a balance between ditching the old ways and ushering in the new ways.

The path forward

“We have entered an era where sustainability is becoming increasingly important to investors and consumers alike, conducting business with an ESG awareness is not just a ‘should’ but a ‘must’ to remain competitive in the global marketplace,” said Kasiti Ketsuriyonk, partner at Deloitte.

Going forward, regulation will remain critical to the development of the market, as it plays an important role in providing assurance to investors and clear guidelines and incentives for issuers.

“Sustainability reporting is gaining momentum across Asia,” adds Ketsuriyonk. “Stock exchanges and regulators are increasingly supporting publicly listed companies as well as small and medium sized enterprises to encourage reporting on ESG metrics and strategy. These efforts guide investment decisions and create transparency for all stakeholders.”