The Bank of Thailand (BOT) and the Securities and Exchange Commission (SEC) have published a draft of Thailand’s sustainable finance taxonomy.
Phase one of the taxonomy, a classification system of economic activities deemed environmentally sustainable, focuses on the energy and transportation sectors. These were selected for two reasons: their significant volume of greenhouse-gas (GHG) emissions and the availability of technological solutions to decarbonise these sectors.
During the consultation period, which ran from 26 December 2022 to 26 January 2023, BOT and SEC received input from a range of stakeholders, including government, the private sector, academics and international organisations.
Most agreed that phase one should prioritise economic activities that contribute significantly to greenhouse gases. Some proposed that a ‘red list’ should be created and the scope of the taxonomy expanded to cover other economic activities, such as manufacturing and agriculture, in the next phase. BOT and SEC said that all comments received had been incorporated within the published taxonomy.
BOT and SEC are also holding a joint seminar on 5 July, to present the taxonomy and its use as a reference tool for classifying green activities in Thailand.
The Thailand taxonomy board, which has the role of developing the taxonomy, includes representatives from BOT and SEC, as well as from 11 other agencies, such as the Ministry of Natural Resource and Environment, the Thai Bankers’ Association and the Thailand Greenhouse Gas Management Organisation.
Sustainable finance initiatives
The taxonomy is an extension of the work carried out by the Working Group on Sustainable Finance of Thailand, whose members include the Fiscal Policy Office of the Ministry of Finance, BOT, SEC, the Office of Insurance Commission and the Stock Exchange of Thailand.
The group was set up to develop a sustainable finance plan to support the Thai economy in achieving the Sustainable Development Goals and carbon-emission-reduction targets in line with the Paris Agreement goals. Its work resulted in the creation of five key sustainable finance initiatives. The first was to create the taxonomy.
The other four initiatives include improving the data environment, implementing effective incentives, creating demand-led products and services and building human capital. The taxonomy is also intended to establish a common investment language for the Thai sustainable finance market and help to accelerate its development further.
The taxonomy is being developed to closely align with the ASEAN taxonomy, first published in 2021, with a second version in March this year. The main focus of the Thailand version is to define activities that reduce GHGs to achieve the country’s climate change mitigation objectives, in line with its climate policy and international obligations.
It is focused on covering six environmental objectives: climate change mitigation, climate change adaptation, sustainable use and protection of marine and water resources, protection and restoration of biodiversity and ecosystems, pollution prevention and control, and resource resilience and transition to a circular economy. Future versions of the taxonomy are expected to include screening criteria.
This story first appeared in our sister publication, ESG Clarity.