Amid escalating climate change, financial institutions are playing a key role in driving Thailand industries towards a greener economy. ‘Green finance’ has emerged as a significant trend globally, and also in Thailand offering a pathway for sustainable business operations and addressing the challenges of climate change. It is increasingly favored by investors worldwide who are opting for environmentally friendly products and services.
Thailand's industries are moving towards a green economy, with the financial sector playing a crucial role in this transition. (Photo: Aleksandr Zykov)
According to the United Nations Environment Programme (UNEP), Green financing is to increase level of financial flows (from banking, micro-credit, insurance and investment) from the public, private and not-for-profit sectors to sustainable development priorities. A key part of this is to better manage environmental and social risks, take up opportunities that bring both a decent rate of return and environmental benefit and deliver greater accountability. Currently, financial tools that are widely used for green finance includes green bonds, green equity funds, and green loans.
In Thailand, as per the Ministry of Commerce, data from the period 2007 to 2017 reveals that the proportion of registered companies in the green industry was as low as 0.4% of all registered corporate entities (excluding electricity generation businesses). In 2017, there were 12,322 companies, marking an increase from 9,632 in 2007.
However, the figures for 'green loans' in the country show a consistent expansion, accounting for 2.5% of the total loans in 2020. Within this category, loans to alternative energy power plants amounted to over 280,000 million baht. By 2021, Thailand had more than 844 alternative energy power plants, more than double the number from 2013 when there were only 357.
Prominent banks in Thailand are actively promoting green finance initiatives. For example, in April 2023, Siam Commercial Bank (SCB) entered into an agreement to provide a 2 billion baht green loan to Energy Absolute Public Company Limited (EA), a significant player in the energy sector. This loan is designated for investment in the acquisition of public electric buses (E-Bus).
EA and SCB jointly signed a green loan for the purpose of investment in electric vehicle public transportation in Bangkok and surrounding provinces. (Photo: SCB)
Kasikorn Bank (Kbank) offers the Green House Loan to encourage the purchase of environmentally friendly, energy-saving homes. The Government Savings Bank provides the GSB Go Green Loan, which supports solar rooftops, electric vehicles, and energy-efficient electronic devices. Many other leading banks also offer similar loans.
And for Thailand, the promotion of green finance mechanisms through the issuance of sustainability bonds has allowed the country to raise over 1.25 trillion US dollars. This reflects that financial institutions, businesses, and investors in Thailand are beginning to align themselves with a new business model that places greater emphasis on the environment and leads to a balance between 'investment returns' and 'environmental benefits.'