The Bank of Thailand (BOT) published a directional paper on the transition to environmental sustainability within the financial landscape in the country. BOT also informed that the Thai Bankers' Association (TBA) announced its environmental, social, and governance (ESG) Declaration to set the banking industry's clear common direction in addressing the ESG agenda with proactive execution.
Directional Paper on transitioning to environmental sustainability
BOT had, in February 2022, issued a consultation paper on repositioning the financial sector of Thailand for a sustainable digital economy. In continuation to that development, BOT has now issued a directional paper on transitioning toward environmental sustainability. The directional plan in the paper considers both the timing and speed of such a transition, also striking a balance between transitioning and the potential impact. Below are the key building blocks of this plan:
- Adjust the business operations of financial institutions to encourage the offering of products and services that meet needs of the business sector by issuing policy guidelines in the third quarter of 2022 for financial institutions’ business operations that take into account environmental factors
- Establish a taxonomy that defines and classifies economic activities based on their environmental impact, in collaboration with both public and private sectors as well as financial institutions; the initial stage would entail classifying activities with high greenhouse gas emission rates to be completed by January 2023
- Develop platforms for environment-related data and setting data disclosure standards for financial institutions, in collaboration with the government agencies, private sector, and financial institutions to systematically develop such platforms beginning in the fourth quarter of 2022
- Support the creation of appropriate incentives to encourage financial institutions, the business sector, and consumers to recognize the urgency of making environment-related transitions, and to alleviate any cost burden that they may incur
- Enhance the knowledge management and skills of financial sector personnel through capacity building, by jointly developing courses with both domestic and international experts with the aim to create awareness and understanding, and improve their capability in assessing environment-related opportunities and risks as well as in providing advisory support to businesses
ESG Declaration of Bankers' Association
In pursuing its shared vision of sustainable development goals with the introduction of ESG Declaration, the TBA outlined action priorities in addressing key issues of emerging ESG risks and opportunities in relation to climate change, diversity and human rights, financial inclusion, and reduced inequalities, while fully supporting smooth transition of Thailand toward achieving the United Nations (UN) Sustainable Development Goals and the commitments to the Paris Agreement. Under the ESG Declaration, all TBA members agreed on six shared action priorities:
- Ensure good corporate governance and effective oversight at the board level, with clear accountability and responsibility at the management level regarding the ESG agenda
- Integrate ESG into business strategies and define frameworks for sustainable finance to support Thailand in making harmonious transition toward net zero society, as committed
- Incorporate ESG into risk management processes
- Utilize digital technology to increase financial accessibility and help customers achieve net zero emissions and sustainable growth
- Communicate and collaborate with all stakeholders in raising public awareness on ESG issues
- Develop monitoring and reporting systems in line with the regulatory frameworks and global sustainability disclosure standards
- Press Release on Paper on Environmental Sustainability
- Paper on Environmental Sustainability (PDF in Thai)
- Press Release on ESG Declaration
Keywords: Asia Pacific, Thailand, Banking, ESG, Climate Change Risk, Sustainable Finance, Governance, Disclosures, Thai Bankers Association, BOT
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
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