Overview of ESG / Sustainable Investment Trends in ASEAN

Sustainable investment in ASEAN is expanding significantly as nations recognise its dual role in addressing environmental and social challenges while fostering economic growth. Singapore spearheads the region’s sustainable finance market with an impressive USD 21.7 billion in issuances as of 2022. Thailand follows with USD 4.3 billion, reflecting a strong commitment to advancing ESG initiatives. Other countries, including the Philippines and Indonesia, also contribute to this dynamic but uneven market, underscoring opportunities for further regional development. [1]

ASEAN countries utilise a broad spectrum of ESG financial instruments, including green bonds, sustainability-linked loans, and social bonds. Thailand stands out by issuing sovereign sustainability bonds, which constituted 63.7% of its sustainable finance market in 2022. These bonds have channelled resources into high-impact projects, positioning Thailand as a leader in the regional ESG ecosystem. Prominent sectors for ESG investment include renewable energy and sustainable transportation, where green bonds have been instrumental in driving transformative initiatives.

Regulatory advancements across ASEAN are accelerating the integration of ESG principles in financial markets. Thailand, in particular, has taken significant steps through initiatives such as the Securities and Exchange Commission’s (SEC) guidelines on climate risk management and the Thailand SDG Investor Map, which identifies investment opportunities aligned with sustainable development goals. These frameworks are vital in fostering market transparency, credibility, and the overall growth of the ESG ecosystem.

Corporate engagement in ESG practices across ASEAN is gathering pace, with increasing representation in global indices like the Dow Jones Sustainability Index. Thailand leads in this domain, as publicly listed companies adopt robust ESG frameworks to improve governance, mitigate risks, and align with international sustainability standards. Institutional players, such as Thailand’s Government Pension Fund (GPF), exemplify leadership by embedding ESG considerations into investment strategies, paving the way for long-term financial and sustainability goals.

Despite rapid advancements, the ASEAN sustainable finance market faces challenges, including global economic headwinds like inflation and rising interest rates. These factors led to a contraction in sustainable finance volumes in 2022, highlighting the need for resilience and adaptability. Nevertheless, the rise of social bonds in Thailand, addressing critical areas such as employment, microfinance, and equality, demonstrates the region’s innovative approach to tackling societal challenges through finance.

[1] Source: Estimated by Speeda based on Climate Bonds Initiative

ESG Investment Drives Innovation and Resilience in ASEAN Financial Markets

ESG investment is reshaping ASEAN’s financial markets by fostering innovation, improving risk management, and enhancing global competitiveness. Financial institutions and governments are increasingly embedding ESG principles into policies, driving diversification and directing capital towards sustainable projects. Instruments such as sustainability-linked loans and sector-specific green bonds illustrate the region’s tailored approach to ESG-driven financial product innovation.[2]

The adoption of ESG frameworks has bolstered financial stability by mitigating environmental, social, and governance risks. The rise of ESG-focused funds and indices has further enhanced market transparency, enabling investors to assess companies’ non-financial performance effectively.

Global investors are increasingly attracted to ASEAN’s commitment to sustainability. Initiatives such as Thailand’s collaboration with FTSE Russell to implement international ESG rating systems have positioned the region as a competitive player in the global investment landscape. This progress has incentivised corporate compliance with international sustainability standards, elevating ASEAN’s financial markets on the global stage.

[2] Source: Climate Bonds Initiative

Thailand a Major Pioneer in ASEAN Sustainable Finance with Diverse Investment Opportunities

Thailand has solidified its position as a leading force in ASEAN’s sustainable finance landscape, ranking as the second-largest market with USD 4.3 billion in issuances in 2022. The country’s market is distinguished by its broad range of instruments, including green bonds, sustainability bonds, and sustainability-linked loans. Sovereign sustainability bonds dominate, comprising 63.7% of Thailand’s sustainable finance market, underscoring the government’s dedication to funding impactful projects aligned with sustainable development goals. [3]

Thailand has also emerged as a pioneer in social bond issuance, setting a benchmark for the region. Since 2019, the country has issued a series of social bonds, with the Government Savings Bank’s THB 10 billion bond in 2022 standing as the largest in ASEAN. These bonds focus on critical social issues such as employment, microfinance, and equality. Corporate contributions, including green bonds by Global Power Synergy and sustainability-linked loans from Thai Union Group, further enrich Thailand’s sustainable finance offerings.

Key sectors like energy and transportation are at the forefront of Thailand’s sustainable investment landscape. Initiatives such as wind power projects and electric buses financed through green bonds exemplify the country’s commitment to decarbonisation and sustainable infrastructure. This sectoral diversity, combined with robust financial instruments, positions Thailand as a prime destination for both domestic and international ESG-driven investors.

[3] Source: Climate Bonds Initiative | The World Bank

Robust Regulatory Frameworks Propel Thailand’s ESG Integration

Thailand’s regulatory framework is central to its success in embedding ESG principles within its financial markets. The Securities and Exchange Commission (SEC) has taken a leading role, issuing guidelines for climate-related risk management and disclosures by asset managers. These guidelines, aligned with global standards such as the Task Force on Climate-related Financial Disclosures (TCFD), aim to enhance market transparency and combat greenwashing. Collaborative initiatives, such as the Thailand SDG Investor Map developed with the United Nations Development Programme (UNDP), further direct private investments toward sustainable and impactful opportunities.

The Stock Exchange of Thailand (SET) has reinforced ESG adoption through its partnership with FTSE Russell to implement a sustainability rating system for listed companies. Scheduled for full implementation by 2026, this initiative aligns Thai firms with international benchmarks, boosting their global competitiveness and appeal to foreign investors.

Another notable advancement is the introduction of the Thailand Taxonomy, a framework for evaluating the sustainability alignment of financial assets. Initially covering energy and transportation sectors, the taxonomy is set to expand, reflecting Thailand’s ambition to extend its ESG impact across diverse industries.

These regulatory developments provide clear, consistent guidelines for market participants and underscore Thailand’s commitment to fostering a transparent, credible, and globally competitive sustainable finance ecosystem.

[4] Source: Asia Asset Management | World Bank | CDP and the Securities and Exchange Commission (SEC)

Pioneering Projects Drive Sustainable Finance in Thailand

Thailand has demonstrated its commitment to sustainable finance through transformative projects that align with ESG objectives. Green bonds have played a pivotal role, funding significant renewable energy and transportation initiatives. In 2023, Gulf Energy Development PCL (GULF) issued green bonds to support wind power projects, while Electricity Generating PCL (EGCO) utilised similar instruments to expand renewable energy capacity and reduce greenhouse gas emissions. These projects highlight the critical role of green finance in advancing Thailand’s environmental goals. [5]

Innovative financing tools have also emerged, exemplified by WHA Corporation PCL’s issuance of sustainability-linked bonds. As the first logistics and industrial park operator in Thailand to undertake such an initiative, WHA Corporation has set a precedent for sustainable growth in industrial operations. Absolute PLC (EA) further underscored the potential of ESG financing by issuing Thailand’s largest corporate ESG bond in 2023, valued at THB 9,866 million. This bond financed electric vehicle (EV) public transport projects, including EV buses, reinforcing the transportation sector’s role in decarbonisation efforts.

These projects not only advance Thailand’s sustainability agenda but also solidify its reputation as a leader in ESG investments within ASEAN. By leveraging innovative financing mechanisms and prioritising impactful sectors like energy and transportation, Thailand continues to attract global attention and investment in its sustainable development initiatives.

[5] The Thai Bond Markets Association

Thai Commercial Banks as the Lead Industry Pushing ESG Integration and Innovation

Commercial banks in Thailand are at the forefront of integrating ESG principles into the country’s financial ecosystem, spearheading initiatives that align with sustainability goals. Kasikornbank (KBank) leads with its ambitious “Climate Strategy 2024,” targeting net-zero emissions across its operations and financed portfolio by 2030. KBank pioneered ASEAN’s sustainability bond market, raising USD 100 million to fund green and social projects. Its ESG risk assessment framework has facilitated the approval of over THB 389.2 billion in loans for medium and large enterprises, underscoring its role in responsible financing.

Bank of Ayudhya (Krungsri) has similarly championed ESG initiatives with its “Krungsri Race to Net Zero” program, focusing on waste reduction and energy efficiency. By committing to phase out coal-fired power plant exposure by 2030, Krungsri exemplifies responsible lending. Transition loans for SMEs, tailored to support their shift toward sustainable practices, form a cornerstone of the bank’s ESG strategy.

Bangkok Bank has made significant contributions through its “Bualuang Green Financing” program, allocating THB 10 billion to environmental projects. It played a key role in ESG bond issuances, underwriting 76% of the Thai capital market’s ESG bonds in 2023. Additionally, the bank promotes sustainable investment through mutual funds that adhere to ESG criteria.

Siam Commercial Bank (SCB) has focused on innovation, offering products like ESG-linked interest rate swaps and green business loans for SMEs. SCB has also underwritten green bonds for major infrastructure projects, such as mass transit systems, showcasing its commitment to advancing sustainable development in Thailand.

These initiatives illustrate the collective efforts of Thai commercial banks in embedding ESG principles into their operations and offerings. By championing sustainable financing, these institutions are driving Thailand’s transition to a greener, more responsible financial future.

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