Political importance
Thailand has incorporated ESG principles into its political ambitions by embracing the UN Sustainable Development Goals in its National Economic and Social Development Plan. Evolving legislation in Thailand is driven by mounting environmental concerns and the country’s steadfast commitment to achieving carbon neutrality by 2050 and net-zero emissions by 2065.
While Thailand has not yet enacted a formal regulatory framework mandating compulsory ESG implementation by corporate sectors, key regulatory bodies such as the Bank of Thailand (BOT) and the Securities and Exchange Commission (SEC) have introduced several voluntary measures to encourage companies to regulate ESG. These measures include the Thailand Sustainability Investment list, sustainable bonds, the SRI Fund, the Thailand Voluntary Emission Reduction Program, the Energy Attribute Certificates, the Thailand ESG Fund, and environmental labels.
Additionally, the SEC Reporting Guide encourages Thai companies to align their internal policies with international standards and assess how their human rights commitments extend to their global supply chains.
Corporate attention
ESG is becoming a fundamental aspect of business operations in Thailand, with more and more companies acknowledging the importance of transparency and accountability regarding their environmental, social, and governance impacts. While sustainability reporting is currently limited to listed companies and SRI Funds on a comply-or-explain basis, private companies are demonstrating increasing commitment to ESG principles by voluntarily disclosing their compliance with ESG criteria and revaluating their business practices. Additionally, Thailand’s private sector actively engages in initiatives to reduce its carbon footprint, including developing new projects to lower greenhouse gas emissions and purchasing carbon credits to offset their emissions.
Trends
Climate change is driving regulations in Thailand, with many stalled draft legislations regaining momentum as the country embraces ESG principles to propel Thailand towards a sustainable future. To achieve its ambitious carbon emission targets, the government is investing heavily in renewable and clean energy, bolstering its sustainability framework to direct new investments to green projects. Social issues are also gaining traction in Thailand with the SEC elevating the focus on social factors by encouraging companies to adopt business practices that positively impact society. Similarly, financial institutions in Thailand are joining efforts to promote responsible lending practices, advocating banks to incorporate ESG risks into their lending strategies and help raise the standard of governance, strategy, risk management, and disclosures to be in line with international standards.
Threats and opportunities
The ESG landscape in Thailand involves a combination of voluntary market guidelines and mandatory legal requirements, in which environmental, social and governance principles are often found integrated in policies issued by the government or regulatory authorities. This presents a significant challenge for companies in identifying and managing ESG risks to ensure compliance. While current requirements for companies to adopt key ESG policies are limited, monitoring voluntary initiatives is crucial as indicators of growing scrutiny from regulatory bodies and stakeholders, emphasizing responsible business practices. Meeting societal expectations expressed in market guidelines is essential for companies to maintain competitive advantages and comply with emerging regulations.
Voluntary ESG guidelines in Thailand allow companies to signal resolute commitment to sustainability by exceeding regulatory obligations. This helps attracting private investors and customers while also enabling companies to leverage public initiatives offering fiscal and non-fiscal benefits, such as the SRI Fund, the Thailand Sustainability Investment list, and the Thailand ESG Fund. Additionally, adopting stricter voluntary ESG market guidelines in Thailand addresses growing commercial pressure from stakeholders in regions with mature ESG laws, aligning with international standards. As mandatory regulations in Thailand are currently limited, companies that prioritize sustainability in Thailand significantly enhance long-term business viability and proactively comply with evolving ESG regulations.
The Thailand Taxonomy, launched by the Bank of Thailand, marks a major development in ESG regulations in Thailand. Aligned with the ASEAN and EU taxonomy, business activities are now categorized based on sustainability objectives using a screening referred to as the ‘traffic light system.’ Green indicates near-zero or zero carbon emissions, while red indicates activities that are non-compatible with a net-zero path. Under its pilot phase 1, the new standardized classification is currently implemented on a voluntary basis to promote and support the transition to a sustainable economy in Thailand but will likely shape future regulations.
Additionally, the Thai parliament is deliberating draft amendments to the National Environment Quality Act (NEQA), which serves as the cornerstone of environmental legislation in Thailand. The NEQA establishes quality standards for environmental matters and takes precedence over other legislation. If approved, the existing NEQA will be strengthened with several major revisions, with the expectation of more effective pollution prevention and rectification of environmental damage.
The SEC Reporting Guide mandates that companies listed in Thailand annually disclose their ESG performance across their entire business value chain by submitting the Form 56-1 One Report to the SEC on a comply-or-explain basis. Listed companies are also encouraged to align with international standards. However, while regulations are rapidly evolving, private companies are not presently obligated to implement ESG practices, leaving individual progress dependent on institutional and stakeholder pressure.