How an investment decision today will play a vital role in our planet’s tomorrow
Thailand’s Securities Exchange Commission (SEC) aims to boost its role in promoting green, social, and sustainability bonds for greater public benefits, according to SEC Secretary-General Ruenvadee Suwanmongkol.
The launch of the Sustainable Development Goals (SDGs) by the United Nations in 2016 served to bring the world together on a mission to end poverty, fight inequality and tackle climate change through various international frameworks, cooperation and financing. According to OECD Global Outlook on Financing for Sustainable Development 2019 report, the UN has urged OECD countries to take urgent and bold action in calling on all actors, both public and private, to coordinate better and mobilize more financial resources so as to fulfil the promise of Agenda 2030 at home and abroad. Having a “sustainable development footprint” in terms of finance must be enhanced by raising both awareness and participation.
Todate, Thailand’s fund raising through these sustainability bonds has been continuously maintained with six current bonds issued by banks, power generation companies and the transportation sector totalling Bt33.16 billion ($1.04 billion) equivalent bond size during 2018-2019. BTS Group’s low carbon transportation project for the construction of the new Mass Railway Transit Authority of Thailand’s pink and yellow lines was the largest green bond with Bt13 billion (up from Bt5 billion) offered to institutional investors and high net worth investors in May 2019. In light of the detailed and complicated disclosure required for this green bond, the higher cost of certification and verification by a third party to qualify for green bond status, SEC is considering facilitating purchase and relaxing some regulations in cooperation with other government units for tax incentives while also supporting a waiver of its approval and filing fee until May 31. The latest to come on the market is the Thai government’s first green bond issuance by the Bank for Agriculture and Agricultural Cooperatives (BAAC) which is offered to domestic institutional investors with a limit not exceeding Bt20 billion in size. BAAC will use the proceeds to grant low interest-rate loans to community enterprises, farmers, and SMEs in agricultural sector for forestry conservation.
In addition, social enterprise bonds are in the pipeline for capacity building and seminars to up public awareness in various provinces, working with other government units to push for fund mobilization to promote social enterprise business and achieving ultimate goals of environmental prevention, social problem solving, and financial freedom. The Community Enterprise Act B.E. 2548 has been amended and supplemented with more updates on profit distribution given to the entity, instead of merely seeking government fund subsidy.
In parallel, SEC is studying and exchanging ideas with other foreign stock exchanges including those in Luxembourg, Hong Kong and CLMV countries, to update debt and equity securities, regulatory mapping, and explore business opportunities in various areas, develop the Thai capital market to international standards, and comply with International Organization of Securities Commissions.
SEC’s Secretary-General Ruenvadee also notes that Thai investors should have equitable treatment and protection, easy accessibility to multiple investment/saving choices with adequate knowledge, and that the retail investors should be encouraged to participate in these green, social, and sustainability bonds that bring about investment diversification, benefit our society, and to achieve the SDGs.
Conceptually, financing sustainable development in poor countries and helping developing countries is an investment in the well-being of all nations in order to achieve the SDGs. The three focus areas for reform are (i) better measurement (an initiative to assess the quantity and the quality of finance for SDGs); (ii) better regulation (through tax regimes and investment frameworks, sustainability reporting); and (iii) better coordination (connecting supply and demand for financing for sustainable development in countries).
Green bonds are intended to encourage sustainability and to support climate-related or other types of special environmental projects such as those that aim to improve energy efficiency, pollution prevention, sustainable agriculture, fisheries and forestry, the protection of aquatic and terrestrial ecosystems, clean transportation, clean water and sustainable water management. Financing the cultivation of environmentally friendly technologies and the mitigation of climate change are also included. Social bonds, meanwhile, aim to finance projects with a focus on social issues which will benefit under-served populations including women and low-income communities with limited access to basic infrastructure and finance. Sustainability bonds are a mix of green bonds and social bonds. All are fixed-income debt instruments.
Globally, the green bond market has rapidly grown to about US$500 billion in value thanks to a growing number of investors investing their money more responsibly and beginning to embed Environmental, Social and Governance (ESG) standards into their investment decisions. However, the global green bond market is currently less than one per cent of the global bond market. Fifteen countries are the major issuers of green bonds, and of these, the USA, China, and France accounted for 47 per cent of the global issuance in 2018. Canada, Germany, Mexico, Netherlands, Spain and Sweden take the remaining top positions. But while countries in Asia and the Pacific have been leading in green bond technologies, Asia still lags behind in green bond issuance.