Banks are continuing to incorporate environmental, social and governance (ESG) factors into their business operations in a push for a sustainable transformation of the economy.
Sathian Leowarin, senior executive vice-president and chief strategy officer at Siam Commercial Bank (SCB), said that in addition to digital transformation, organisations have taken the ESG concept into account when operating businesses to ensure sustainable growth.
He said climate change has had a dramatic impact on the business sector and people's lifestyles, while social inequality remained a global challenge that all parties had to tackle together.
As the environment and society are interconnected with the economy, an imbalance in one of them will inevitably have an impact on the others, said Mr Sathian.
He said the pandemic showed organisations that embrace ESG factors, meaning they assess the possible social and environmental risks and follow good governance, can better handle difficult business situations.
Mr Sathian said this year SCB is continuing to pursue sustainability through three main strategies: sustainable finance, creating a social impact, and ensuring a better environmental future.
For sustainable finance, the bank incorporates ESG factors into three activities: responsible loan extensions, green financial product offerings, and the promotion of sustainable investment.
In January this year, SCB became a member of the Equator Principles Association and adopted the Equator Principles.
The Equator Principles is a globally recognised risk management framework adopted by financial institutions for determining, assessing and managing environmental and social risks in projects, and is primarily intended to provide a minimum standard for due diligence and monitoring to support responsible risk-based decision-making.
He said this year SCB stands ready to provide credit worth more than 20 billion baht to tackle climate change, reduce social disparity and promote a better quality of life.
The bank wants to continue to offer ESG-related products this year to all customer segments, said Mr Sathian. For major corporate customers, the bank offers sustainable loans, green bonds, a sustainability-linked bond, and an ESG advisory service for developing big projects.
The SCB SME Go Green loan campaign is for small and medium-sized enterprises (SMEs). The lending focuses on energy efficiency, pollution management, green transport and supporting female entrepreneurs.
Products for retail borrowers include loans for clean energy vehicles and green homes.
The bank also has ESG investment funds available for customers. Last year SCB offered 79 ESG funds worth 39.5 billion baht, representing 7.3% of its net assets under management in 2021.
ESG IS A MUST
Krit Jitjang, president of Kasikornbank (KBank), said the adoption of ESG will help the bank enjoy quality growth.
He said embracing ESG principles is a must, not an option, which will ensure banks, their customers and partners all grow together.
Mr Krit said if a bank takes ESG factors into account when evaluating loans, it will reduce risks businesses could pose to the environment and society. Lending to environmentally friendly companies presents a good business opportunity as these firms are on a growth trend, he said.
Last year the value of KBank's credit for project finance was 12.9 billion baht, while credit for medium-sized enterprises that passed its ESG risk evaluation was roughly 407 billion.
The bank sold green finance products worth 65.2 billion baht last year.
This year KBank introduced the Green Zero loan campaign under its "Go Green Together" scheme to offer a wide array of financial products to environmentally conscious corporate and individual customers, said Mr Krit.
The bank allocated 100-200 billion baht towards sustainable financing and investment from now until 2030.
This year KBank's sustainable financing and investment target is 25 billion baht, of which 3 billion is earmarked for its Green Zero loan campaign.
BLUE BONDS
Recently TMBThanachart Bank Plc (ttb) announced plans to offer "blue bonds" in the third quarter of this year to increase access to financing for sustainable marine and ocean-based projects as well as "blue economy" projects in Thailand. The bonds carry a maturity of five years.
International Finance Corporation (IFC), a member of the World Bank Group, will subscribe up to US$50 million for these blue bonds, helping ttb increase its financing of eligible blue assets.
IFC is expected to help ttb with the structuring of the bond and assist in developing a blue finance strategy and framework, according to a joint statement by the bank and IFC.
IFC is also supporting ttb's broader sustainability agenda, including a green bond subscription of up to $100 million dedicated to financing customers' purchases of electric vehicles (EV).
"Ttb's strategy and business operations always aim for a sustainable banking framework, and one of our strategic focuses is climate finance. IFC's support will help ttb scale our green finance portfolio for EVs and build capacity in identifying eligible blue assets," said ttb chief executive Piti Tantakasem.
"This will enable us to focus on critical areas such as marine plastic recycling, water conservation and wastewater treatment projects, which are key to the country's economy."
IFC's managing director Makhtar Diop said the corporation has been at the forefront of creating green and blue financing markets in Asia, including Thailand.
With this investment, IFC expects to establish new asset classes in the Thai debt market and leverage more investments in the blue and green economies to support Thailand's sustainable development and address the country's key climate challenges.
According to global investment company abrdn, the importance of sustainable and green investments is going to increase as Thai investors become more aware of how they want to invest. Thailand could become a sustainable investment leader, said the firm.
Visiting from Singapore recently, René Buehlmann, abrdn's chief executive for Asia-Pacific, said Thailand is an important growth market for the company.
He outlined the trends that will have the biggest impact on Thailand and offer the greatest opportunities for Thai investors. The key trend is the rise of ESG-focused investments.
"As Thai investors become more socially conscious, they will want to invest in companies with strong ESG standards. Our recent conversations with the Stock Exchange of Thailand confirm that many Thai companies are ready to embrace sustainability and ESG reporting, which is encouraging for global investors," Mr Buehlmann said.
He said responsible investing can go hand-in-hand with profitable investing. Abrdn's advice is to invest where there is the best chance for dual performance, with both financial and environmental returns, because this puts the investor in a position to be part of the greater good.
Holding investments with strong ESG credentials adds meaningful diversity to portfolios, Mr Buehlmann said, which can help investors to navigate downturns. The fields of clean energy and digital transformation both offer exciting new opportunities, he said.
Looking ahead, Mr Buehlmann acknowledged considerable uncertainties in terms of global inflation, geopolitical risks in Eastern Europe, and the pandemic impacting both micro- and macro-economic trends.
Despite these challenges, he believes Asia will continue to grow thanks to its changing demographics and rising consumer demand, as investors will continue to want Asian exposure.
The company recently launched two ESG-integrated innovative strategies for Thai investors. The abrdn Global Innovation Equity Fund invests in innovative businesses transcending geographies and sectors that create a positive impact on society whilst maintaining a sustainability focus for a greener future. The abrdn Listed Private Capital Fund offers retail investors access to diversified opportunities in private assets, including private equity, private debt, infrastructure and REITs, with ESG factors embedded into the investment process.
