As more major corporates move towards green investment, the issuance of environmental, social and corporate governance (ESG) bonds is expected to reach 100 billion baht this year, roughly 20% growth from 2020, says Ariya Tiranaprakit, executive vice-president of the Thai Bond Market Association (TBMA).
An ESG bond is a type of debt financing instrument designed to raise funds for ESG projects.
According to data from the Securities and Exchange Commission (SEC), the total ESG bond issuance totalled 86.4 billion baht in 2020, of which 50 billion was for sustainability bonds, 29.6 billion for green bonds and 6.8 billion for social bonds.
The surge was spurred by the participation by many large private companies such as BTS Group Holdings (BTS), Energy Absolute (EA), PTT Plc, Global Power Energy (GPSC), Ratch Group (RATCH), and state enterprises like the Bank for Agriculture and Agricultural Cooperatives while the Ministry of Finance remained the largest contributor of ESG bonds in 2020.
In the first four months this year, total issuance of ESG bonds stood at 61 billion baht, including the sustainability bonds worth 50 billion baht issued by the government to finance the Orange Line electric train project and the Covid-19 stimulus package.
The new issuers this year include Toyota Leasing (Thailand), which has issued 2 billion baht in green bonds, Bangkok Expressway and Metro (BEM), which has issued 6 billion worth of social bonds, and the National Housing Authority with 3 billion worth of sustainability bonds.
In addition to these three companies, some Thai companies have launched ESG bond offerings in foreign markets such as Kasikornbank and Bank of Ayudhya, according to data from the TBMA.
"We may see our country's first sustainability-linked bond this year. There is a good sign that green bond issuing will continue to flourish in the private sector," Ms Ariya said.
She said ESG fundraising is a global trend along with growing concerns about social and environmental protection.
To promote the issuance of ESG bonds, the TBMA has reduced the registration fee for ESG bonds in the secondary market while the SEC has extended the fee waiver for licence application and filing for ESG bonds until the end of May 2022.
Regulators just published issuance and offering criteria for sustainability-linked bonds, which should also benefit from the fee waiver, said Ms Ariya.
She said the fee waiver is to incentivise issuers and serve as compensation for the third-party review which the bond issuers are required to carry out in accordance with the global standard.
Sakda Pongcharoenyong, president of Tris Rating and the only local reviewing agency of ESG bonds, said the ESG bond market in Thailand remains small but has high potential for growth compared to the European and US markets in which most large bond funds have policies to prioritise ESG bonds.
"The government has a key role to drive the growth of both the supply and demand for ESG bonds among investors because Asian countries have less environmental concerns than Western countries," he said.
Mr Sakda said Tris is talking with a few potential issuers who are planning to issue a green bond this year.
He said issuing green bonds carries some additional costs namely verification and certification costs to make sure that the projects create positive ESG impacts.
The incremental costs for the bond issuance will not rise too high as the public will know that the companies are supporting environmental and social sustainability.
"ESG bonds have become a top agenda among global top investors. The product also helps the company diversify their bond investor base to another segment," Mr Sakda said.