Large local banks are moving forward with plans to introduce transition products in the third quarter of this year, in line with sustainable finance requirements set down by the Bank of Thailand.
According to Chartsiri Sophonpanich, president of Bangkok Bank (BBL), the bank is progressing in transition finance as part of the regulator's sustainability requirements and the global trend of monitoring carbon emissions.
BBL expects to submit transition products to the central bank in the third quarter this year, he said.
Transition finance refers to financial products and services designed to support businesses and industries in transitioning to more sustainable practices, particularly in the context of environmental, social and governance factors.
The practice aims to facilitate the shift from traditional, often environmentally harmful, practices to more sustainable and responsible alternatives.
Transition finance typically involves providing funding or investment to support initiatives that promote sustainability, such as projects focused on renewable energy, energy efficiency improvements, waste reduction, pollution control, and other environmentally friendly practices. This can include loans, bonds, equity investments, or other financial instruments tailored to meet the specific needs of companies undergoing transition.
The bank currently offers a range of green financial products, including green loans, green bonds and sustainability-focused index bonds, catering to diverse customer segments such as large corporations, small and medium-sized enterprises (SMEs) and individual clients.
Renewable energy and conversion of biofuel projects are the bank's key focus.
BBL, the country's largest lender by total assets, launched the Bualuang Transformation Loan scheme at the beginning of this year to support SMEs in transitioning to sustainable business practices.
The loan scheme, worth 20 billion baht, features a fixed interest rate of 5% per year, with a maturity period of five years.
"The bank expects the loan programme to not only bolster SMEs, but also enhance their competitiveness and sustain growth in the long term," Mr Chartsiri said.
He said while large corporations have clearly outlined goals aimed at striking a balance between sustainability and profitability, it is more challenging for smaller companies to make the transition and become informed about sustainability.
Incentives can help smaller firms transition to sustainable practices, said Mr Chartsiri.
BBL also provides green property loans to retail customers, such as for solar panel installation.
Ronadol Numnonda, deputy governor of the Bank of Thailand, said the central bank requires banks to submit transition products by the third quarter to assist local businesses in transitioning to greener activities.
For the next step, he said the regulator requires domestic systemically important banks to submit transition plans for at least one priority sector by 2025.
The Bank of Ayudhya (Krungsri), the country's fifth-largest player, is also gearing up to submit transition products to the central bank in the third quarter.
Krungsri was the first Thai bank to launch sustainable deposits, a term-deposit product for commercial and corporate clients to support social and sustainable projects.
The bank's suite of green financial services encompasses sustainability-linked loans, green and blue loans, as well as green and blue debentures.
Kasikornbank (KBank) is also focusing on sustainable finance, aiming to offer green financial services worth 200 billion baht by 2030.
KBank wants to grow its green loans to 100 billion baht by the end of this year.