Thailand

A. ESG Reporting

1. Are there legal or regulatory requirements for companies to make ESG disclosures in your jurisdiction?

Yes.

2. What are the key legislative and regulatory sources for ESG disclosure requirements and to whom do they apply?

ESG-related disclosures are mandatorily required only for listed companies and sustainable and responsible investing funds (SRI Funds).

The Security Exchange Commission (SEC) sets out the following guidelines:

(a) reporting guidelines, including the disclosure of ESG aspects, (SEC Reporting Guide) to be reported annually (in Form 56-1 (One Report)) by Thai listed companies; and

(b) disclosure guidelines for asset managers of SRI Funds as a measure to prevent greenwashing. The disclosure requirements apply to mutual funds which invest in sustainable and responsible projects in accordance with international standards, such as the United Nations Global Compact, the United Nations Sustainable Development Goals, the TCFD, and the International Capital Market Association’s Green Bond Principles.

ESG-related disclosures may expand to financial institutions as a result of a policy introduced by the Bank of Thailand (BOT) on business operations of financial institutions in consideration of environmental perspectives and climate change (BOT Policy), to raise the standard of governance, strategy, risk management, and disclosures to be in line with international standards, such as the UN’s Principles for Responsible Banking, Principles for Responsible Investment and the Equator Principles.

At the end of 2023, the BOT issued an industry handbook to assist financial institutions in implementing their environmental and climate change risk policies. The BOT will begin monitoring and assessing the adoption of the policy by financial institutions in 2024, with this process continuing thereafter. In the initial phase, financial institutions will conduct self-assessments in accordance with the policy and the industry handbook.^[1]

3. Are the requirements mandatory or do they apply on a comply-or-explain basis?

Pursuant to the SEC Reporting Guide, environmental aspects are on a “comply-or-explain” basis. If a listed company does not disclose their GHG emissions, the company must clarify their reasoning for not making this disclosure. Further, in the event a listed company may be in material breach of environmental laws, it must clarify the relevant facts, reasons, impacts and measures taken to remedy the breach.

The disclosure guidelines for SRI Funds contain mandatory disclosures in relation to ESG.

4. Which aspects of ESG do the requirements focus upon?

Under the SEC Reporting Guide, environmental, social and governance aspects are covered for listed companies.

The disclosure guidelines for SRI Funds focus on the disclosures of investment objectives, goals that the fund aims to achieve, and types and characteristics of securities that the fund focuses on investing in, which prioritize globally recognized sustainability and ESG aspects such as climate change, environmental protection, low carbon footprint or reducing inequality.

5. Are the disclosure requirements based on international standards? If so, which one(s)?

According to the SEC Reporting Guide, listed companies are encouraged (but not required) to align with international standards. For social aspects, companies are encouraged to implement international standards to their internal policies, such as the UN Guiding Principles on Business and Human Rights, or the OECD Guidelines for Multinational Enterprises. Listed companies may also disclose their social and environmental aspects based on the guidelines provided by the GRI.

The disclosure guidelines for SRI Funds are based on IOSCO’s Recommendations for Sustainability-Related Practices, Policies, Procedures and Disclosures in Asset Management (Final Report).

Pursuant to the BOT Policy, financial institutions should disclose their sustainability activities in accordance with acceptable or international standards, such as the TCFD or ISSB Standards.

6. How do the disclosure requirements approach materiality (e.g. single or double materiality)?

The disclosure requirements under the SEC Reporting Guide adhere to a double materiality approach, while the disclosure guidelines for SRI Funds focuses on impact materiality.

7. Are there requirements for the disclosure of GHG emissions? If so, please specify the scope (e.g. Scope 1, Scope 2 and/or Scope 3), to whom they apply and whether there are requirements on the measurement methodology.

Yes. The SEC Reporting Guide requires disclosure of direct and indirect GHG emissions with a measurement standard that is internationally recognized (e.g., ISO 14064-1:2018). At present, the disclosure requirements only apply to Scope 1 and Scope 2 GHG emissions.

8. Are there requirements to obtain independent assurance of any ESG disclosures? If so, what is the scope of such requirements?

There are no mandatory assurance requirements.

9. For companies not subject to mandatory or comply-or-explain ESG reporting, are voluntary ESG disclosures customary?

In recent years, there has been an increasing trend in ESG disclosures, where many private companies acknowledge the significance of being transparent and accountable with respect to their environmental, social, and governance impacts and standards.

Listed companies are influenced by the Stock Exchange of Thailand’s mandatory reporting requirements to adopt ESG policies. As there are no penalties for not having such policies, each company's progress depends on institutional and stakeholder pressure.

10. Has your jurisdiction issued or adopted a taxonomy on sustainable activities? Is it mandatory and what is its scope of application?

Thailand Taxonomy, Phase 1 was officially announced on 30 June 2023. The Thailand Taxonomy has been prepared to be compatible with the ASEAN and EU taxonomies. It will take a targeted approach in its first phase and focus on voluntary disclosures. It will be applicable to the energy and transportation sectors as pilot projects.

Thailand Taxonomy, Phase 2 is currently under development and will be applicable on a voluntary basis to the manufacturing, agriculture, real estate, construction and waste management sectors. A public hearing will be conducted in the fourth quarter of 2024.

11. Are there plans to adopt or incorporate the ISSB’s IFRS S1 and/or S2 standards? If so, please indicate the extent of alignment, to what extent the standards will be mandatory, to whom they will apply and the timeline.

No, we are not aware of any plans from Thai regulators to officially adopt the ISSB Standards at the policy or regulatory level.

However, the SEC has issued a guide on best practices for managing and disclosing climate-relate risk management for asset managers, which aligns with the TCFD recommendations. Additionally, the SEC has supported the Chartered Financial Analyst (CFA) Institute in issuing the Guidance for Integrating ESG Information into Equity Analysis and Research Report. This suggests that the SEC may adopt the ISSB Standards in the near future.

12. Other upcoming developments / direction of travel

Regulators, investors and other stakeholders in Thailand are placing an increasing focus on the adoption of ESG principles across all sectors both as legally required measures and as voluntary guidelines for action. Ongoing and upcoming developments include:

(a) Equator Principles

We believe it is likely that more financial institutions in Thailand may elect to adopt the Equator Principles to enable better assessments and evaluations of environmental and social risks associated with project finance transactions.

(b) Human Rights Due Diligence

Companies in Thailand are being encouraged to examine the extent to which their human rights commitments apply to their global supply chain. The Guiding Principles on Business and Human Rights developed by the United Nations have been used as the main reference guide.