As
the new generation has shifted to a boom in consumption of alternative products
in which the carbon dioxide emissions of production processes are reduced in
the long term, such as biodegradable plastics and meat substitutes from
plants/laboratories, etc., this business model has begun to attract a lot of investor
interest with the potential to raise hundreds of millions of dollars. In
addition to having future profitability, this type of business is classified as
a sustainable business and has a tendency to grow at a high rate in the long
term.
In the sustainable
development of Thai
businesses, the role
of the government is
to set business practices and educate
the operators
continuously. However, the adoption of sustainable business management is
mostly seen in large and listed companies. The Securities and Exchange
Commission of Thailand (SEC) has set out the sustainability assessment standards
and encourages the disclosure of business
sustainability information (in the three main areas of environmental, social
and governance, known as ESG) in the companies’ annual
reports.
In addition, to promote investment in sustainability, the SEC has issued a
measure to exempt fees for filing the applications for three types of bond offered
for sale from May 2019 until May 2021, namely green bonds, social development
bonds and sustainability bonds, which will become a factor
in stimulating sustainable business operations through fundraising.
Lately, businesses in Thailand have
started issuing green bonds in line with the sustainable business models that
meet the needs of investors shifting
to a greater focus on environmental impact. Consideration
of the yields on 3-year conventional bonds and 3-year green bonds with
similar offering
times
reveals that compared to
government bonds, in
2019
the yield spread of green bonds and conventional bonds with
an A rating and
3-year maturity was
0.74% and 0.76% respectively, while in 2020 the yield spread of 3-year AAA(THA)-rated green bonds and conventional
bonds is 1.67% and 1.78% respectively. It is
worth noting that the yield spread between government bonds and 3-year green bonds
offered to investors by companies is lower than the yield
spread of between government bonds and conventional
bonds with the same rating, resulting in lower financial costs for
companies offering
green bonds than conventional bonds. In practice, however,
the yield that a company will offer to investors may be
determined by many
other related factors, including the operating performance, future investment plans, investor
confidence, market conditions of each period, etc.
In addition, businesses have also
adopted a clearer ESG-based sustainable management approach that will
impact their corporate
image, as
evidenced by the continued growth in the number of listed companies in
compliance with criteria of the SETTHSI index, or the SET Thailand Sustainability Investment index,
since 2018. These
listed companies operate businesses according to ESG principles and
meet the liquidity criteria set by the Stock Exchange of Thailand including
the number of
securities and market
capitalization, with businesses in energy, banking and
finance, and telecommunication sectors, accounting for more than 50% of SETTHSI
index-compliant listed companies. The growth in the number of listed
companies meeting
SETTHSI index
criteria reflects the
role that sustainable management factors play
in the investment sentiment of
corporate funding, and gives a
signal to consumers about the stance of these companies on
social and environmental responsibilities, which will lead to a change in
business models, products and services in line with the funds’ objectives.
As
Thailand ranked 78th in the world in the 2020 Environmental
Performance Index (EPI), Thailand needs to improve environmental quality in
many aspects that are still below average such as air quality, waste
management, etc. Taking into account the factors supporting business adaptation,
together with the current environmental situation, the impact of manufacturing
on Thailand’s environment comes in the form of carbon dioxide emissions and
dust problems, which are still mainly concentrated in agricultural, energy and
transportation sectors. KResearch perceives that businesses engaging in
agricultural products, food, energy, logistics, chemicals and plastics are the major
players that have to step up their adjustment for long-term sustainability. If
achieved, it will not only bring operational advantage in the long run, but will
also have positive effects on the overall sustainability of the country, and
should improve Thailand’s future EPI assessment.
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