Thailand Taxonomy, an alternative for accessing financial services

Thailand Taxonomy, an alternative for accessing financial services

        Environmental problems are an important issue that is increasingly affecting the economy. However, nowadays, each sector has a different understanding of environmentally friendly activities. In particular, inappropriate funding may lead to exaggerated claims that environmental actions have already been taken (“greenwashing”) or the insufficient allocation of funds for the adaptation of business sectors, especially during the transition period (transitional activities).

        Therefore, a classification standard for green economic activities (taxonomy) is required to ensure consistent understanding and connection points for reference in policy formulation and strategic planning between the government, business, and financial sectors. This includes the standard and consistent development of products and services of the business sector.

        Therefore, the Bank of Thailand (BOT) and the Securities and Exchange Commission (SEC), as representatives of the Working Group on Sustainability in the Financial Sector, are in the process of developing Thailand Taxonomy, a classification standard for green economic activities under a working group comprising representatives from government agencies and the business and financial sectors. The aim is to promote the classification for green economic activities in the assessment of eco-friendly business operations. It is also one of the reference options for accessing financial services and tools that will support a business’s transition towards environmental sustainability.

            Thailand Taxonomy uses principles based on environmental science. The activities are divided into three levels (Traffic Light System) which are Green, Amber, and Red. Thailand Taxonomy Phase 1 involves the classification of economic activities in the energy and transportation sectors, as they are major sectors with high greenhouse gas emission. The classification of economic activities in other important sectors will be performed in the next phase.

           The drafting of the Thailand Taxonomy Phase 1 is in the process of hearing opinions and suggestions, including the potential impact of implementation from 26 December 2022 to 26 January 2023, and is expected to be completed by the end of the first quarter of 2023.