Draft Thailand Taxonomy toward environmental sustainability

          At present, many countries around the world, including Thailand, are facing the risks arising from climate change, which is an important, serious problem that all countries must urgently solve.

          In Thailand’s case, the Bank of Thailand (BOT) and the Securities and Exchange Commission (SEC) act as the Thailand Taxonomy Working Group responsible for establishing the classification standard for green economic activities. The objective is to create a common understanding between the government, business, and financial sectors, which will help each sector in the assessment of the status of environmental operations and preparation of the appropriate adaptation plans during the transition, in accordance with the context of the climate change of Thailand, in a timely manner.

Classification of green economic activities takes into account two important dimensions:

          Environmental objectives. Thailand Taxonomy consists of six objectives, as follows:

(1)  Climate change mitigation;

(2)  Climate change adaptation;

(3)  Sustainable use and protection of marine and water resources;

(4)  Resource resilience and transition to a circular economy;

(5)  Pollution prevention and control;

(6)  Protection and restoration of biodiversity.

          The preparation of the Thailand Taxonomy Phase 1 starts from climate change mitigation.

            Economic sector. Thailand Taxonomy Phase 1 covers the energy and transportation sectors, as they are the sectors that play an important role in climate change and have high greenhouse gas emissions. The activities of the energy and transport sectors are divided into 22 activities. Assessment criteria for the extent of climate change mitigation as a result of emission reduction have been established.

            In the next phase, Thailand Taxonomy will consider the manufacturing and agricultural sectors, under the objectives of climate change mitigation and climate change adaptation.

            Thailand Taxonomy uses principles based on environmental science. The activities are divided into three levels (Traffic-Light System):

• Green indicates the activities that mitigate climate change with current net greenhouse gas emissions close to or equal to zero based on indicators projected by international models, predicting that such activities will be able to reduce and achieve net zero greenhouse gas emissions by 2050 to prevent the global temperature rise from exceeding 1.5°C;
• Amber indicates the activities that do not have current net greenhouse gas emissions close to or equal to zero and are in the process of improvement in order to reduce greenhouse gas emissions;
• Red indicates the activities that cannot be considered as net GHG friendly and do not meet the criteria and indicators for Green or Amber activities.
  With the use of the Thailand Taxonomy, businesses can plan for business adaptations that will increase their access to financial services, especially various sustainable financial instruments. This can be achieved through reference to the international definition of eco-friendly economic activities, investment attrition, including foreign investment, that will support future adaptation, and preparation in the event that Taxonomy-aligned disclosure is required.

            Financial sector. Financial institutions can refer to the Thailand Taxonomy in designing financial products and services to meet the needs of Thai business adaptations, as well as more systematic assessment of portfolios credit risks.

            In addition, the Thailand Taxonomy can be used by the government in formulating policies or establishing incentives in order to prepare the economy for climate change risks, as well as ensuring sustainable adaptation and growth.