Sustainable Finance
Commitment
To effectively manage ESG risks in lending and promote sustainable finance to support the achievement of the Sustainable Development Goals and the goals of the Paris Agreement
Materiality
The whole world is increasingly focusing on environmental, social and governance (ESG) and climate change challenges as they can adversely impact people’s livelihoods and properties, disrupt supply chains, reduce competitiveness and hamper sustainable development. As a financial intermediary, the Bank plays a significant role in driving sustainable development by supporting businesses and households to adapt and cope with challenges, as well as to help them to create positive impacts on the environment and society, including the transition to a low-carbon economy. We attach significant importance to underwriting loans with environmental and social responsibility. Specifically, we adhere to the Bank of Thailand's (BOT) regulations regarding responsible lending; incorporate ESG risk, impact assessment and mitigation considerations into the Bank's credit underwriting process; and provide financial support for environmentally-friendly activities while creating value for society to achieve the Bank's Sustainable Development Goals and Thailand’s Greenhouse Gas Emissions target.
Management Approach
The Bank has continuously cooperated with various sectors to strengthen sustainability within the Thai banking sector. In 2023, the Bank collaborated with the Thai Bankers’ Association in producing the Industry Handbook: Internalizing Environmental and Climate Change Aspects into Financial Institution Business for Banks, in alignment with the Bank of Thailand’s (BOT) policy statement on Internalizing Environmental and Climate Change Aspects into Financial Institution Business, which requires commercial banks to incorporate environment and climate change opportunities and risks into their governance structure, strategy formulation, risk management and information disclosure.
The Bank has collaborated with the Thailand Taxonomy Board, comprising agencies from both the public and private sectors, to develop the Thailand Taxonomy namely a classification system of economic activities deemed as environmentally-sustainable. Phase 1 of this work covers the energy and transportation sectors which create a high proportion of greenhouse gas emissions. To increase knowledge and understanding within the organization, the Bank organized a training session under the topic “Inside Thailand Taxonomy: Journey to Sustainability” with experts from the Climate Bond Initiative (CBI). We also encouraged our employees to participate in the Thai Bankers’ Association’s training course on Thailand Taxonomy Phase 1 via the Bank's online learning platform.
The Bank recognizes that increasing household debt has been an enduring challenge for Thailand. The Bank cooperates and supports measures to sustainably solve the household debt problem in line with the BOT’s responsible lending guidelines. In 2023, the BOT launched a new regulation to manage household debt with an aim to ensure appropriate debt management throughout the debt cycle, covering development and advertisement of lending products, granting of loans, troubled debt management and debt relief, as well as a strict requirement to provide accurate and full information on loan conditions and risks that customers should be aware of. Although this regulation will come into effect in 2024, the Bank has already begun necessary preparations to adjust its relevant credit management processes accordingly.
The Bank continues to increase employee awareness and understanding of ESG risks and opportunities through online seminars, its online learning platform, internal training courses and internally published articles, while also sending employees to attend external training and seminars. In 2023, we organized seminars on various topics such as “Energy Transition: the Business Survival in the Era of Global Chaos”, “Carbon Credits and Renewable Energy Trading Market, Opportunities for Business in an Era of Global Chaos”, and “Carbon Footprint, Carbon Credits & the Carbon Credit Market and the Credit Work Role Now and in the Future”, so that our staff can apply the knowledge received to provide useful advice to customers. With our longstanding commitment to operating business in line with sustainable finance guidelines, in 2023 the Bank received three global awards related to sustainable finance, namely Best Bank for Sustainable Finance in Thailand Award, and Outstanding Leadership Award in ESG-related Loans for Asia-Pacific from Global Finance magazine’s Sustainable Finance Awards 2023, and Best Sustainable Bank in Thailand in 2023 from FinanceAsia magazine.
The Bank has established a responsible lending policy which entails setting up an Exclusion List of loan applicants or activities that the Bank does not provide credit for. We also developed and incorporated ESG risk mitigation dimension in our credit assessment and underwriting process, along with communicating relevant policies and guidelines and providing training to relevant business and working units to emphasize the importance of considering ESG risks in the lending process to ensure efficient and effective responsible lending management. The Bank’s Board of Directors is responsible for formulating policies and strategies and monitoring responsible lending operations. The Corporate Governance Committee and the Risk Oversight Committee are responsible for providing necessary support to the Board of Directors. Executives and staff in departments concerned are responsible for implementing the related credit policies and driving the Bank’s ESG strategy and strategic direction on responsible lending. Furthermore, the Bank allows stakeholders to express their opinions on ESG impacts that may occur from the Bank’s lending through the Bank's contact channels.
The Bank considers ESG issues when considering loans to prevent negative impacts that may arise from projects or activities which the Bank provides credit to, while also creating ESG risk and impact assessment tools for credit officers. The Bank uses the following definitions of ESG factors when considering business loans, project loans and personal loans:
The Bank has collaborated with the Thailand Taxonomy Board, comprising agencies from both the public and private sectors, to develop the Thailand Taxonomy namely a classification system of economic activities deemed as environmentally-sustainable. Phase 1 of this work covers the energy and transportation sectors which create a high proportion of greenhouse gas emissions. To increase knowledge and understanding within the organization, the Bank organized a training session under the topic “Inside Thailand Taxonomy: Journey to Sustainability” with experts from the Climate Bond Initiative (CBI). We also encouraged our employees to participate in the Thai Bankers’ Association’s training course on Thailand Taxonomy Phase 1 via the Bank's online learning platform.
The Bank recognizes that increasing household debt has been an enduring challenge for Thailand. The Bank cooperates and supports measures to sustainably solve the household debt problem in line with the BOT’s responsible lending guidelines. In 2023, the BOT launched a new regulation to manage household debt with an aim to ensure appropriate debt management throughout the debt cycle, covering development and advertisement of lending products, granting of loans, troubled debt management and debt relief, as well as a strict requirement to provide accurate and full information on loan conditions and risks that customers should be aware of. Although this regulation will come into effect in 2024, the Bank has already begun necessary preparations to adjust its relevant credit management processes accordingly.
The Bank continues to increase employee awareness and understanding of ESG risks and opportunities through online seminars, its online learning platform, internal training courses and internally published articles, while also sending employees to attend external training and seminars. In 2023, we organized seminars on various topics such as “Energy Transition: the Business Survival in the Era of Global Chaos”, “Carbon Credits and Renewable Energy Trading Market, Opportunities for Business in an Era of Global Chaos”, and “Carbon Footprint, Carbon Credits & the Carbon Credit Market and the Credit Work Role Now and in the Future”, so that our staff can apply the knowledge received to provide useful advice to customers. With our longstanding commitment to operating business in line with sustainable finance guidelines, in 2023 the Bank received three global awards related to sustainable finance, namely Best Bank for Sustainable Finance in Thailand Award, and Outstanding Leadership Award in ESG-related Loans for Asia-Pacific from Global Finance magazine’s Sustainable Finance Awards 2023, and Best Sustainable Bank in Thailand in 2023 from FinanceAsia magazine.
Sustainable Lending
The Bank has established a responsible lending policy which entails setting up an Exclusion List of loan applicants or activities that the Bank does not provide credit for. We also developed and incorporated ESG risk mitigation dimension in our credit assessment and underwriting process, along with communicating relevant policies and guidelines and providing training to relevant business and working units to emphasize the importance of considering ESG risks in the lending process to ensure efficient and effective responsible lending management. The Bank’s Board of Directors is responsible for formulating policies and strategies and monitoring responsible lending operations. The Corporate Governance Committee and the Risk Oversight Committee are responsible for providing necessary support to the Board of Directors. Executives and staff in departments concerned are responsible for implementing the related credit policies and driving the Bank’s ESG strategy and strategic direction on responsible lending. Furthermore, the Bank allows stakeholders to express their opinions on ESG impacts that may occur from the Bank’s lending through the Bank's contact channels.
Integrating ESG Issues into the Credit Approval Framework
The Bank considers ESG issues when considering loans to prevent negative impacts that may arise from projects or activities which the Bank provides credit to, while also creating ESG risk and impact assessment tools for credit officers. The Bank uses the following definitions of ESG factors when considering business loans, project loans and personal loans:
- Environmental such as deforestation, damage to natural resources and biodiversity loss, the creation of soil, water, air, noise and sea pollution, as well as climate change that is deemed to have an impact on business activities.
- Social such as human rights violations, labor rights violations, unfair labor practices, household debt problems, community rights violations, and adverse impacts on the community which includes indigenous peoples and minorities, such as the loss of arable land, involuntary migration, restricted access to natural resources and public utilities, and negative impact on income, culture, lifestyle, health and safety.
- Governance such as corruption, violation of personal data rights, money laundering, financing terrorism and the proliferation of weapons of mass destruction, infringement of intellectual property, and unfair trade competition.
Business Loans and Project Loans
The Bank integrates ESG considerations into business and project loan approval processes to prevent legal risk, credit risk and reputation risk. The processes start from Know Your Customer (KYC) and Customer Due Diligence (CDD) and cover issues such as money laundering, financing terrorism and the proliferation of weapons of mass destruction, as well as conducting background checks on credit applicants to see if there is negative news related to ESG issues about them such as environmental destruction, human rights violations and corruption. Applications for business and project loans are carefully considered under the credit underwriting standards established by the Bank. There is also a controlling and monitoring mechanism that is suitable for the level of risk.
We have strict guidelines when it comes to project finances or activities that may have severe adverse social and environmental impacts, such as mining, power plants, and infrastructure development. The Equator Principles have been applied in the credit underwriting process. In considering and approving credit applications, the Bank requires comprehensive environmental and social due diligence of projects, while also considering information about greenhouse gas emissions Scope 1 and 2, certified domestic or international environmental and social management standards such as Environmental Management Systems ISO14001, and Occupational Health and Safety Management Systems ISO45001 or OHSAS18001, as well as how the projects manage environmental and social risks and impacts.
Examples of environmental and social risks and impacts taken into consideration.
|
Factors |
Risks and Impacts |
|
Environmental aspects |
|
|
Social aspects |
|
Guidelines for Project Finance
- Classification of project loan applications according to the level of environmental and social risks and impacts is divided into three categories:
- Category A refers to projects that may have high environmental and social impacts.
- Category B refers to projects that may have moderate environmental and social impacts.
- Category C refers to projects that may have low or no environmental and social impacts.
- For project loan applications under Category A and Category B, comprehensive assessment of their environmental and social risks and impacts must be conducted, following the Bank’s environmental and social due diligence as follows:
- The Customer must put in place a process to identify and manage environmental and social risks and impacts and submit a report on an Environmental and Social Impact Assessment (ESIA) for the project that is of an acceptable standard to the Bank. The customer’s process for identifying and managing environmental and social risks and impacts shall consist of:
- Environmental and social risk and impact assessment of projects that are being considered for a loan.
- Guidelines or measures to mitigate environmental and social risks and impacts.
- A consultation process with stakeholders.
- A mechanism for receiving complaints.
- The Bank’s officers must study the customer’s environmental and social impact assessment report and other related documents to identify significant environmental and social risks and impacts, as well as measures to prevent and mitigate these risks and impacts. The result of such a study will be used as information for considering credit underwriting and determining terms and conditions of the loan as appropriate.
- The Customer must put in place a process to identify and manage environmental and social risks and impacts and submit a report on an Environmental and Social Impact Assessment (ESIA) for the project that is of an acceptable standard to the Bank. The customer’s process for identifying and managing environmental and social risks and impacts shall consist of:
The Bank has credit risk management measures to ensure that the loans it offers are effectively managed for their environmental and social impacts. Project loan applications that may cause environmental and social impacts must have appropriate and adequate measures to prevent and mitigate impacts. Loan applications under Category A must have an independent environmental and social expert to review and assess the project risk and impact, while also reviewing the environmental and social risk management system of the project. In addition, the Bank requires a higher credit approval authority level based on the higher level of risk. After a project loan has been approved, the Bank’s responsible credit officer will regularly monitor the implementation of preventive and mitigating environmental and social impact measures when conducting regular credit reviews throughout the term of the project finance.
Project Finance Results in 2023
|
Risk Category |
Number of Projects |
|
Category A |
0 |
|
Category B |
19 |
|
Category C |
4 |
|
Total |
23 |
|
Outcome |
Number of Projects |
|
Approved |
23 |
|
Declined |
0 |
Personal Loans
The Bank has taken ESG issues into account when considering personal loans. In the process of the Know Your Customer (KYC) and Customer Due Diligence (CDD) procedures, ESG factors such as money laundering, terrorism finance, and the proliferation of weapons of mass destruction, are carefully considered. The purpose of the loan must not violate the law nor have a severe impact on the environment and society. In addition, we place importance on considering the customers’ affordability risk, and compliance with the responsible lending guidelines to prevent customers from having excessive debt that could affect their quality of life, particularly the vulnerable groups such as the elderly, low-income earners and first jobbers. After the loan has been approved, the Bank monitors customers' spending and debt repayment behavior for use in reviewing credit limits to be consistent with their ability to repay debt. We have a system in place to notify customers when the repayment period is overdue (within the scope stipulated in the debt collection law). We also monitor economic and social situations, natural disasters and epidemics that may affect the customer’s ability to repay debt in order to find ways to provide appropriate mitigation measures to help affected customers.
Sustainable Financial Products
The Bank offers financial products that promote sustainability to business and individual customers to support environmentally-friendly activities, improve the quality of life of people in society, and promote the achievement of Sustainable Development Goals and the Paris Agreement goals.
Loans that are Environmentally-friendly and Promote Sustainability
Corporate Customers
In 2023, the Bank provided sustainable loans for corporate customers and project finance with total credit of more than Baht 41,938 million baht. These were loans for renewable energy projects, electric vehicle businesses, and sustainability-linked loans.
SME Customers
In 2023, the Bank provided sustainable loans for small and medium-sized enterprises with total credit of more than Baht 5,902 million. Loans comprised Bualuang Green Loans and Bualuang Green Solar Energy Loans, loans for waste and disposal management businesses, loans for businesses that reuse and recycle materials, and transformation loans for enterprises in transition under the Bank of Thailand's Emergency Decree on Rehabilitation Loans.
Individual Customers
In 2023, the Bank provided sustainable loans for individual customers by offering home loan products that help preserve the environment, including Bualuang Poonphol Green Loan and Bualuang Green Home Loan. The total credit extended was more than Baht 70 million.
ESG Bonds for Sustainability
The Bank plays an important role in financing activities that promote sustainability in public and private sectors by underwriting sustainability bonds that comply with international standards, while also working as a green structuring advisor. In 2023, the Thai capital market issued ESG bonds totaling Baht 37,366 million, of which Baht 28,366 million, 76 percent of the total ESG bonds issued, was underwritten by the Bank.
Mutual Funds for Sustainability
The Bank collaborates with the Group’s asset management companies, to select and offer investment products in the form of mutual funds with investment policies related to ESG or promoting sustainability to support businesses with social and environmental responsibility. In 2023, the Bank launched a new fund, Bualuang B-TOP-THAIESG Mutual Fund. At the end of 2023, the Bank offered nine funds for sustainability promotion with net assets under management of Baht 14,732.15 million.
Loans that are Environmentally-friendly and Promote Sustainability
Corporate Customers
In 2023, the Bank provided sustainable loans for corporate customers and project finance with total credit of more than Baht 41,938 million baht. These were loans for renewable energy projects, electric vehicle businesses, and sustainability-linked loans.
- Loans for Renewable Energy
The Bank promotes renewable energy businesses to create energy security and mitigate climate change by supporting loans for investment in the production and transmission of electricity from renewable energy sources both domestically and internationally. Projects include solar power plants, wind power plants, and hydropower plants. - Sustainability-linked Loans
The Bank encourages businesses to achieve sustainable development goals, particularly in environmental and social dimensions, by supporting sustainability-linked loans. In 2023, the Bank’s overseas branches provided loans to corporates with total credit of more than Baht 7,548 million to facilitate business improvement or implement projects such as increasing energy efficiency, reducing greenhouse gas emissions, managing landfill waste, and increasing employee training hours. In addition, Bangkok Bank (China) Company Limited, a subsidiary of the Bank, joined other commercial banks to support sustainability-linked loans with total credit of Baht 2,480 million to facilitate the customers’ in achieving their sustainability goals. - Loans for EV Business
The Bank supports the transition of automotive industry from traditional vehicles powered by internal combustion engines (ICE) to electric vehicles (EV) in order to reduce greenhouse gas emissions from the use of fossil fuels. We also support government policies to promote Thailand to become a regional EV production base by providing loans to EV manufacturers and importers, as well as loans to support the EV ecosystem, such as EV charging stations.
SME Customers
In 2023, the Bank provided sustainable loans for small and medium-sized enterprises with total credit of more than Baht 5,902 million. Loans comprised Bualuang Green Loans and Bualuang Green Solar Energy Loans, loans for waste and disposal management businesses, loans for businesses that reuse and recycle materials, and transformation loans for enterprises in transition under the Bank of Thailand's Emergency Decree on Rehabilitation Loans.
- Bualuang Green Loan and Bualuang Green Solar Energy Loan
The Bank supports SME to conduct business in an environmentally-friendly manner as well as supporting the government’s Bio-Circular-Green (BCG) economy policy by providing the special interest rate Bualuang Green Loan for the following investments:
- Investment in renewable energy. This includes, for instance, investment related to products that support renewable energy and help reduce greenhouse gas, such as solar, wind and hydropower; investment to reduce energy consumption within a business; and manufacturing of EV automobile parts and electric motorcycles.
- Investment in waste management in terms of reuse and recycling of materials.
- Investment in the production or use of biodegradable materials to replace chemicals that create environmental problems.
The loan scheme also supports investments for improving or developing machinery, equipment, tools and appliances as well as various systems or processes in operations to reduce greenhouse gas emissions and preserve the environment as follows:
- Investment in energy transition and efficient use of energy or resources.
- Investment in the use of digital technology, automation or robotics, and innovation in environmentally-friendly operations.
Since 2022, the Bank has extended credit support with special interest rates to entrepreneurs investing in installing solar rooftop power in their workplaces under the Bualuang Green Solar Energy Loan service to help lower energy costs and reduce greenhouse gas emissions. In 2023, the Bank partnered with PTT Oil and Retail Business to provide Bualuang Green Solar Energy loans with special conditions to PTT Station operators to support their transition to clean energy, with a maximum loan of 100 percent of the total costs of solar power system. - Loans for Environmentally-friendly Businesses
The Bank supports loans for waste and disposal management businesses, and loans for businesses that reuse and recycle materials, such as wastewater management, disposal of waste by biological methods, and processing of waste or disposal materials. In 2023, the Bank provided loan support for this group of businesses with total credit of more than Baht 74 million. - Transformation Loans
The Bank provides transformation loans under the BOT's Emergency Decree on Rehabilitation Loans to help entrepreneurs affected by the Covid-19 pandemic to invest in enhancing their capabilities to compete and grow sustainably. The loans cover three forms of transformation: Digital Technology, Green, and Innovation.
Individual Customers
In 2023, the Bank provided sustainable loans for individual customers by offering home loan products that help preserve the environment, including Bualuang Poonphol Green Loan and Bualuang Green Home Loan. The total credit extended was more than Baht 70 million.
- Bualuang Poonphol Green Loan and Bualuang Green Home Loan
The Bank recognizes the importance of people having homes that meet energy-saving and environmental conservation requirements. Since 2022, we have provided loans with special conditions under Bualuang Poonphol Green Loan to promote housing improvements by using renewable energy technology or innovative technology that increases energy efficiency, such as the installation of rooftop solar panels, using wind energy for cooling, installing EV chargers, and upgrading houses to make them suitable for elderly and disabled people. In 2023, the Bank offered loans with special conditions under Bualuang Green Home Loans for purchasing houses with solar rooftop panels in the property projects of those developers who are the Bank’s customers. In addition, the Bank partnered with the Provincial Electricity Authority (PEA), CRC Thai Watsadu, a subsidiary of Central Retail, and Nexter Digital and Solutions (QChang), to organize special campaigns for customers who apply for the Bualuang Poonphol Green Loan. Loan appraisal is free of charge while also providing special discounts for installing solar panels.
ESG Bonds for Sustainability
The Bank plays an important role in financing activities that promote sustainability in public and private sectors by underwriting sustainability bonds that comply with international standards, while also working as a green structuring advisor. In 2023, the Thai capital market issued ESG bonds totaling Baht 37,366 million, of which Baht 28,366 million, 76 percent of the total ESG bonds issued, was underwritten by the Bank.
Mutual Funds for Sustainability
The Bank collaborates with the Group’s asset management companies, to select and offer investment products in the form of mutual funds with investment policies related to ESG or promoting sustainability to support businesses with social and environmental responsibility. In 2023, the Bank launched a new fund, Bualuang B-TOP-THAIESG Mutual Fund. At the end of 2023, the Bank offered nine funds for sustainability promotion with net assets under management of Baht 14,732.15 million.
|
Funds |
Investing Strategy |
Details |
AUM Unit: Million Baht |
|
ESG Integration |
Invest in companies that support society in four areas: environmental, social, good governance and anti-corruption. The fund donates 40 percent of income from fund management fees to a foundation or a social development organization. |
421.38 |
|
|
Bualuang Thai Equity CG Fund (B-THAICG), |
ESG Integration |
Invest in companies with good corporate governance by considering the CG Scoring of the Thai Institute of Directors or other relevant agencies. The Bualuang Thai Equity CG Fund (B-THAICG) also considers companies that are certified as members of Thailand’s Private Sector Collective Action Against Corruption (CAC). |
6,664.26 |
|
Bualuang Sustainable Investing Portfolio (B-SIP), Bualuang Sustainable Investing Portfolio RMF (B-SIPRMF) and |
Thematic Investing |
Invest in companies across the globe that are sustainably managed with concern for social and environmental impact in every step of the production of goods and services. |
6,260.99 |
|
Thematic Investing |
Invest in securities or financial instruments of businesses engaged in sustainable innovations such as clean energy, electric vehicles, circular economy, waste management, and energy storage. |
567.96 |
|
|
ESG Integration |
Invest in equities of listed companies on the Stock Exchange of Thailand (SET) and the Market for Alternative Investment (mai) that are recognized for their outstanding credentials in environment or sustainability. |
817.56 |
Engagement with Customers on ESG Issues
The Bank builds engagement with business and individual customers on opportunities and challenges related to ESG issues by setting up booths showcasing sustainable finance products, organizing seminars, and providing knowledge through the Bank's online communication channels, covering the website, Facebook or YouTube. Furthermore, the Bank cooperates with affiliated companies, alliances and customers to organize knowledge sharing activities related to ESG issues on a regular basis. Some of the key activities in 2023 were:
- Organized the “SME Transformation: Business Transformation, Growth and Sustainability” seminar on the 20th anniversary of the Bualuang SME Club to enhance the potential of SME to cope with challenges and grow sustainably. Bank executives and partner organizations shared experiences and provided knowledge on how Thai SME can adapt to the digital age and prepare for future transformations, such as new environmental and labor measures of trading partner countries.
- Organized online seminars for SME customers to provide knowledge about environmentally-friendly business management. We invited representatives from business partners and experts from external organizations to share knowledge and experiences as well as introducing Bualuang Green Loan and Bualuang Green Solar Energy Loan to participants. In 2023, six online seminars were organized, with more than 1,900 participants.
- Organized activities to exchange knowledge about fundraising by issuing ESG-related debentures to various business groups, such as retail, real estate, petrochemical and chemical products.
- Communicated knowledge on ESG or sustainability to customers using Bangkok Bank Mobile Banking in the form of Snap on Mobile media from August - December 2023.
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