Sustainable Finance
Commitment
To efficiently and effectively manage ESG risks in lending and promote sustainable finance in order to support the achievement of the Sustainable Development Goals and the goals of the Paris Agreement
Materiality
Thailand is facing environmental, social, and governance (ESG) challenges, including climate change issues. This may impact the country’s development capability as well as peoples’ livelihoods in the long run. All sectors therefore need to work together to support the transition toward a sustainable future. Such transition necessitates transformation by businesses and this leads to investment opportunities needing financing support from commercial banks. The Bank recognizes its role to facilitate the transition and has always and will continue to underwrite loans as a responsible financier. In our credit approval process, we take ESG risks and impacts into consideration carefully and comprehensively. To achieve our sustainability goals, we also provide environmentally friendly loans and investment products that create value for the environment and society to support the Sustainable Development Goals and the achievement of Thailand’s Greenhouse Gas Emissions target.
Management Approach
Leveraging Sustainable Finance
The Bank has cooperated with various agencies to align its business operations with sustainable banking guidelines. In 2022, the Bank joined with other members of the Thai Bankers’ Association in an ESG Declaration which will provide a guide to the banking sector for tackling ESG issues, raising stakeholder awareness, and driving the Thai economy towards sustainability. The declaration also marks an important step for the banking sector in supporting Thailand’s commitment to meet the UN Sustainable Development Goals and the Paris Agreement GHG carbon emission reduction targets. The Bank continually raises employee awareness and understanding about ESG risks and opportunities through online seminars, the Bank’s online learning platform, and internal training courses on related issues, and relevant articles disseminated through internal communication channels. The Bank also encourages employees to attend trainings and seminars organized by external organizations.
Responsible Lending
The Bank has cooperated with various agencies to align its business operations with sustainable banking guidelines. In 2022, the Bank joined with other members of the Thai Bankers’ Association in an ESG Declaration which will provide a guide to the banking sector for tackling ESG issues, raising stakeholder awareness, and driving the Thai economy towards sustainability. The declaration also marks an important step for the banking sector in supporting Thailand’s commitment to meet the UN Sustainable Development Goals and the Paris Agreement GHG carbon emission reduction targets. The Bank continually raises employee awareness and understanding about ESG risks and opportunities through online seminars, the Bank’s online learning platform, and internal training courses on related issues, and relevant articles disseminated through internal communication channels. The Bank also encourages employees to attend trainings and seminars organized by external organizations.
Responsible Lending
The Bank is committed to adhering to the Sustainable Banking Guidelines for Responsible Lending established under the Memorandum of Understanding on cooperation between member banks of the Thai Bankers’ Association as supported by the Bank of Thailand. We have established a responsible lending policy which entails setting up an exclusion list of loan applicants or activities that the Bank does not provide credit support to, developing ESG risk management processes, and fostering effective ESG risk management in our lending process among executives and staff in relevant departments in order to prevent negative impacts on society, the environment and the Bank’s reputation.
To ensure efficiency and effectiveness in its responsible lending management, the Board of Directors is charged with the responsibility for formulating policy and strategies and monitoring responsible lending operations. The Corporate Governance Committee and the Risk Oversight Committee have the responsibility to provide necessary support to the Board of Directors while executives and staff in related departments are responsible for implementing policy and driving the Bank’s strategic operations. Furthermore, the Bank consults with external experts on key ESG risks and also provides opportunities for stakeholders to express their opinions on the potential ESG impacts of the Bank’s lending through its contact channels. Advice, comments and information received are used for reviewing and keeping the Bank’s policy, strategies and practices on responsible lending up-to-date while ensuring they adequately cover significant ESG risks. Framework for Credit Underwriting with ESG Risk Assessment We have established a business and personal loan approval framework that takes into account ESG issues. We have also developed ESG risk and impact assessment tools for credit officers to ensure that lending operations are in line with the Bank’s Responsible Lending Policy.
The definition of ESG factors that the Bank has used to support for business, project and personal loan approvals, in order to prevent risks and adverse impacts caused by the projects or activities that the Bank provided loans to:
- Environmental: deforestation, natural resources and biodiversity loss, soil, water, air, noise and marine pollution, climate change issues caused by greenhouse gas emission from business activities.
- Social: human rights violation, labour rights violation and unfair treatment, household indebtedness, community rights violation and impacts which includes indigenous and minority groups such as losing land rights, limiting access to natural resources and infrastructure, impacts to income, cultures and life, health and safety, involuntary resettlement.
- Governance: corruption, data privacy violation, money laundering, terrorism and proliferation of weapons of mass destruction financing, intellectual property rights violation, and unfair competition.
Framework for Credit Underwriting with ESG Risk
Assessment We have established a business and personal loan approval framework that takes into account ESG issues. We have also developed ESG risk and impact assessment tools for credit officers to ensure that lending operations are in line with the Bank’s Responsible Lending Policy.
- Business Loans and Project Loans
ESG issues are part of the consideration process for corporate and project finance. Our Know Your Customer (KYC) and Customer Due Diligence (CDD) processes cover issues such as Money Laundering, Terrorism Finance, and Proliferation of Weapons of Mass Destruction Financing. We conduct background checks on credit applicants to see if there is negative news related to ESG issues such as environmental destruction, human rights violations, corruption and violations of personal data rights. This serves to prevent legal risks and helps to assess the potential debtor’s ability to pay off debts and safeguard the reputation of the Bank. - Personal Loans
The Bank takes ESG issues into account when considering personal loans by requiring the responsible lending officer to comply with the Know Your Customer (KYC) and Customer Due Diligence (CDD) procedures. A number of risk factors covering ESG issues are carefully considered, such as money laundering, terrorism financing and proliferation of weapons of mass destruction. The objective of the loan requirement must not be against the law or cause serious impacts on the environment or society. To prevent customers from having excessive debt that could affect their quality of life, the Bank has set criteria for considering personal loans based on credit risk and affordability risk to ensure that customers have sufficient funds to cover their daily living expenses. Such criteria, which are set in accordance with guiding principles set forth by the Bank’s Compliance Unit, focus specifically on vulnerable groups such as the elderly, low-income people and first jobbers.
Sustainable Financial Products
Loans for Environmentally Friendly Activities and Sustainable Promotion Loans
The Bank is committed to developing and providing loans that support achievement of the Sustainable Development Goals of United Nations and the climate change goals of the Paris Agreement.
The Bank is committed to developing and providing loans that support achievement of the Sustainable Development Goals of United Nations and the climate change goals of the Paris Agreement.
|
Details |
Outstanding Loan Balance as of 2022 Unit: Million Baht |
|
Corporate Customer |
|
|
Loans for Renewable Energy Loans for investment in the production and transmission of electricity from renewable energy sources such as solar power plants, wind power plants and hydropower plants. |
88,063 |
|
Loans for Electric Mass Transit System Projects |
16,573 |
|
Loans for Energy Conservation Loans for activities that fall under the Energy Conservation Promotion Act, such as renovating a building for energy conservation and improving production lines to reduce energy consumption. |
83 |
|
Loans Linked to Sustainability Performance Loans for businesses to develop and adapt to achieve their sustainability goals. In 2022, the Bank support an ESG-linked revolving credit facility to Indorama Ventures Public Company Limited. |
1,130 |
|
SME Customer |
|
|
Loans for Environmentally Friendly Business such as Bualung Green Loans, Bualuang Green Solar Energy Loans, Loans for Waste Management and Disposal Business, and Loans for Business Reuse and Recycling of Materials. |
1,122 |
|
Transformation Loans Loans for business to expand their capability through investment in three areas: Digital Technology, Green, and Innovation. |
337 |
|
Retail Customer |
|
|
The Bank started offering the Bualuang Poonphol Green Loans in November 2022. The loan is aimed to promote housing improvements by using clean and renewable energy innovations or universal designs for the elderly or disabled. |
|
Sustainable Bonds
The Bank plays an important role in funding sustainability activities of leading government and private organizations in Thailand by being a consultant, giving an advice relating to procedures and screening process for properties that can be used for funding the bonds that promote sustainability, including underwriting ESG bonds. In 2022, the Bank had a total value of ESG bonds underwriting of Baht 119,145 million.
|
Product |
Value Unit: Million Baht |
Standards |
Assessed and approved by |
|
Green Bonds |
|||
|
Green Debentures of Toyota Leasing (Thailand) Company Limited, No. 1/2022 |
2,000 |
ICMA-GBP |
Sustainalytics |
|
Green Debentures of IRPC Public Company Limited, No. 1/2022
|
750 |
ICMA-GBP, ASEAN-GBS |
DNV Business Assurance Australia Pty Ltd. |
|
Green Debentures of Global Power Synergy Public Company Limited, No. 1/2022 |
12,000 |
ICMA-GBP, ASEAN-GBS |
DNV Business Assurance Australia Pty Ltd. |
|
Green Debentures of Xayaburi Power Company Limited (XPCL), No.1/2022 |
8,395 |
ICMA-GBP, ASEAN-GBS |
DNV Business Assurance Australia Pty. Ltd. |
|
Sustainability Bonds |
|||
|
The Kingdom of Thailand’s Sustainability Bonds in the fiscal year 2022 |
65,000 |
ASEAN-ESG, ICMA-ESG, LMA-GLP |
Sustainalytics |
|
Sustainability-linked Bonds |
|||
|
Sustainability-Linked Bonds of BTS Group Holdings Public Company Limited, No.1/2022 and No. 2/2022 |
31,000 |
ICMA-SLBP |
DNV Business Assurance Australia Pty. Ltd. |
Remark:
- ICMA-GBP = ICMA's Green Bond Principles
- ICMA-ESG = ICMA's Green and Social Bond Principles and Sustainability Bond Guidelines
- ASEAN-GBS = ASEAN Green Bond Standards
- ASEAN-ESG = ASEAN Green, Social and Sustainability Bond Standards
- LMA-GLP = LMA's Green Loan Principles
- ICMA-SLBP = ICMA's Sustainability-Linked Bond Principles
Mutual Fund for Sustainability
The Bank has collaborated with the group’s asset management company to select and offer investment products in the form of mutual funds with ESG factors taken into consideration. In 2022, the Bank offered funds for sustainability promotion with net assets under management (AUM) worth Baht 14,344.11 million.
Funds
Investing Strategy
Details
AUM
Unit: Million Baht
ESG Integration
Invest in companies that participate in social responsibility in four areas: environmental, social, good governance and anti-corruption.
475.02
Bualuang Thai Equity CG Fund (B-THAICG),
Bualuang Siriphol Corporate Governance Fund (BSIRICG) and
Bualuang Siriphol Corporate Governance RMF (BSIRIRMF)
ESG Integration
Invest in companies with good corporate governance and are certified as member of the Thai Private Sector Collective Action Against Corruption (CAC). Good corporate governance may be considered from CG Scoring
by the Thai Institute of Directors or other related agencies.
7,476.25
Bualuang Sustainable Investing Portfolio (B-SIP),
Bualuang Sustainable Investing Portfolio RMF (B-SIPRMF) and
Bualuang Sustainable Investing Portfolio
Impact 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.
5,745.70
BCAP Clean Innovation Fund (BCAP-CLEAN)
Thematic Investing
Invest in securities or financial instruments of businesses benefitting from innovations that sustain the environment such as clean energy,
electric vehicles, circular economy and waste management, and energy storage.
647.13
Project Finance Loans
All applications for project finance are carefully reviewed under the credit approval standards established by the Bank. We have set up a clear and transparent process, as well as a controlling and monitoring mechanism that is suitable for the level of risk. We have strict guidelines when it comes to projects that may have severe social and environmental impacts, such as mining, power plants, and infrastructure development. We apply the Equator Principles in the credit underwriting process. This requires Environmental and Social Due Diligence at the project level, while also taking 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 information related to environmental and social risk and impact management of the projects into consideration before credit approval.
Examples of environmental and social risks and impacts taken into consideration
|
Environmental aspects |
|
|
Social aspects |
|
The Bank has categorized projects according to the level of environmental and social risks and impacts 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.
|
Risk Category |
Number of Projects |
|
Category A |
8 |
|
Category B |
19 |
|
Category C |
34 |
|
Total |
61 |
|
Outcome |
Number of Projects |
|
Approved |
61 |
|
Declined |
0 |
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