The Importance of “Green Finance”: When Finance Becomes a Tool to Drive a Low-Carbon Economy

In an era where climate change has become an urgent global issue, businesses and the financial sector worldwide are under increasing pressure to assess environmental risks and integrate ESG (Environmental, Social, Governance) principles into their operational strategies. As a result, Green Finance has emerged as a key instrument enabling businesses to transition toward a low-carbon economy. In Thailand, by 2025, this trend has become more evident — driven by government policies, growing awareness among the private sector, and increasing demand from ESG investors who seek to fund projects with positive environmental impacts. For businesses that are interested or looking for new opportunities, Green Finance is no longer just an option, but a vital pathway to strengthening long-term organizational sustainability.

Government policies and the Bank of Thailand’s framework on “Sustainable Finance Initiatives for Thailand.”

To build an infrastructure that supports green finance, the Bank of Thailand (BOT), in collaboration with relevant agencies, has developed the “Sustainable Finance Initiatives for Thailand.” This initiative aims to facilitate the Thai financial system’s transition toward a low-carbon economy through various measures, such as establishing guidelines for financial institutions to assess climate-related risks and promoting green financial products (Green Products).

In addition, in May 2025, Thailand launched Thailand Taxonomy Phase II which expands the scope of activities classified as “green/sustainable” to include the agriculture, industrial, construction, real estate, and waste management sectors. This expansion is part of the country’s broader effort to ensure that 95% of national greenhouse gas emissions fall within the assessment framework of the Thai Taxonomy.

These approaches help establish “rules” and “criteria” that enable the financial market to allocate capital toward carbon-reduction projects in a more strategic and transparent manner.

Key instruments such as Green Bonds, Sustainability-Linked Loans, and Carbon Credit Financing are closely related to the allocation of capital for environmental purposes. 

In Thailand today, financial instruments that play a key role in mobilizing and allocating capital for environmental purposes involve funding mechanisms that encompass all sectors of the economy, including but not limited to: 

• Green Bond / Sustainability BondDebt instruments that specify the use of proceeds to support green projects, such as renewable energy, water management systems, and green buildings, among others. The ESG bond market in Thailand has continued to grow steadily, with annual key data provided by ThaiBMA, which reports the issuance of Green, Social, and Sustainability Bonds.
• Sustainability-Linked Loan (SLL): A type of loan in which interest rates or financial benefits are tied to the borrower’s achievement of ESG targets, such as meeting specific greenhouse gas reduction indicators.
• Carbon Credit Financing / Carbon Offset: Particularly for green projects that still generate residual emissions, offsets are applied by purchasing carbon credits from verified projects, such as forest restoration or clean energy initiatives.
  

These financial instrumentsenable entrepreneurs pursuing green projects to access targeted funding, while allowing investors to choose projects that meet environmental standards and achieve greater overall efficiency. 

Examples of initiatives by Siam Commercial Bank and Kasikorn Bank under their Green Finance Framework.

In Thailand’s banking sector, we are beginning to see tangible developments:

• Kasikorn Bank (KBank) launched its 2025 Green Finance Framework, which defines eligible green project categories, selection procedures, fund management, and reporting requirements. The framework has undergone external verification (Second Party Opinion) to ensure alignment with international standards, such as the Green Bond Principles and Green Loan Principles. KBank aims to expand its green loan portfolio for further growth. 
• Siam Commercial Bank (SCB) has also demonstrated notable achievements,announcing that it reached over THB 180 billion in Sustainable Finance within 2.5 years, exceeding the target set in its 3-year plan.

What are the impacts on businesses of accessing green finance, reducing costs, and enhancing ESG credibility ? 

• Improved access to better financing terms: Through Green Finance, businesses can obtain loans, lower interest rates, or preferential conditions, especially if their projects demonstrate strong environmental potential.
• Long-term cost reduction : By assessing and optimizing energy use, lowering greenhouse gas emissions, and minimizing redundant processes, businesses can reduce operational costs over the long term.
• Enhanced credibility: Utilizing Green Finance tools along with ESG reporting allows investors, customers, and stakeholders to recognize that the organization has a clear sustainability approach, as well as transparency and accountability.
• Preparedness for future regulations and standards: As ESG regulations, carbon taxes, and environmental disclosure requirements become stricter, businesses with a Green Finance foundation are better equipped to respond effectively and take timely action.

Conclusion: Green Finance is not merely an option but a “new economic imperative” that demands attention.

By 2025, Thailand is moving full speed to lay the foundation for a financial system that supports green activities, through strengthened government Taxonomy policies, the practical use of various financial instruments, and case studies of banks and businesses increasingly adopting Green/Blue Finance frameworks as key drivers. 

 “Green Finance” has become a central driver for advancing Thailand’s economy toward a low-carbon society. The government, through the Bank of Thailand, has established the Sustainable Finance Initiatives for Thailand and expanded Thailand Taxonomy Phase II to enable financial institutions and businesses to allocate capital to environmentally friendly activities. At the same time, pressures from global markets and ESG investors are pushing businesses to adapt quickly to mitigate risks from measures such as the EU’s CBAM. Investments through Green Bonds or green loans continue to grow, as they allow organizations to access lower-cost capital and enhance ESG credibility, while supporting the transition to clean energy, carbon reduction, and a circular economy. In the future, Green Finance will no longer be merely an “option” but a core mechanism of Thailand’s economic system, linking business, finance, and the environment in a sustainable way.

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