ESG 2024 Comparisons

In 2024, there have been significant developments in the ESG space across various dimensions. These include regulators attempting to strengthen the ESG disclosure requirements, public policy initiative linking ESG with investment instruments to boost the economy, and the private sector collaborating more actively to drive society towards a sustainable economy.

Guidelines for ESG Disclosure

Earlier this year, the Stock Exchange of Thailand (SET) published guidelines for ESG disclosure which are in accordance with international standards, such as the GRI standards and the SDGs. These guidelines are tailored for eight different sectors: agricultural and food, consumer products, financial, industrial, property and construction, resources, services, and technology. These guidelines include disclosure of ESG metrics specific to each sector, annual progress report tables, etc. Listed companies are encouraged to disclose their ESG aspects based on these guidelines on a voluntary basis.

The Office of Insurance Commission (OIC) has also released ESG disclosure guidelines for life and non-life insurance companies. Although not mandatory, the OIC encourages life and non-life insurance companies to disclose their ESG information, covering their value chain, and the principles for sustainable insurance (SPI).

ESG Symposium

On 30 September 2024, an ESG Symposium event was held in collaboration with various sectors, both public and private, under the concept “Driving Inclusive Green Transition”. The aim of the ESG Symposium is to promote a transition to a low-carbon society and to seek actions against the global warming crisis. There were discussions over energy-saving technologies, transitioning to renewable energy sources, developing decarbonisation technologies, and fostering a sustainable value chain. The main drivers of the energy transition in Thailand are (i) a supportive legal framework, (ii) the promotion of green financing, (iii) the development of green technology and infrastructure and (iv) boosting SME competitiveness.

ESG Model and Bio Circular Green Model

The SET has introduced the concept of the BCG model and the ESG model, based on the philosophy of sufficiency economy. The BCG model includes bioeconomy (focusing on optimising bioresource production through technology), circular economy (maximising resource use), and green economy (an economy minimising environmental impact). Various sectors are encouraged to adopt these models alongside ESG principles on a voluntary basis.

Tax Incentives for Investment in ESG Funds

In order to promote ESG investment in Thailand, tax incentives have been introduced for those who invest in ESG funds (Thai ESG Funds), including tax deductions of up to 30% of the investor’s assessable income, with an investment amount not exceeding THB100,000, provided that the investors maintain the investments for at least eight years from the purchase date. This not only represents the significance of ESG alone but also highlights how ESG can serve as a powerful tool to boost the economy in Thailand.

Responsible Lending

After a public hearing in 2023, the BOT implemented responsible lending guidelines applicable to financial institutions, asset management companies, credit card operators, personal loan, or nano loan business operators under its supervision. The Bank of Thailand (BOT) notification aims to provide measures for responsible lending throughout the debt cycle, promote a culture of good credit and financial discipline, and address household debt issues.

Developments in Thailand’s Climate Change Bill and Clean Air Bill

The Department of Climate Change and Environment and the Ministry of National Resources and Environment have made progress with the draft Climate Change Act, following the conclusion of public hearings in 2024.

The bill represents a major step forward in Thailand’s efforts to reduce GHG emissions in line with global targets. In addition to establishing a legal framework to address GHG emissions, it also introduces the integration of a taxonomy and financial-related instruments such as the Emissions Trading System (ETS), carbon credits, and a carbon tax aimed at encouraging private sector participation in GHG-reduction efforts.

Moreover, in 2023, the Thai cabinet approved the draft Clean Air Act as part of a broader effort to reduce pollution systematically. This bill marks a significant milestone in Thailand’s environmental and public health policies, with a focus on recognising the right to clean air as a fundamental right. It emphasises public participation, stringent control mechanisms and the use of economic instruments and measures.

Thailand has made significant progress over the past year in areas such as labour rights, human rights, and corporate social responsibility. One of the most important regulatory changes was the amendment of labour laws aimed at improving workers’ rights and conditions, particularly for migrant workers who form a substantial part of the labour force. These amendments introduced stronger protections against unfair dismissal and enhanced workplace safety standards. Additionally, Thailand has pushed forward its National Action Plan on Business and Human Rights (NAP), encouraging companies to implement human rights due diligence, especially in industries like agriculture and manufacturing, where social impacts are significant.

In terms of case law, human rights cases have continued to highlight the need for stronger social governance. For instance, in the garment industry, a court ruling required companies to compensate workers who were laid off without proper severance during the pandemic, reinforcing the importance of labour rights even in times of economic hardship. These legal and regulatory developments reflect Thailand's increasing focus on social governance, with companies being held more accountable for their social impact and encouraged to integrate social considerations into their operations to meet both national and international expectations.

The Securities Exchange Commission (SEC) has continued to promote stricter adherence to the Corporate Governance Code (CG Code), which emphasises transparency, ethical behaviour, and accountability to build long-term stakeholders’ trust. The enforcement of the Personal Data Protection Act (PDPA) has also marked a key shift in governance, placing greater responsibility on businesses to manage personal data securely and aligning with global data protection standards.

Moreover, the SET is set to enhance its oversight of listed companies through a comprehensive process initiated on 25 March 2024. This includes stricter listing qualifications by increasing profit and shareholder equity requirements, to strengthen financial status and performance. Investor warnings will be enhanced with new criteria for financial risks, auditor’s refusal to express an opinion, and non-compliance with specified standards, replacing the current C (Caution) sign. Furthermore, delisting criteria will be tightened for companies lacking continuous business or failing to rectify free float issues. Additionally, the standards for backdoor listings and resuming trading will be made to be in line with the standards for new listings. These measures, developed in collaboration with the SEC, aim to improve the quality of listed companies, ensure comprehensive information disclosure, and maintain the market’s confidence and stability.

The ESG framework in Thailand is dispersed across a combination of various laws and regulations, with relevant regulatory bodies showing increasing commitment to the integration of ESG. Relevant regulatory bodies include the following.

• The BOT – responsible for monetary policy, financial stability, and overseeing and regulating the country’s banking system and financial institutions, the BOT plays a vital role in promoting sustainable finance. For instance, it develops the Thailand Taxonomy in collaboration with a working group, including the SEC.
• SEC – responsible for overseeing and regulating the capital markets, enforcing securities laws, and regulating securities trading and financial products in the capital markets, the SEC also oversees the disclosure of information by listed companies, ESG ratings, and sustainable financial products in the capital market, etc.
• SET – the centre for trading listed securities and being responsible for providing systems necessary for securities trading and conducting any businesses relating to securities trading, such as clearing house, securities depository, securities registrar, and similar activities.

Apart from the above, there is also a sector or industry-specific regulator who normally oversees the usual operation of the businesses in that industry, such as the Energy Regulatory Commission (ERC), who is responsible for overseeing and regulating the energy sector in Thailand, including electricity, natural gas, and other energy sources. Its primary functions involve overseeing energy tariffs, ensuring fair competition, and promoting efficient and sustainable energy use within the country.

Each of these bodies monitors the laws and regulations implemented in other countries as well as market trends, adopting best practices through mandatory measures and voluntary guidelines.

ESG laws and regulations will affect business sectors in general but are likely to have the greatest impact on the industrial, transportation, and oil and gas sectors, due to their significant contributions to carbon emissions. Companies in these sectors may need to adopt cleaner technologies, improve transparency, and implement more sustainable practices in order to align with ESG principles.

Financial institutions are also keen to engage in ESG-related transactions, and companies from various sectors are increasingly promoting ESG to foster more sustainable business practices.

Although ESG initiatives are being shaped by state policies, regulations, and private sector efforts, they may encounter further adjustments due to prevailing political instability. For instance, regarding the new environment law currently in the drafting process, the incoming government may take economic factors into account and determine which sectors will be subject to such law, as well as the extent to which the law will be enforced.

SET ESG Ratings

The SET has renamed the list of sustainable securities of listed companies from THSI (Thailand Sustainability Investment) to SET ESG Ratings. Listed companies can voluntarily participate and obtain the SET ESG Ratings if they pass at least 50% of each test on ESG aspects, including corporate governance reporting (CGR).

To promote ESG practices, the SET has introduced the SETESG Index, allowing investors to compare the ESG ratings of listed companies and make more informed investment decisions. Note that from 2026, the SET may replace SET ESG Ratings with FTSE Russel ESG Scores in order to enhance transparency and align with global benchmarks and standards.

Enhanced Standards for Listing

As mentioned above, the SET is raising the standards for overseeing listed companies, focusing on strengthening financial health and transparency. New rules will impose stricter listing criteria (such as increasing the proportion of profit and shareholders’ equity), enhance information disclosure to investors, and include warnings for companies facing financial risks, in order to ensure greater market stability and investor confidence.

While unlisted companies, including limited liability companies and public limited companies, are generally required to prepare mandatory reports; eg, financial statements or annual reports (as applicable), listed companies are required to report annually in Form 56-1 (One Report). Pursuant to the SEC’s Form 56-1 reporting guide, environmental aspects are on a “comply-or-explain” basis. If a listed company does not disclose their GHG emissions, the company must provide a rationale for not making this disclosure. On a further note, the SEC and the Thailand Greenhouse Gas Management Organisation (TGO) have published a guideline for reporting GHG emissions including the companies’ policies to reduce the negative impacts of GHG emissions with quantitative goals, measures and strategy.

Directors of companies are required to comply with their fiduciary duties and conduct their roles and responsibilities as directors in accordance with the Civil and Commercial and the Public Limited Company Act, B.E. 2535 (1992), as applicable. These laws set forth the roles, duties, and responsibilities of directors in general and do not specifically address ESG requirements.

The BOT regulations govern the roles and responsibilities of directors and the management of financial institutions. At a higher standard, directors and the management of financial institutions must set the direction for sustainable banking, integrate ESG factors into their decision-making processes and risk management practices, and ensure transparent sustainability disclosures in accordance with acceptable or international standards.

For other entities committed to ESG obligations, directors and the management should also observe and ensure compliance with ESG obligations. For instance, companies may be required to comply with ESG requirements set out under the green loan or bond principles, or under relevant agreements.

Non-profit entities can be formed as foundations or associations. Social enterprises can be registered in accordance with the Social Enterprises Promotion Act B.E. 2562 (2019). The social enterprises must have objectives that include, among others, promoting the employment of the deserved targets and addressing community, environmental or social issues, noting that they must use at least 70% of their profit for such objectives.

Under Thai law, directors are empowered to manage the business operations of a company under the control of the general meeting of shareholders. Although shareholders can influence or control the company’s direction at a higher level or during certain instances, this does not ensure that the company will conduct its operations in a sustainable manner. Should companies voluntarily adopt ESG standards or comply with ESG-related laws and regulations, shareholders can be more confident in the company’s commitment to sustainable practices, which can mitigate operational risks. Companies that adhere to ESG obligations may become more attractive to investors, as they demonstrate a proactive approach to sustainability and risk management.

The BOT, as a key financial regulatory body, has set a strategic direction for the financial sector’s sustainable development in Thailand.

The BOT has established standards for the business operations of financial institutions (eg, standards for lending practices, management and corporate governance, and disclosure) to ensure financial stability, enhance transparency, and promote responsible management within the sector. As the BOT also promotes the transition toward financial sustainability, it has introduced developments to the regulations and guidelines. Earlier in 2023, the BOT published guidelines on financial business operations considering environmental and climate change aspects. The guidelines seek co-operation from financial institutions to implement sustainable governance, strategy, risk management, and disclosure, taking into account the environmental and climate change factors. For instance, financial institutions should target sustainable financing based on science-based criteria and may involve experts in evaluating financial products to prevent greenwashing. The BOT has begun to monitor the implementation of these guidelines from 2024 onwards.

The BOT has also implemented responsible lending guidelines, which are supplementary to the market conduct criteria, aiming to address household credit issues, encourage a good credit culture, and foster financial discipline.

When raising or providing sustainable finance, corporate entities such as lenders or borrowers are expected to comply with laws and regulations with respect to each ESG pillar as a basic requirement. Compliance with applicable laws and regulations is a common condition and obligation under finance documents. The fundamental laws include, among many others, the Constitution of Thailand, the Civil and Commercial Code, the Enhancement and Conservation of the National Environmental Quality Act, the Factory Act, the Hazardous Substance Act, the Occupational Safety, Health, and Environment Act, the Public Health Act, the Labor Protection Act, the Public Limited Company Act, and the Act Supplementing the Constitution Relating to the Prevention and Suppression of Corruption.,

In addition to fundamental requirements under laws, lenders may impose stricter requirements and standards for a borrower to comply with such as equator principles (EP), global reporting initiative (GRI), and the United Nation’s sustainable development goals (SDG), etc.

Initiatives by the BOT, the SEC, and the SET to promote green financing have been steps toward sustainability. Many Thai banks and financial institutions are increasingly interested in engaging in sustainable financial products, such as green loans or bonds, sustainability-linked loans or bonds, and ESG-focused investment options. Investors and companies are also seeking to align with ESG principles.

In order to access sustainable finance, companies are required to meet the relevant standards and regulations; eg, green loan or bonds principles, the SEC’s criteria for sustainable bonds or sustainability-linked bonds. Smaller corporate entities may find it more challenging to meet the ESG criteria or access sustainable financial products due to limited expertise or resources.

While the Thai financial sector is promoting the transition towards sustainable financing, financing or investment in the assets which are less compatible with sustainability goals has not been entirely discontinued. However, financial products or projects with stronger sustainability credentials may be offered with more favourable commercial terms (eg, more favourable interest rates) compared to those with lower alignment, due to market trends and lower associated risks.

It may be worth noting that, pursuant to Thailand’s power development plan (PDP), the state aims to promote renewable energy. However, the country still relies on energy sources that are less compatible with sustainability goals, such as natural gas, albeit in reduced quantities. As these fossil fuels are not entirely phased out, projects related to these fossil fuels may continue to generate revenue and maintain their bankability.

Recently, there has been an increasing interest in sustainable finance products such as green bonds, green loans, and sustainability-linked loans, particularly those with an aim to fund projects that support sustainable development. These financial instruments often come with stringent requirements, including the need to produce detailed reports, action plans, monitoring systems, and maintenance of ESG scores or ratings. These obligations necessitate significant efforts and costs, which typically only large corporations can afford. Smaller enterprises often lack the resources to meet these rigorous standards, limiting their access to sustainable finance products.

As ongoing obligations as required by financiers, companies are subject to continuous monitoring of their financial and operational performance. This scrutiny ensures that they adhere to the set ESG criteria, but it also introduces the risk of greenwashing – where companies falsely claim that their environmental and social compliance are all in order and falsely state that sustainability performance appears to be better than what it actually is. This deceptive practice can undermine the credibility of sustainable finance and erode investor trust.

Against this backdrop, the SET, which oversees the trading of investments in the secondary market in Thailand, has publicised and raised awareness of greenwashing practices, especially when carried out by large companies that usually claim better performance in dealing with ESG practices. The SET has also warned the corporations to be mindful about the accuracy and transparency of the information reported by their businesses, which must be verifiable. It is the businesses’ obligation to balance the level of the disclosure to provide the clear, consistent and comprehensive disclosures, with not overclaiming or exaggerating the disclosed information. Meanwhile, investors must remain vigilant against greenwashing, being able to conduct thorough due diligence. They should be able to critically assess the authenticity of ESG claims and ensure that the companies they invest in are genuinely committed to sustainable practices.

Currently, several papers and guidelines issued by regulators and officials serve as a guide for business operators to implement ESG practices, such as ESG disclosure and reporting, operational action plans, the maintenance of good governance, etc. While these guidelines are to be implemented by businesses on a voluntary basis, regulators and governments strongly encourage their adoption. Companies with international headquarters or partnerships are often mandated to comply with certain standards, reflecting the global shift towards more stringent ESG requirements. Even in the absence of formal sanctions, market pressure and investor expectations are compelling companies to become more proactive and involved in their practices. This evolving landscape suggests that what is now considered soft law in the realm of ESG is gradually hardening, as voluntary guidelines increasingly influence mandatory regulations and corporate behaviour.

Setting ESG goals is not just the agenda of one organisation alone; it involves all stakeholders, business partners, and contracting parties throughout the value chain. It is essential to maintain a consistent approach and align standards for ESG compliance from the starting point of the raw materials of products to the last where products are completed, ready to be delivered. Conducting due diligence is one method for businesses to ensure their partners meet the same ESG standards and to identify any gaps or inconsistencies. To avoid unintentional non-compliance, global companies increasingly require due diligence before any official engagement with partners, particularly those in local jurisdictions. Domestically, companies especially in the agribusiness, often provide support to involved parties throughout the value chain, such as farmers, local communities, etc, to ensure sustainable responsibility is duly observed from upstream to downstream operations. This comprehensive approach helps ensure that all parties are committed to sustainable and responsible business practices.

Conducting a thorough study of potential business partners provides greater clarity on their ESG policies and identifies any gaps compared to standard requirements. This ESG due diligence process allows companies to assess whether potential partners align with their own ESG goals. Identifying these gaps early on helps companies understand what additional measures or improvements are needed to bring potential partners up to the desired ESG standards.

Selecting the right partner through ESG due diligence assessment not only enhances a company’s image but also significantly increases the likelihood of achieving its ESG goals. A partner that aligns well with a company’s ESG objectives can contribute positively to the overall sustainability and ethical practices of the supply chain. This alignment fosters a collaborative environment where both parties work towards common goals, such as reducing environmental impact, improving labour conditions, and ensuring good governance. Moreover, it mitigates risks associated with non-compliance and potential reputational damage, thereby creating a more resilient and sustainable business collaboration and partnership.

Considering how ESG plays a pivotal role in business operations and serves as a link for the benefit of all relevant stakeholders including shareholders, directors, business partners, customers, and employees, ESG due diligence is extremely crucial in M&A transactions.

First, ESG due diligence has become increasingly prominent, especially for foreign investors, as it helps identify potential risks in the target business. These risks range from environmental concerns such as oil and gas or energy industries, social and human rights issues such as industrial or construction industries which rely heavily on labour and governance issues particularly for those financial institutions, insurance companies, and public companies which often face stringent governance and transparency requirements.

Once risks are identified, the due diligence exercise will include imposing appropriate mitigation measures for those risks. This could involve implementing stricter environmental controls, enhancing labour practices, or improving governance structures. For example, companies might adopt international standards or comply with specific jurisdictional requirements to address identified gaps as required or preferred by investors.

The result of ESG due diligence is a critical component in the decision-making process and value assessment of the transaction. A thorough ESG evaluation ensures that investors are informed of the risks for making decisions and that the target company is not only compliant with current regulations but also well-positioned for long-term sustainability. This is increasingly important to investors who would like to have a sustainable and responsible business. Companies that are well-equipped with ESG practices are often seen as more resilient, making them financially desirable in the long run.

Based on the type of company, listed companies are required to submit an annual report (Form 56-1 (One Report)). However, environmental aspects are reported on a “comply-or-explain” basis. If a listed company does not disclose its GHG emissions, the company must provide a rationale for not making this disclosure.

Companies are generally not mandated to publish transition plans. However, in the case of financial institutions, the top-level strategy should incorporate transition plans towards sustainable banking. This reflects the growing expectation for financial institutions to lead by example in adopting sustainable practices. Currently, companies are not penalised for failing to meet their ESG targets, as compliance remains largely voluntary. However, as regulatory frameworks evolve and investor pressure increases, there may be greater accountability in the future for not achieving the stated ESG targets, including legal consequences, reputational damage or financial repercussions tied to investor confidence and market trends.

ESG targets may vary among companies in different industries. For instance, an energy company, which has achieved AA rating from the SET ESG Ratings, has set its ESG target to reduce carbon intensity by 25% by 2030 and to increase the proportion of renewable energy in its portfolio to at least 40% by 2035. A major financial institution has also set its net zero goal for its headquarter office within 2030.

Currently, Thai laws do not specifically impose restrictions or conditions on sustainability claims or ESG labels made by companies in general.

On an activity basis, in the case that the companies engage in sustainability-linked bond transactions as issuers, the bonds should comply with the disclosure requirements set by the SEC. For example, issuers should disclose their compliance with international standards, such as ASEAN SLBS and ICMA SLBP. Also, the framework for bond issuance should be based on scientific indicators and benchmarks, and reviewed by an external reviewer.

Moreover, companies listed on the SET are required to disclose ESG-related information in line with the Sustainability Reporting Guidelines. ESG claims must be accurate and align with the disclosed information.

As the ESG legal framework remains largely dispersed across the laws and regulations of the region, different regulatory bodies monitor ESG disclosure and compliance or ESG marketing claims; eg, the BOT, the SEC, the SET, and the Office of Insurance Commission.

Although the carbon credit market in Thailand is a voluntary market, the TGO, a public organisation under the Ministry of Natural Resources and Environment, is established to manage the voluntary carbon market, and oversee the issuance and trading of carbon credits. Additionally, the TGO provides technical support and capacity building to various sectors, helping them align with low-carbon practices and national climate targets, including Thailand’s Nationally Determined Contributions (NDCs) under the Paris Agreement.

As discussed in 5.1 Key Requirements, the disclosure of ESG is not mandatory for companies in general. Therefore, there is no penalty under general laws for non-disclosure. However, as a general principle, if a company deceives a person with the assertion of a falsehood or the concealment of facts in order to obtain any benefit/property from such person, the company may be considered to have committed fraud under the criminal law and the damaged parties may be entitled to claim for any damages.

If companies engage in specific ESG-related activities, such as issuing sustainability-linked bonds, the Securities Act, B.E. 2535 (1992) (as amended) imposes fines and/or imprisonment for any person who makes a false statement or conceals the facts which should have been disclosed in the registration statement, filed prospectus, or the periodic/annual report. This does not limit the investors’ rights to file for any damages from the issuers with respect to such false statements.

In the coming years, companies will make significant strides in meeting their reporting obligations, particularly with the implementation of the 56-1 One Report, which aims to streamline and standardise corporate disclosures. However, they will face several challenges in this effort.

One major challenge is the complexity and variety of ESG reporting standards. Navigating these diverse frameworks to select the most relevant ones for their operations can be difficult. Additionally, the cost implications of developing and maintaining robust ESG reporting systems can be substantial, posing a particular challenge for smaller companies with limited financial resources.

The dynamic nature of the regulatory environment further complicates matters, as companies must continuously adapt to new and evolving regulations. Moreover, there is a risk of greenwashing, where companies might make misleading claims about their environmental practices in an attempt to meet reporting obligations quickly. This not only undermines the credibility of their reports but also exposes them to reputational damage and potential legal consequences. Despite these challenges, companies that successfully navigate these obstacles will be better positioned to demonstrate their commitment to sustainability and corporate responsibility.

Currently, Thailand does not have a specific framework for ESG-related litigation. State authorities or any persons bringing litigation in court must rely on existing laws which serve as the basis for such claims; eg, criminal law, tort law, employment law, or environmental law. There may be cases related to each pillar of ESG; however, the authors are not aware of any cases brought based on ESG as a consolidated approach. The complexity of each case depends on the basis of the claim, the evidence provided, and the facts involved.

In Thailand, class action lawsuits are allowed in cases where multiple persons are affected by the same causes or the same grounds for damage. Lawsuits typically involve tort, breaches of contract, and claims of legal rights, such as under environmental law, consumer protection law, securities and exchange law, and trade competition law. For instance, investors can file a class action lawsuit against a securities issuer if the issuer submits a prospectus containing false statements or provides misleading information in financial statements which deceive investors.

Note that a company may be delisted from the SET ESG Ratings due to allegations of misgovernance by state authorities.

NGOs and activists play a significant role in environmental and climate-related matters in Thailand, and they are important stakeholders to consider. Groups like Greenpeace Southeast Asia are highly active in campaigns promoting renewable energy and opposing pollution, influencing both public opinion and policy discussions. Another key organisation is the Wildlife Friends Foundation Thailand (WFFT), which focuses on wildlife conservation and habitat protection, addressing environmental concerns through rescue operations and advocacy.

Beyond environmental issues, organisations like Thai Lawyers for Human Rights (TLHR) and EarthRights International work at the intersection of political and environmental activism. TLHR provides legal support to those affected by political oppression, including environmental activists. EarthRights International, on the other hand, combines legal action for environmental protection with human rights advocacy, often representing communities impacted by large corporate projects that harm ecosystems.

These groups exert pressure on government bodies and private entities to adopt more sustainable and environmentally conscious practices. The work of such NGOs and activists contributes to broader governance and policy reforms.

In Thailand, the issue of greenwashing – where companies make misleading claims about their environmental practices – has garnered increasing attention from both regulatory authorities and investors. While specific legal claims or lawsuits due to incorrect, incomplete, or misleading ESG claims are not extensively documented, the BOT and SEC have been proactive in addressing greenwashing through the development of the Thailand Taxonomy. Released in June 2023, this taxonomy is designed to provide a clear framework for sustainable finance, drawing from established guidelines such as the EU Taxonomy, ASEAN Taxonomy, and the Climate Bond Initiative. The primary goal is to align Thailand’s financial sector with its national strategy to achieve net-zero carbon emissions by 2050, initially focusing on high-impact sectors like energy and transportation.

The guidelines for applying ESG criteria involve an initial assessment of the intensity of ESG use by product issuers who are partners. This is done through questionnaires, reviewing the full prospectus, and interviewing about the use of ESG in the investment process to evaluate the overall ESG score of the product. This score helps decide whether the product will be selected for investors.

A rise in ESG-related legal proceedings can be anticipated due to several factors, including progressive legal developments, proactive enforcement, and globalised trends.

Progressive Legal Developments

New regulatory frameworks particularly on environmental matters such as the Clean Air Bill and Climate Change Bill are set to impose mandatory obligations on business operators. Companies will be required to limit their emissions and pollution levels and provide detailed information on these emissions to government to be stored in the database. These regulations will establish a legal basis for companies to hold accountable for their environmental impact, leading to more active cases as businesses strive to comply with stricter standards.

Proactive Enforcement

Regulators are taking a more proactive role in enforcing legal violation, particularly against those which are listed companies that affect the interests of the wider public. This heightened scrutiny means that non-compliance will be more readily identified and acted upon, resulting in an increase in legal proceedings. Regulatory bodies may make an accusation, impose penalties and implement sanctions on companies that fail to comply with regulatory requirements which, in turn, drives the need for businesses to strictly adhere to these regulations.

Global Trends and Stakeholder Activism

Global trends are also influencing the local landscape, as stakeholders including investors, consumers, and NGOs have become more vigilant and attentive to ESG issues. This increasing awareness is encouraging activism, where stakeholders are more willing to pursue lawsuits against the companies that commit malpractices or violate laws. The global push for sustainability and ethical business practices is resonating in Thailand, leading to a more robust approach to ESG compliance and enforcement.

As these factors converge, one can expect to see more litigation proceedings related to ESG issues. Companies will face lawsuits not only from regulatory bodies but also from affected stakeholders. This potential increased legal activity will compel businesses to adopt more rigorous ESG practices to mitigate risks and avoid potential legal challenges.