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Thailand rolls out first ESG funds under new tax scheme
Incentives aimed at luring more investors to help the country achieve sustainable development goals
Patricia Chiu 15 Dec 2023

Thailand has launched 22 mutual funds with a focus on environmental, social and governance (ESG) principles, which are expected to raise 10 billion baht (US$284 million) by year-end.

The funds, launched by 16 asset management firms, form the first batch of Thai ESG (TESG) funds under a programme of the Securities and Exchange Commission (SEC) in collaboration with the Ministry of Finance, Federation of Thai Capital Market Organizations (FETCO), the Stock Exchange of Thailand (SET), and the Association of Investment Management Companies (AIMC).

“The Thai ESG funds as endorsed by the governmental sector features an investment policy that focuses on ESG assets, helping to diversify the types of sustainability-themed mutual funds,” says SEC secretary-general Pornanong Budsaratragoon.

The launch follows the cabinet’s approval in November of tax incentive measures aimed at making the TESG funds more attractive to investors. Under the programme, individuals who purchase units of any approved TESG funds are eligible for a tax deduction of up to 30% of their assessable income, with a maximum limit of 100,000 baht per tax year, provided that they hold the investment units for a minimum of eight years from the date of purchase. 

The government will also exempt investors from capital gains tax if they hold the funds to maturity. However, if sold before the specified time, the government will collect tax, as well as an additional penalty.

Since all the TESG Funds invest predominantly in domestic assets such as stocks and debt securities with environmental protection or sustainability themes, SEC’s Pornanon says the initiative also allows investors to have a hand in helping Thailand achieve its sustainability goals, while benefiting from tax privileges and long-term savings. More such funds are expected to be launched in the coming year.

“This aligns with the country's sustainable development goals and the SEC Strategic Plan, which aims to build a sustainable capital market,” Pornanon adds. 

National sustainable goals

FETCO chairman Kobsak Pootrakool says the new programme will be a key capital market mechanism that will drive Thailand closer to its national sustainable goals, particularly its goal to achieve net-zero greenhouse gas (GHG) emissions by the year 2065, as outlined in the Paris agreement.

“This can motivate listed companies to build their competitiveness, particularly by conducting business with ESG focus. On the investor side, the Thai ESG fund is a vehicle for building sufficient retirement savings. With strong support from the government sector, TESG funds can contribute to the achievement of the national sustainable goals and ESG excellence," Kobsak adds.

AIMC chairperson Chavinda Hanratanakool says the 22 TESG funds represent investments in over 200 listed Thai companies that were selected for their “outstanding sustainability efforts or commitment to disclosing information and setting GHG emissions reduction goals”. The association will continue to monitor and inspect listed companies that may fail to comply with the ESG criteria.

The 16 companies offering the 22 approved TESG funds are Krung Thai Asset Management, Krungsri Asset Management, Kasikorn Asset Management, Kiatnakin Phatra Asset Management, KWI Asset Management, Talis Asset Management, TISCO Asset Management, SCB Asset Management, Bualuang Asset Management, Principal Asset Management, UOB Asset Management (Thailand), Land and Houses Asset Management, Wan Asset Management, East Spring Asset Management (Thailand), MFC Asset Management, and Asset Plus Mutual Fund.

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