The Asian Development Bank (ADB) is assisting the government of Thailand in designing, issuing and monitoring innovative capital market initiatives as part of the country’s recovery from the Covid-19 pandemic in a manner aligned with the 2015 Paris Agreement and the UN Sustainable Development Goals.
ADB’s technical assistance through the Asean catalytic green finance facility (ACGF) includes bond framework development and external reviews to help Thailand’s Ministry of Finance (MoF) and National Housing Authority (NHA) design green, social, and sustainability bonds based on global and Asean standards and best practices.
ADB is also helping the government develop internal systems to monitor the use of bond proceeds and prepare post-issuance reports. These measures will help lay the groundwork for more green, social and sustainability bond issuances.
The initiatives, announced on September 24, include support for Thailand’s first sustainability bond, a first-of-a-kind issuance by a sovereign in Southeast Asia. The bond was issued on August 13-14 by MoF’s Public Debt Management Office in two tranches totaling 30 billion baht (US$964 million).
The first tranche amounting to 10 billion baht will be used to finance green infrastructure through the Mass Rapid Transit orange line (East) project, while the other tranche amounting to 20 billion baht is earmarked to resolve and remedy the social impact from Covid-19. It will fund public health measures, job creation through small and medium-sized enterprises, and local public infrastructure development with social and environmental benefits.
The issuance, which was 3 times oversubscribed, achieved a final coupon of 1.585% per annum, which was lower than the market yield of the existing 15-year government-benchmark bond. It generated a strong demand from both onshore and offshore investors led by insurance companies, asset management companies, government-related funds, and financial institutions. It also attracted a number of ESG-focused investors.
ADB likewise supported the NHA’s maiden social bond, which was issued on September 23 in three tranches totaling 6.8 billion baht. It is among the first social bonds issued by a state-owned enterprise in Southeast Asia. The bond will finance affordable housing in Thailand and promote sustainable communities. Other green and sustainability bonds are in development stages.
“These social and sustainability bonds will help the country recover from Covid-19 by focusing on long-term, green and inclusive infrastructure,” says ADB country director for Thailand Hideaki Iwasaki.
ACGF unit head Anouj Mehta adds: “As countries face an increasing financing gap for climate-resilient infrastructure, especially following the Covid-19 pandemic, it is essential for governments to tap into domestic and global capital markets with green and sustainability bonds.”
ADB is preparing a new country partnership strategy to support Thailand’s economic recovery with a pipeline of green and climate-resilient infrastructure projects. The strategy will also focus on rebuilding regional cooperation through the Greater Mekong sub-region programme and other platforms.
Through the private sector operations department, ADB has been supporting green finance development in Thailand. The projects include a 5 billion baht purchase of the initial five-year and seven-year green bonds by B.Grimm Power PCL in 2018. These were the first certified climate bonds to be issued in Thailand. ADB also purchased a 3-billion baht tranche in the first green bond issuance of 10 billion baht by Energy Absolute PCL in 2019.
