Thailand's Stock Exchange Joins ESG Movement

The Stock Exchange of Thailand (SET) announced on July 31 its collaboration with FTSE Russell to implement a new sustainability scoring framework for listed companies. This initiative places Thailand at the forefront of a worldwide shift towards integrating Environmental, Social, and Governance (ESG) considerations into financial markets.

SET plans to adopt FTSE Russell’s ESG data model by 2026, replacing its current ESG ratings system. The transition will begin with a pilot phase from 2024 to 2025, allowing stakeholders to adapt to the new methodology. This change aims to elevate Thai companies’ sustainability practices to international standards and support investors in making ESG-informed decisions.

SET President Pakorn Peetathawatchai emphasized the significance of this partnership. “It would encourage Thai listed companies to raise their sustainability practices to international levels and support investors in integrating ESG into their investment decisions, in line with sustainable investment trends,” he said.

Thailand’s move mirrors similar initiatives by major global exchanges. Nasdaq, for instance, has issued its own ESG reporting guide aligned with established frameworks like the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB). The New York Stock Exchange (NYSE) actively supports the UN Sustainable Stock Exchanges (SSE) initiative, encouraging ESG disclosure among listed companies.

In Asia, the Singapore Exchange (SGX) has already implemented comprehensive sustainability reporting guidelines, promoting transparency and alignment with global standards. These efforts are part of a broader movement, exemplified by the SSE Initiative, which aims to enhance corporate transparency and performance on ESG issues worldwide.

ESG is advantageous

The adoption of FTSE Russell’s framework offers several advantages for Thai companies and investors.

“It will also significantly elevate the profile of Thai companies in the international ESG discourse, making them more relevant to discerning global investors,” said Helena Fung, head of Sustainable Finance and Investment APAC at LSEG.

Unlike SET’s current voluntary ESG ratings based on questionnaire responses, FTSE Russell’s model assesses sustainability efforts using publicly available data. This approach, already used to evaluate over 8,000 companies in 47 countries, will allow for more direct comparisons with international peers.

To facilitate this transition, SET and FTSE Russell will conduct capacity-building workshops and create a knowledge base on the new scoring methodology in both Thai and English. This support system aims to ensure that Thai companies can effectively adapt to and benefit from the new framework.

The global impact of this partnership is underscored by the fact that approximately $15.9 trillion is benchmarked to FTSE Russell indices. This move could potentially increase international investor interest in Thai companies that demonstrate strong ESG performance.

As more stock exchanges adopt similar frameworks, the trend towards ESG integration in financial markets is likely to accelerate. Thailand’s proactive approach positions its capital market as a leader in sustainability practices, potentially influencing other exchanges in the region to follow suit.