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SEC revises Thai ESG rules to broaden investment scope and strengthen asset management companies’ fiduciary duty for responsible investment

Tuesday 30 July 2024 | No. 156 / 2024

Bangkok, 30 July 2024 – The Cabinet, at its meeting convened today, has passed a resolution approving the revision to the tax incentive measures for promoting sustainable investment in Thailand through Thai ESG funds, as proposed by the Ministry of Finance. According to the revised measures, the investment limit eligible for tax exemption is increased to 300,000 baht per person per year and the unitholding period is shortened to five years for the purchases made between 1 January 2024 to 31 December 2026. These measures aim to promote the Thai capital market’s growth as well as build trust and confidence and promote long-term investments in the capital market via Thai ESG funds. The Ministry of Finance will evaluate the outcomes of these tax benefit measures at the end of the next three years.

In this regard, the Securities and Exchange Commission (SEC) is amending the relevant regulations to support the aforementioned tax benefit measures. These amendments broaden the investment scope of Thai ESG funds and strengthen the fiduciary duty of asset management companies (AMCs) to ensure responsible investment.

Mrs. Pornanong Budsaratragoon, SEC Secretary-General, said: “The Capital Market Supervisory Board (CMSB), at its meeting No. 7/2567 convened on 16 July 2024, passed a resolution approving in principle the proposed amendments to the Thai ESG regulations to accommodate the government’s savings and investment promotion initiatives. The proposed amendments address two important matters, as follows:

1. To Broaden the investment scope by:

(1) Allowing Thai ESG funds to invest in shares of listed companies that have been evaluated by ESG ratings/scores providers other than SET (SET ESG ratings). This change aims to offer AMCs more diverse reference alternatives when making investment decisions. However, these ESG ratings/scores providers must have internationally recognized evaluation standards;

(2) Providing Thai ESG funds with more investment alternatives in shares of listed companies that demonstrate corporate governance excellence. These companies must disclose their goals and corporate value-up plans, provide updated reports on the execution of these plans, and have an environmental action plan in place. Additionally, they must communicate progress on these matters to investors according to specified criteria.

2. To strengthen the roles and responsibilities of AMCs: In managing Thai ESG funds, AMCs must exercise their fiduciary duty by carefully considering ESG factors throughout the investment process for the benefit of unitholders. This includes incorporating ESG considerations when setting investment policies and strategies, as well as during the selection and monitoring of investments in quality businesses. This aims to ensure sustainable investment according to the objectives of Thai ESG funds.

“The Notifications concerning the amendments to the Thai ESG regulations are expected to be published in the Government Gazette and become effective within August 2024. Investors are eligible to invest in the existing Thai ESG funds and benefit from the new tax benefits right away. The SEC will coordinate with relevant parties to ensure convenience and make necessary preparations for AMCs wishing to establish Thai ESG funds under the new conditions or to revise the existing fund scheme to enhance flexibility in making investments under the new regulations,” added SEC Secretary-General.

In this regard, Thai ESG funds are required to disclose sustainability information of the funds in compliance with the regulations governing Sustainable and Responsible Investing Fund (SRI Fund) to ensure that investors receive sufficient information for making investment decisions. In addition, Thai ESG funds will be exempt from the application fee and the fund scheme revision fee, similar to the SRI Fund*, throughout 2024.

______________________

Remark:

* The regulations governing SRI Fund require that AMCs managing SRI Fund disclose relevant information in full pursuant to the same disclosure standards. This is to allow investors to compare information across SRI Funds conveniently and have sufficient information for making investment decisions, while mitigating the greenwashing risk. The SEC grants exemption for the application fee of 100,000 baht per fund and the fund scheme revision fee of 5,000 baht per fund for the SRI Fund applications submitted in 2024.

NEWS

Securities and Exchange Commission

Corporate Communication and Investor Service Department

Tel. (66)2033-9502-5 E-mail: press@sec.or.th

No. 156 / 2024	Tuesday 30 July 2024
SEC revises Thai ESG rules to broaden investment scope and strengthen asset management companies’ fiduciary duty for responsible investment
Bangkok, 30 July 2024 – The Cabinet, at its meeting convened today, has passed a resolution approving the revision to the tax incentive measures for promoting sustainable investment in Thailand through Thai ESG funds, as proposed by the Ministry of Finance. According to the revised measures, the investment limit eligible for tax exemption is increased to 300,000 baht per person per year and the unitholding period is shortened to five years for the purchases made between 1 January 2024 to 31 December 2026. These measures aim to promote the Thai capital market’s growth as well as build trust and confidence and promote long-term investments in the capital market via Thai ESG funds. The Ministry of Finance will evaluate the outcomes of these tax benefit measures at the end of the next three years.
In this regard, the Securities and Exchange Commission (SEC) is amending the relevant regulations to support the aforementioned tax benefit measures. These amendments broaden the investment scope of Thai ESG funds and strengthen the fiduciary duty of asset management companies (AMCs) to ensure responsible investment. Mrs. Pornanong Budsaratragoon, SEC Secretary-General, said: “The Capital Market Supervisory Board (CMSB), at its meeting No. 7/2567 convened on 16 July 2024, passed a resolution approving in principle the proposed amendments to the Thai ESG regulations to accommodate the government’s savings and investment promotion initiatives. The proposed amendments address two important matters, as follows: 1. To Broaden the investment scope by: (1) Allowing Thai ESG funds to invest in shares of listed companies that have been evaluated by ESG ratings/scores providers other than SET (SET ESG ratings). This change aims to offer AMCs more diverse reference alternatives when making investment decisions. However, these ESG ratings/scores providers must have internationally recognized evaluation standards; (2) Providing Thai ESG funds with more investment alternatives in shares of listed companies that demonstrate corporate governance excellence. These companies must disclose their goals and corporate value-up plans, provide updated reports on the execution of these plans, and have an environmental action plan in place. Additionally, they must communicate progress on these matters to investors according to specified criteria. 2. To strengthen the roles and responsibilities of AMCs: In managing Thai ESG funds, AMCs must exercise their fiduciary duty by carefully considering ESG factors throughout the investment process for the benefit of unitholders. This includes incorporating ESG considerations when setting investment policies and strategies, as well as during the selection and monitoring of investments in quality businesses. This aims to ensure sustainable investment according to the objectives of Thai ESG funds. “The Notifications concerning the amendments to the Thai ESG regulations are expected to be published in the Government Gazette and become effective within August 2024. Investors are eligible to invest in the existing Thai ESG funds and benefit from the new tax benefits right away. The SEC will coordinate with relevant parties to ensure convenience and make necessary preparations for AMCs wishing to establish Thai ESG funds under the new conditions or to revise the existing fund scheme to enhance flexibility in making investments under the new regulations,” added SEC Secretary-General. In this regard, Thai ESG funds are required to disclose sustainability information of the funds in compliance with the regulations governing Sustainable and Responsible Investing Fund (SRI Fund) to ensure that investors receive sufficient information for making investment decisions. In addition, Thai ESG funds will be exempt from the application fee and the fund scheme revision fee, similar to the SRI Fund, throughout 2024. ______________________ Remark: The regulations governing SRI Fund require that AMCs managing SRI Fund disclose relevant information in full pursuant to the same disclosure standards. This is to allow investors to compare information across SRI Funds conveniently and have sufficient information for making investment decisions, while mitigating the greenwashing risk. The SEC grants exemption for the application fee of 100,000 baht per fund and the fund scheme revision fee of 5,000 baht per fund for the SRI Fund applications submitted in 2024.

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