Sustainable investing going mainstream in Thailand

Sustainable investing has gone mainstream across the globe, particularly in the United States and Europe. Similarly, Thai investors are paying more attention on listed companies’ actions towards sustainability, believing that these practices would translate into sustained performances in the long run.  

Globally, more and more investors are looking beyond returns, with realization that business prosperity and sustainability of society and environment are interdependence. That explains why “sustainable investing” has become a buzzword as assets under fund companies’ management exceed a trillion US dollars and their funds have recently witnessed a jump in net inflows.

Amid the novel coronavirus (COVID-19) outbreak that has pressured purchasing power and economic outlook, global assets in sustainable funds hit a fresh record of nearly USD 2 trillion in the first quarter of 2021, up 17.8 percent from the previous quarter. Europe accounts for 83 percent of global assets, followed by the United States with 12 percent share.

In Europe, sustainability funds saw their assets increasing by about 17.5 percent from December 2020 to USD 1.63 billion in the first three months of 2021, data from Morningstar report titled “Global Sustainable Fund Flows: Q1 2021 in Review” showed.

In the United States, sustainable funds there in the first quarter of 2021 attracted an all-time record level of fund flows: net inflows were nearly USD 21.5 billion, compared with the previous record of USD 20.5 billion set in the fourth quarter of 2020 and more than double the USD 10.4 billion seen one year ago in the first quarter of 2020. It was also about 5 times greater than first-quarter flows in 2019. 

As of March 2021, assets totaled nearly USD 266 billion. That’s a 123 percent increase year-on-year.

In the rest of the world—chiefly Australia, Canada, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Singapore, South Korea, Taiwan and Thailand—the value remains low but the outlook is promising. Investors no longer want to invest in companies of which main goal is solely profits. Profitability is great, but it could not be sustained in a long term without supporting factors, including good governance, environment policy, and ‘social license to operate’ from stakeholders. 

More and more investors are now screening potential investments with new criteria that credit companies that care for the environment, employees, suppliers, customers and the communities where they operate. Records show these criteria have steered these companies through complexity of sustainability challenges such as outbreaks, flood risk, data security, demographic shifts and regulatory pressures. 

Thailand has been riding on this trend. During the past decade, Thailand’s securities authorities have worked hard in promoting ESG (environment, social, and governance). For example, The Stock Exchange of Thailand (SET) launched Thailand Sustainability Investment (THSI) in 2015 as the list of listed companies passing ESG criteria. Among the criteria are actions launched to address climate change, energy and water conservation, human rights protection, workplace safety, supply chain management, board independence, executive compensation, anti-corruption, ESG risk management and innovation.

There actions have been quite rewarding as more and more listed companies have integrated ESG into business strategies and practices. To date, 124 out of 757 listed companies which constitute 69 percent of total market cap are enlisted to THSI and 73 companies are included in SETTHSI Index. 

These efforts have been rewarding with 21 Thai listed companies being selected to be included in Dow Jones Sustainability Emerging Markets Index, the highest number in ASEAN for seven consecutive years. Moreover, 11 of these listed companies are qualified for DJSI World Index, 7 of which are designated “industry leaders”, the best in their categories. By country, Thailand has the second highest number of industry leaders in the world after the United States. 

Aside, 38 listed companies are members in FTSE4Good Emerging Indexes (2020) and 40 are members in MSCI ESG Universal Index (2020), the largest number in ASEAN for both indices.