Getting Started in Responsible Banking ー Remarks by Assistant Governor of the Bank of Thailand

Distinguished speakers, ladies and gentlemen.

I would like to thank the United Nations Thailand, the UNEP Finance Initiative and the Thai Bankers Association for organizing today’s seminar on Getting Started in Responsible Banking. It is important for our financial industry to have an understanding and appreciation of the Key Concepts of the PRB. Today’s event will help us better understand and appreciate the rationale why certain concepts are being prescribed or recommended, the goals and objectives they seek to achieve and more importantly the Practices that have been tried, tested and adopted elsewhere.

The UN PRB trails the PRI for many years. I suspect that the investor base in the PRI are more activist than the depositor base of the banking system. Also PRI is market based and capital market participants are typically more familiar with the discipline of disclosures and have been subject to closer investor scrutiny. But the essence of ESG should be the same whether it is socially responsible investment or socially responsible lending. And as Thai banks fund themselves in the international capital market they are increasingly exposed to the preferences of the investors, especially global investors. Hence the growing awareness and interests in PRB.

Last month, the BOTput out a consultation paper on repositioning Thailand’s Financial Sector for a Sustainable Digital Economy where managing transition towards sustainability is one of the key priorities. On the environment, we articulated that we wish to see the Thai financial sector incorporate environmental considerations into their risk assessments, support businesses in coping with environment-related risks and transitioning away from environmentally unfriendly activities without disrupting the economy. At the same time, on the social side, the issue of inequality is a long standing structural weakness in Thailand. The financial sector is expected to play a part in facilitating households to smoothly transition towards digital finance and helping heavily indebted households manage their debts sustainably.

It can be seen that the financial sector has an important commitment to society as a whole, and banks can systematically internalize sustainability issues as well as strengthen transparency through disclosure. In this process, the UN Principles for Responsible Banking will be an integral supporting tool to achieve this objective.

On climate change, there is no denying that this is a new and unfamiliar risk. Thus, our workplan is to focus on building an ecosystem andtools to support financial institutions in this journey. The workplan involves five key building blocks.

The first one is to develop Green Taxonomy to create a common definition and understanding for environmentally sustainable activities. Second is enhancing environmental and climate-related disclosure of financial institutions to align with international standard such as the Task Force on Climate-related Financial Disclosures (TCFD). Third is to promote financial products and services that can support the transition, by issuing standard practices on how banks can integrate environmental consideration. Fourth is to determine incentive structure to help alleviate the burden or cost of adjustments for financial institutions and real sectors. And last but not least, the capacity building for both financial industry and regulators.

In conclusion I’d like to say that sustainable banking is a process and a long journey, especially climate change. Not only do financial institutions need to learn, but regulators too need to try these new approaches. Events such as today’s seminar will go a long way in helping us through this journey towards a sustainable and green economy.

Thank you very much.