Thailand Taxonomy Phase II in a bird’s eye view

In face of escalating climate changes and challenges, financial sector, as an allocator of capital, is undergoing a transformation through policies and tools to help businesses and households adapt to climate change in timely manner. Taxonomy is one of the critical tool to classify activities, assets, and income proportions that align with key sustainability objectives and conditions. It aims to ensure each sector has a common definition of environmentally-friendly activities, serving as a reference point for guiding policy formulation, strategy development, and risk assessment for businesses' future adaptation.

Thailand has divided the development of the Thailand Taxonomy into phases. In June 2023, Thailand Taxonomy Phase I has been released to support climate change mitigation, aimed at reducing greenhouse gas emissions of the activities in the energy and transportation sectors. These sectors deemed vital to Thailand's environmental aspirations and economic. Far from being a regulatory straitjacket, Taxonomy serves as a voluntary compass, guiding market participants towards a common understanding of environmentally significant activities.

In the initial phase, Taxonomy underscored business transition – to become less brown. Looking ahead to the Thailand Taxonomy phase II, it is expected that the listing activity coverage and criteria will continue to foster business transition and adaptability, particularly in Thai industry, which still heavily relies on fossil fuels with limited resources and capital to adapt themselves towards environmentally friendly operations. Additionally, the Thailand Taxonomy’s environmental objective necessitates to extend its focus beyond climate change mitigation, especially given the vulnerability of Thailand's agricultural sector, to climate change adaptation. This consideration would help prevent loss and damage in the future. Amidst this, the waste management and construction sectors may encounter challenges in defining appropriate scope and criteria aligned with the local context and international standard.

The Thailand Taxonomy Board expects to schedule a public consultation to solicit feedback on the draft of Thailand Taxonomy Phase II from various stakeholders, including governmental bodies, private enterprises, civil society groups, and international organizations, during the fourth quarter of 2024, with a targeted release in the subsequent year.

In the meantime, businesses across the four major economic sectors - industry, agriculture, waste management, and construction and real estate - all of which are affected by the implementation of the Taxonomy, should closely monitor the ongoing development of its scope and criteria. This can be efficiently achieved through active engagement with industry associations or pertinent government bodies. In addition, it's imperative to stay informed not only about the upcoming Thailand Taxonomy Phase 2 but also other related policies or regulations, such as the draft Climate Change Act B.E. ... which currently opens for public consultation. Such proactive involvement will facilitate a comprehensive assessment of potential impacts and enable businesses to adequately prepare for necessary adjustments in production processes and data collection for greater financing accessibility or preparing for future disclosure and reports.