Thailand Times: Financing Gaps and Sustainable Finance Development Journey in Thailand

Transcript

Thailand Times
Focus: Sustainable Finance

Financing Gaps and Sustainable Finance Development Journey in Thailand

Bangkok Thailand

Archawat Chareonsilp
Moderator

Hello and welcome to the ADB Thailand Times conversation series. We will be talking about development and sustainable finance in Thailand. In the second episode, we will be talking more about Thailand's journey towards sustainable finance and how Thailand is working with the ADB to address the climate financing gap. When we are talking about a development bank like ADB, people usually think about financing infrastructure projects like roads and bridges. But the role of the  development bank is evolving to also include promotion of climate resilience and how Thailand and ADB can work together to make sure that Thailand is ready for that. Today, we are with the ADB Country Director of the Thailand Resident Mission, Mr. Anouj Mehta. Sawatdee Krub Khun Anouj and welcome to Thailand Times.

Anouj Mehta
Country Director
ADB Thailand Resident Mission

Thank you so much and I am glad to be here.

Archawat Chareonsilp

How are you doing?

Anouj Mehta

Very good, very happy to be here and a very exciting country with great work that we can do together with the Government of Thailand. So very happy to be here.

Archawat Chareonsilp

Wonderful, wonderful. Should we start with the first question?

Anouj Mehta

Please go ahead.

Archawat Chareonsilp

The first question is, you know, it has been many decades that ADB and Thailand have been working together, and ADB has clearly contributed to a lot of Thailand's financial and economic success, right? We became an upper higher income country in 2011. 

Fast forward to today, Thailand is aspiring for the next level of development now, so called Thailand 4.0, right? In your perspective, what will be the next role for ADB in its work with Thailand to help her transition towards this ambitious goal?

Anouj Mehta

Very good. Thank you very much for that question. I think, you know, right at the outset, the alignment of ADB's support for Thailand, which is enshrined in our country programming strategy for Thailand, is very close to the Government of Thailand's own focus on a green, or a climate resilient economy with their net zero commitments. ADB itself has positioned itself as a climate bank, with the target of $100 billion lending for the region. The two interests are completely aligned. I would say the two areas that ADB can work very closely in supporting Thailand, I think number one is policy, number two is projects. If I take policy first, I think the government has already got really good policies in terms of achieving its net zero commitments, its strategy 4.0, as well as its bio-circular-green growth model. I think within that the measures that we can provide them with, whether in fiscal aspects of mobilizing capital, whether in terms of aspects such as identifying priority sectors or priority projects, which helped them achieve the goals of BCG [bio-circular-green] or strategy 4.0. I think this is where we can use our policy hat, which would be using technical assistance support, developing knowledge, developing capacity, it could be national, or sub-sovereign level. So, that's the first part. I think the second is demonstration by working on the most critical sectors and therefore really doing projects. And for that, I think, three critical sectors, I would say healthcare, you know, where we could bring in a lot of our expertise, technical expertise, but also financing for developing healthcare projects, which are both inclusive, but also climate resilient. So, we are already working on a project like that, and I think if we can expand that, that will be number one. I think number two is urban, in terms of especially developing sustainable green cities, which are able to cope with the impacts of climate change, flooding, stormwater drainage, but also just making these smart green cities which are a global standard. So, waste management, I think, is a big issue within urban development, that will be a second part. And then I would say, after that, I would say, transport. So, sustainable transport where we can look at a number of different models of especially bringing in electric vehicles. Our private sector department recently did a project on electric ferries. I think one of the first such projects in maybe in Southeast Asia, which we would love to replicate and expand. But, those would be the two areas that I would see us working closely with Thailand, to advance Thailand zone targets.

Archawat Chareonsilp

Thank you. I think that's very insightful. Let me double click on that. You did mention, climate resilience, healthcare, and also smart cities or resilient cities. I read last year in 2021 the Global Climate Risk Index actually ranked Thailand as number nine for the country who's likely to be most hit by climate change, right?

It is clear that Thailand will need to invest, you know, in terms of getting Thailand prepared for climate mitigation and adaptation. The question is how, you know, how can we ensure that Thailand has the right financial resource with the right option? How can ADB support Thailand in order to make sure that we secure the right level of financials, and also the right knowledge?

Anouj Mehta

Well, I think that's a very very good question. And, you know, you can almost frame it with Thailand's own ambitions for net zero, which are so well enshrined, and Thailand was very well-represented at COP 26 at Glasgow last year. So, if I see that and I see the ambitions of Thailand, we would love to support that with, and I would say, you know, two factors. One is scale, because to achieve climate resilience targets, so net zero targets, scale of financing needed from the private sector is critical, especially given the availability of public funds. But, also beyond finance, private sector also brings in technology, very fast implementation, so that's number one. And I think the second is time. You know, given the way we are with climate change, we don't have a lot of time. You know, and I'm talking about all of the developing world, or the planet actually. With that, the importance is to try and bring in innovative financing instruments. And with that, you know, the one that comes straight to mind is green bonds. And the second would be green finance vehicles. So, let me talk a little about both of these. Green thematic bonds –and thematic bonds can be green, blue, sustainable, social – they have this ability to be able to bring a lot of capital from global pools pension funds, insurance companies, and bring them into a large number of projects at one go. So, you know, as an example, two years ago, we were privileged to support the Government of Thailand in doing a sustainability bond. And we provided a little technical assistance support, and that bond till today continues to raise money from the markets. I think $6 billion or so. 

So, furthering the ability of bonds to be done by sovereign levels, sub-sovereign levels, SOEs, is what we want to do. Just two days ago, we launched an initiative, which we call the GSS+ Bonds Initiative, which is exactly aimed at this.  Scaling up the issuance of green and thematic bonds, by governments, SOEs and cities across Thailand, and beyond even Southeast Asia. The second are these national green finance vehicles. So, one of the questions that we often get asked to the private sector is if they're going into greenfield projects, new projects, where there isn't much of a credit rating or a track record, they will be risking funds. So, if we create national facilities, or even sub-national facilities, with public sector money, which can de-risk projects, it could be a guaranteed structure, it could be a revenue support structure, blended structure. That can mobilize a lot more private capital. And that's another area, I think, where we can use our knowledge. We have done some of these instruments in other countries before, and tailor something for the use of Thailand, for example, for the urban sector. So, those are two I think, critical ways, bonds and national financing vehicles, which could be some of the expertise that people bring in for Thailand to mobilize capital.

Archawat Chareonsilp

Fantastic. I was really really pleasantly surprised when you said that not only ADB bringing financial support, but also time. We all agree that we don't have much time, right, when it comes to climate change. Given ADB’s vast geographical remittance and also rich expertise in working with many countries, if I were to ask you to name maybe top three key learnings, when it comes to sustainable finance, what would the top three key learnings be? And how can we best make sure that all the countries have access to this learning, and able to implement it without having to reinvent the wheel?

Anouj Mehta

Oh, great question, let me segue a little bit into the learnings that we've seen because of a vehicle that is already on the ground. So, the ASEAN Catalytic Green Finance Facility, which we call ACGF, for short, this was set up maybe three and a half years ago. And what this is trying to do for all of Southeast Asia, managed by ADB, is to try and really bring in lessons in terms of how to develop green projects and bring in green financing instruments. What we're seeing from the work of the ACGF is that there are three areas in which we really support in the way of lessons learned, capacity. So, capacity development, I think, especially at sub-national levels, the big issue now is how do cities finance themselves. But also, how do they govern themselves? We're
seeing examples of cities which are looking at sustainable green development, but they need capacity development of the institutions, which are managing the city's water supply solid waste. So, number one is capacity building. I think the second one is in terms of knowledge, but especially knowledge in terms of financing instruments. So, can a city basically do a bond issuance? Can the city have an accounting system, which can be credit rated better? So, the second one, I think, is in terms of awareness and knowledge building, which has happened in other parts of the world, and bring that in to try and improve the capacity and knowledge at the sub-national level. I think that's the second one. I think the third one is simply demonstration. So, you know, apart from capacity and knowledge, and putting guidelines and toolkits together, nothing is as good as actually doing a project. And therefore, what I would call an anchor, or a demonstration project has worked so well in so many parts of the world including Thailand. So, if we choose those priority sectors, everybody's talking a lot about oceans health right now. ADB has an Oceans Action Plan. So, I would say if we can pick demonstration projects in really new areas where things really need to happen, such as plastics, and management of that in waste, or very advanced cities and waste management. In those areas, doing and making an innovative finance project happen is a super lesson for replication by other cities. And I think that would be my third aspect, which I would really sort of urge, because capacity and knowledge must lead to projects. And if you can do a demonstration project, it can lead to a lot of replications.

Archawat Chareonsilp

It's very impressive, I think. I really appreciate the ADB to take this very holistic approach to sustainable finance, not only innovative products, but also support by the right structures, and also with aspiration to bring it to life through projects. So, you know, thank you so much for your time and your very valuable insight. We hope that soon we will be able to have you back here again, so that we can benefit from your wisdom. Thank you for your time.

Thank you very much.