Thailand issues 130 billion baht sustainability-linked bond

Director-general Patchara Anuntasilpa announced that Thailand’s Public Debt Management Office (PDMO) will issue a 130 billion baht sustainability-linked bond for fiscal 2025.

Key takeaways

• The Thai PDMO plans to issue a 130 billion baht sustainability-linked bond for fiscal year 2025, targeting institutional investors interested in sustainable finance.
• The SLB links interest rate adjustments to Thailand’s environmental goals, including reducing CO₂ emissions and increasing electric vehicle adoption by 2030.
• The bond aligns with international standards, reinforcing Thailand’s commitment to the Paris Agreement and long-term carbon reduction targets.

The first issuance of the SLB, with an initial value of 20 to 30 billion baht, will be conducted this month and will include the SLB406A series.

This bond series has a 15-year maturity and is designed to attract institutional investors, particularly insurance companies and cooperatives, which have shown growing interest in sustainable investments.

The proceeds will be used to fund projects aimed at reducing greenhouse gas emissions.

Here are some key details about the bond:

• Value: 130 billion baht (approximately $3.9 billion USD)
• Issuance date: November 2024
• Tenor: 15 years
• Purpose: Funding projects focused on reducing greenhouse gas emissions and supporting electric vehicle use.

Four banks have been appointed as underwriters: Bangkok Bank, Krungthai Bank, Bank of Ayudhya, and Standard Chartered Bank (Thai).

The book-building process will take place on November 19, with the bond’s final issuance scheduled for November 25.

This SLB stands out for being tied to two key national goals for sustainable development: reducing greenhouse gas emissions by 388,000 tons of CO₂ equivalent by 2030 and increasing battery electric vehicle (BEV) usage to at least 440,000 vehicles per year by the same year, a significant increase from the current approximately 70,000 BEVs in circulation.

To ensure accountability, the SLB incorporates an interest rate adjustment structure. If Thailand fails to meet either of the goals, the bond’s interest rate will increase by 2.5 basis points per unmet target.

If both targets are missed, the total increase will be 5 basis points. For instance, if the SLB’s original rate is 2%, and both goals are unmet, the rate could rise to 2.05%. Conversely, if the goals are achieved, the rate will be reduced by 2.5 basis points per target met.

The PDMO currently has outstanding sustainability bonds amounting to 480 billion baht, and this latest issuance reinforces the Thai government’s commitment to financing projects with a long-term positive impact on the economy and the environment.

Patchara also mentioned that after presenting this year’s issuance plan to domestic investors, the office will conduct a roadshow for foreign investors in Hong Kong and Singapore next week, highlighting the SLB’s alignment with sustainability standards set by the International Capital Market Association and the ASEAN Capital Markets Forum.

The bond has already been verified by DNV, a global second-party opinion provider ensuring compliance with sustainability principles.

This initiative aligns with Thailand’s commitments under the Paris Agreement, which include a 30-40% reduction in carbon emissions by 2030, based on the current level of 555 million tons, as well as targets for carbon neutrality by 2050 and net zero emissions by 2065.