In a bid to make environmental, social and governance (ESG) focused funds in Thailand more attractive to retail investors, the Thai government has approved several measures, including improved taxation, to buoy the struggling investment segment.

The Securities and Exchange Commission (SEC) of Thailand announced, following a cabinet meeting, that a resolution has been approved to revise the tax incentive measures for ESG funds. Under the revised measures, individual investors who buy into eligible Thai ESG funds will now be entitled to a tax break of up to 300,000 baht (US$8,586), up from the previous maximum tax deduction of only 100,000 baht.

Additionally, for purchases made from January 1 2024 to December 31 2026, the Thai government agreed to shorten the unit-holding period from the previous eight years to just five.

“These measures aim to promote the Thai capital market’s growth as well as build trust and confidence and promote long-term investments in the capital market via Thai ESG funds,” the SEC notes. “The ministry of finance will evaluate the outcomes of these tax benefit measures at the end of the next three years.”

Earlier in December 2023, Thailand launched the first 22 ESG funds under the new tax scheme. It announced at that time that it expects to raise some 10 million baht from investments into the said funds.

In the same announcement of the improved tax scheme, Pornanong Budsaratragoon, the SEC’s secretary-general, says that the SEC will tweak current regulations for ESG funds to support the additional tax incentives.

Beginning August, Thai asset management companies offering Thai ESG funds, Budsaratragoon says, will now be allowed to invest in shares of listed companies that have been evaluated by ESG ratings or were scored by providers other than the Stock Exchange of Thailand.

“This change aims to offer AMCs [asset management companies] more diverse reference alternatives when making investment decisions,” the SEC points out. “However, these ESG ratings/scores providers must have internationally recognized evaluation standards.”

As well, Thai asset management companies are urged by Budsaratragoon “to exercise their fiduciary duty by carefully considering ESG factors throughout the investment process for the benefit of unitholders.”

Specifically, the SEC called on asset management firms to incorporate ESG considerations when setting investment policies and strategies, as well as during the selection and monitoring of investments in quality businesses, to ensure that any such investments are truly sustainable, in line with the objectives of Thai ESG funds.