Thai ESG funds to attract THB20 to 30 billion to capital market

The Securities and Exchange Commission (SEC) is confident that the revised rules on investment in the Thai environment, social and governance funds, also known as Thai ESG funds, will help attract from 20 to 30 billion baht to the Thai capital market during the remainder of this year.

The revised rules, proposed by the Finance Ministry, were approved during the Cabinet meeting on Tuesday.

The new rules offer investors tax deductions of up to 300,000 baht or up to 30% of their income with a holding period of five years, compared with the current holdings of up to 100,000 baht and eight years, respectively.

The new rules also allow Thai ESG funds to invest in securities at up to 80%, while the remaining 20% can be invested in bonds and investment tokens.

SEC secretary-general Pornanong Budsaratragoon said on Tuesday that the Thai ESG fund under the revised rules will be a positive factor in improving the Thai stock market.

“The Thai ESG funds will help inject mostly new investment capital to the stock market, since there are currently not many green and sustainable bonds available and the offer on sustainability investment tokens has yet to start,” she said.

Pornanong expressed confidence that in the remaining four months of this year, the Thai ESG funds will attract from 20 to 30 billion baht of investment capital.

The current Thai ESG funds, comprising 23 funds and some 90,000 holders, have about 7 billion baht of capital after initial public offering five months ago.

Besides revising the rules for Thai ESG funds, the Finance Ministry is also considering improving rules on the existing Vayupak Funds, which make up the bulk of the state-owned securities. The VAYU 1 and VAYU 2 funds, aimed at small investors and institutes, currently stand at around 350 billion baht.

Finance Minister Pichai Chunhavajira said last month that the ministry is looking into the possibility of establishing a VAYU 3 fund for the general public.

The ministry estimated that under improved rules, these three funds could attract another 150 billion baht to the market, which would up the entire value of Vayupak Funds to half a trillion baht.

However, increased tax deductions from these funds are expected to cost the government around 3 billion baht in tax revenue in the first year, and around 10 billion baht in the following years.