Domestic Bond: Thailand’s Bt30bn sustainability-linked bond
Thailand printed a remarkable first for the Asian market in November when it became the first sovereign borrower in the region, and just the third in the world, to sell a sustainability-linked bond.
The Bt30bn (US$874m) deal was a strategic first for the country, and one that was a long time coming. Discussions began in December 2023, but political changes in the following months meant the deal had to wait for a more stable backdrop.
For its first SLB, the kingdom used a 2.5bp step-up and step-down structure, after first debating a mechanism that would require it to purchase carbon credits instead. The government faced challenges identifying targets that aligned with its own ESG taxonomy as well as international standards, but settled on a 30% reduction in total greenhouse gas emissions and a more than quintupling in annual registrations of zero-emission passenger cars and pick-up trucks by 2030. The latter is seen as particularly aggressive, given that it would require the addition of 440,000 vehicles, up from the 70,000 registrations in 2023.
The transaction itself resembled a conventional sovereign bond sale, with guidance starting at 2.67%–2.79% for the 15.5-year note, about 6bp wide of the prevailing 15-year benchmark at the time. The trade was priced at 2.7%, about 3bp inside fair value, and was not seen to have any greenium.
However, it did attract more than Bt55.285bn in orders from asset managers, insurers, banks and some corporates. That demand came despite the lack of accounting clarity on how these bonds would sit on a company’s books, given the step-up and step-down adjustments.
Thailand’s investors have demonstrated an appetite for corporate SLBs and the country has led the way in Asia, since the Securities and Exchange Commission established guidelines in 2021 that brought the product to the corporate bond market. In 2024, three other baht-denominated SLBs were sold, and Thai Union Group succeeded in meeting its SLB targets for a bond sold in 2021, triggering what is thought to be the first SLB step-down globally.
Thailand has also been an issuer of sustainable bonds, and has laid out targets to reach carbon neutrality by 2050 and net-zero greenhouse gas emissions by 2065. It plans to issue Bt130bn of SLBs during the fiscal year ending in September 2025.
The government’s first SLB was an important vote of confidence in the products in South-East Asia and demonstrated the importance of these structures in supporting the funding of transition finance in hard-to-abate sectors.
Bangkok Bank, Bank of Ayudhya, Krungthai Bank and Standard Chartered were the underwriters.
To see the digital version of this report, please click here
To purchase printed copies or a PDF, please email shahid.hamid@lseg.com