The Kingdom of Thailand ( KoT ), acting through the Ministry of Finance ( MoF ), issued on November 25 its inaugural sustainability-linked bond ( SLB ) amounting to 30 billion baht ( US$870 million ), representing the first of its kind from a sovereign issuer in Asia.

The bond has a tenor of 15.5 years plus 23 days with a coupon rate of 2.70%. The offering featured two key performance indicators ( KPIs ) relating to total greenhouse gas ( GHG ) emissions and annual registration of zero electric vehicles ( ZEV ) cars and pick-up trucks.

To ensure accountability, the SLB incorporates an interest rate adjustment structure. If KoT fails to meet either of the KPIs, there is a 2.5bp coupon step-up per unmet target. If both targets are missed, the total increase will be 5bp. Conversely, if the goals are achieved, the rate will be reduced by 2.5bp.

The first sustainability performance target ( SPT ) involved achieving total GHG emissions of 388,500 kilotonnes of carbon dioxide equivalent in 2030, which represents a reduction of 30% from "business as usual" scenario in the same year, while the second SPT calls for an increase in annual registration of ZEV passengers and trucks by 476% by 2030, equivalent to 440,000 passenger cars and pick-up trucks.

The initiative is aligned with KoT’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 tonnes, as well as targets for carbon neutrality by 2050 and net zero emissions by 2065.

National initiatives

With the incorporation of a green mobility KPI on a nationwide scale, the SLB supports Thailand’s national initiatives around decarbonization and the development of the EV industry. It reinforces KoT’s 2030 decarbonization targets while aligning with its position as a regional auto manufacturing hub.

The transaction, which was upsized from the initial amount of 20 billion baht after exercising the greenshoe option of 10 billion baht, attracted demand from both local and international investors with over 40 accounts participating in the deal. The diverse investor base includes government-related funds, asset management companies, insurance companies, banks, securities companies and cooperatives

The SLB bond is part of the 130 billion baht plan the Public Debt Management Office is eyeing to issue for fiscal year 2025 ending September 2025.

Bangkok Bank, Bank of Ayudhya, Krungthai Bank and Standard Chartered ( Thai ) acted as the joint structuring advisers, bookrunners and lead arrangers for the transaction, while DNV ( Thailand ) was the second party opinion provider.

The MoF issuance of SLB follows its three offerings of sustainability bonds between August 2020 and September 2022 totalling 85 billion baht, the proceeds of which were used to finance mass transit railway projects and address the social impact of the Covid-19 pandemic.