From environmental and social costs
to new investment opportunities
In an era where climate change has become an urgent global issue, and ESG (Environmental, Social, and Governance) principles have emerged as an international standard for assessing organizational sustainability, Thailand’s financial sector has developed an innovative financial solution that bridges blockchain technology with sustainability objectives.
This innovation, known as “Sustainability Tokens,” is a new dimension of investment opportunities, which not only generates financial returns but also delivers positive social and environmental impact simultaneously.
The Securities and Exchange Commission (SEC) classifies digital tokens into two main categories. The first is Utility Tokens, which function similarly to coupons or vouchers and can be used to redeem goods or services from the token issuer. The second is Investment Tokens, which are similar to securities, whereby token holders are entitled to receive returns from the underlying project, such as profit sharing or interest.
The Sustainability Tokens is classified as an Investment Token and can be categorized into four main types based on the objectives of the underlying projects:
- Green Token
Proceeds from the Green Token offering are utilized to invest in environmental projects, such as renewable energy, greenhouse gas reduction, forestry and water management, or green building developments. All funds raised will be allocated exclusively to environmental purposes.
- Social Token
Use of proceeds of Social Token are allocated to social development project.
- Sustainability Token
The Sustainability Token issuer allocates proceeds from the token offering to invest in both environmental and social development projects. The funds raised are utilized for projects that generate dual-positive impacts, such as sustainable infrastructure, environmentally conscious community, and sustainable agriculture initiatives.
- Sustainability-Linked Token
The Sustainability-Linked Tokens have specific terms and conditions linked to the achievement of Key Performance Indicators (KPIs) and Sustainability Performance Targets (SPTs) of the issuer, its affiliates, or projects.
The issuer is also required to utilize the proceeds to support sustainability-related activities through:
(1) Yield adjustment based on performance results.
(2) Operational obligations aligned with the sustainability goals or strategies of the issuer, its affiliates, or the projects.
Enabling Thai ESG Funds to Invest in Digital Tokens
On 30 April 2025, the Securities and Exchange Commission (SEC) initiated a public hearing regarding the amendment of regulations for the Thailand ESG Funds (Thai ESG) and Thailand ESG Extra Funds (Thai ESGX). Key considerations related to sustainability digital tokens include:
Adjustment of Investment Criteria for Sustainability Tokens
The SEC has updated the regulatory framework to align with the criteria for offering sustainability tokens, as well as the general investment rules applicable to mutual funds, including those providing tax benefits. As a result, Thai ESG and Thai ESGX funds are now able to fully invest in sustainability tokens.
Thai ESG Fund Investment Policy
Thai ESG Funds are required to invest, on average over an accounting year, no less than 80% of their net asset value (NAV) in assets of Thai businesses or government entities. These investments may include:
- Equities: Companies listed on the SET or those recognized by international sustainability assessors for excellence in Environmental (E) or ESG performance
- Sustainability Bonds: Investment grade Green Bonds, Sustainability Bonds, or Sustainability-Linked Bonds
- Sustainability Investment Tokens: Green Project Tokens, Sustainability Project Tokens, and Sustainability-Linked Tokens issued in accordance with the Emergency Decree on Digital Asset Business
Attractive Tax Benefits
Investments in Thai ESG Funds offer attractive tax incentives for individual investors. Investors may claim a tax deduction of up to 30% of assessable income, capped at THB 300,000 per person per year, for investments made between 1 January 2024 and 31 December 2026. A minimum holding period of 5 years is required.
- Transparency: All transactions are recorded on the blockchain and are fully traceable, providing investors with confidence that the funds raised are utilized in accordance with the stated objectives.
- Accessibility: Retail investors gain investment opportunities in sustainability projects, which were previously limited primarily to institutional investors or high-net-worth individuals.
- Liquidity: Digital tokens can be traded in secondary markets, offering higher liquidity compared to traditional project-based investments.
- Fractionalization: Enabling individual investors to invest in large-scale projects with relatively smaller investment amounts.
- Efficiency: Fundraising processes and return distributions can be automated through smart contracts, reducing operational costs and time.
Challenges in Investing in Sustainability Tokens
While sustainability tokens offer significant potential, there are several challenges that must be considered:
- Technology Risk: Blockchain technology remains complex and may pose data security risks
- Price Volatility: Digital tokens can be highly volatile, which may not be suitable for all types of investors
- Greenwashing: There is a risk that some projects may claim to be environmentally friendly without delivering real impact; therefore, robust verification standards are essential
- Secondary Market Liquidity: Liquidity may be limited during the initial stages of market development
- Evolving Regulations: The regulatory framework for digital tokens is still developing, which may lead to regulatory changes affecting investments.
Future Outlook: From Environmental Costs to Investment Opportunities
Sustainability tokens reflect a significant paradigm shift in how environmental and social costs are perceived. Once viewed as a burden, these responsibilities are now being transformed into value-driving investment opportunities.
The decision by the Securities and Exchange Commission (SEC) to allow Thai ESG funds to invest in sustainability tokens, along with tax benefits of up to THB 300,000 per person per year, enhancing the attractiveness of this investment option, providing both financial returns and social impact.
For Thailand, which aims to achieve carbon neutrality by 2050 and net zero greenhouse gas emissions by 2065, the development of green financial markets through sustainability tokens will serve as a key mechanism for mobilizing capital to support projects essential to achieving these goals.
Younger investors, particularly Millennials and Generation Z, who place high priority on sustainability, will be the primary force driving the market growth. Sustainability tokens are not only a financial innovation; the token is a transformative tool for building a sustainable future for society and the planet.
References
- https://www.sec.or.th/Documents/PHS/Attach/982/hearing152567s1.pdf
- ThailandESG.com – “Thailand ESG Fund”
- Tilleke & Gibbins – “Thailand Issues Notifications on Sustainability-Related Tokens”