Taskforce on Nature-related Financial Disclosures (TNFD) maturity in the Thai Financial Sector EP.2 (1/2)

2. Results of TCFD and TNFD maturity analysis of a selection of the Thai financial services sector EP.2 (1/2)

2.1.1 Disclosure maturity of the TCFD pillars

Overall maturity of TCFD disclosures

The Thai financial sector, on average, has shown progress by partially aligning with TCFD recommendations. Based on the results, asset management firms and commercial banks lead the way in TCFD disclosure maturity.

The results show that the Thai financial services sector, as a whole, is strong at reporting disclosures under the TCFD governance and risk management pillars but is far weaker at reporting under the strategy pillar. This indicates that current reporting on climate is primarily focused on making some form of public disclosure, but doesn’t yet link the reporting to how climate risks and opportunities are integrated within business decision-making and strategy. The impact of climate considerations within business strategy and decision-making will become more apparent when the quantification of financials become standardised and mandatory, with TCFD reporting moving to IFRS S2.

Figure 1: Average score of climate-related disclosures according to the TCFD (Task Force on Climate-related Financial Disclosures) across business groups in Thailand’s financial sector

^{Sources: PwC’s analysis}

• Asset management firms and commercial banks lead the way in climate reporting within Thailand’s financial sector, with many partially adhering to TCFD guidance. This maturity in disclosure is driven by the integration of climate-related issues into governance structures, risk management frameworks, along with the use of climate-related metrics and targets in reporting. In contrast, government banks and insurance companies are in the early stages of disclosure, primarily providing high-level descriptions of climate-related risks with limited depth, particularly in identifying the impact climate-related risks and opportunities on business, strategy and financial planning.
• Governance is the area most aligned with TCFD in the financial sector, reflecting a strong focus on board oversight and management responsibilities in addressing climate-related issues. Boards and senior management in financial firms are increasingly incorporating climate-related responsibilities into their oversight functions. Also, evolving regulatory and stakeholder pressures are driving the formalisation of climate-related policies and committee structures.
• Risk management related to climate risk is well-disclosed, with financial firms either closely or partially aligning with TCFD recommendations. Firms disclose their processes for identifying and assessing climate-related risks, including consideration of existing and emerging regulatory requirements. They also describe how these processes are integrated into their overall risk management frameworks and their strategies for mitigating, transferring, accepting or controlling these risks. Stronger climate risk disclosures are driven by regulatory requirements, alignment with existing risk management practices, and growing investor expectations within Thailand’s financial sector.
• Businesses often fall short in disclosing their strategies around integrating climate considerations into their planning in accordance with TCFD guidelines. While most firms report on greenhouse gas (GHG) emission reduction commitments, they provide little to no information on how they identify climate risks and opportunities, assess their financial impacts, or conduct climate-related scenario analyses, including time horizons and qualitative or quantitative financial implications. As a result, many firms struggle to translate high-level climate commitments into concrete business strategies. Furthermore, the limited adoption of scenario analysis makes it difficult for firms to assess and disclose the long-term financial impacts of climate risks.
   

Please stay tuned for the next episode, where we will share more on the adoption trends in TCFD-recommended disclosures of Thai financial sector
 

<sub>Remark: Guidance on how to interpret the charts above;
- The four colours in the chart represent different financial subsectors, while the black bar indicates the average performance of the whole Thai financial sector.
- The height or width of the bars for each subsector reflects how well that subsector has aligned its reporting disclosures with the TCFD framework. For example, a wider or taller dark orange bar signifies that asset management firms are more aligned with TCFD compared to the narrower or shorter pale orange bars representing insurance companies.
- The numbers shown represent the average scores for each subsector in terms of alignment with TCFD recommendations across each pillar. Higher scores indicate better compliance, with a maximum score of 4 indicating full alignment and a score of 0 indicating no disclosure.
- The orange dashed outline indicates that, on average, financial firms demonstrate outstanding performance in disclosing according to the TCFD recommendations for that specific pillar or sub-pillar. Conversely, the grey dashed outline highlights areas where the Thai financial sector still has room for improvement in that pillar or sub-pillar.</sub>

Authors:

Chayathorn Chanruangvanich
ESG and Corporate Sustainability Leader, PwC Thailand

Perpetua George
Director, Asia Pacific Sustainability, Nature & Biodiversity, PwC Malaysia