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

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

2.1.2 Deep dive into the adoption trends in 11 TCFD-recommended disclosures

Outliers in TCFD maturity scoring analysis

The TCFD maturity scoring indicates outliers in the trends. It highlights significant gaps and variations in climate-related disclosures across different financial subsectors in Thailand.

1. Governance – Management’s role in climate risk oversight

• There’s a significant gap in the disclosure of management’s role in climate risk oversight among financial firms. Asset management firms and commercial banks adhere more closely to TCFD guidance, while government banks and insurers offer only broad references. This suggests that asset management firms and commercial banks possess more structured governance frameworks, with management actively involved in assessing and integrating climate-related risks into decision-making. In contrast, government banks and insurers, potentially facing less external pressure, are slower in adopting governance practices for climate risk oversight.

2. Metrics and targets – Setting climate-related targets

• A similar trend is observed in the metrics and targets pillar, where asset management firms and commercial banks closely align their disclosures on setting targets for managing climate-related risks and opportunities with TCFD guidance. In contrast, disclosures from government banks and insurance companies remain limited. This discrepancy may stem from stronger investor-driven commitments in asset management firms and banks, whereas insurers and government banks may lack clear internal incentives to establish climate risk mitigation targets.

3. Metrics and targets – GHG emission disclosures

• The disclosure of GHG emissions, particularly for scopes 1 and 2, is high across the financial sector and aligns closely with TCFD recommendations – except in the case of insurance companies. On average, insurers offer only general discussions about GHG emissions with limited data and targets. Given their significant exposure to climate-related risks through underwriting and investments, these limited disclosures raise concerns about their preparedness for managing climate-related financial risks.

4. Strategy – Identification of climate change risks and opportunities

• Asset management firms are effectively disclosing the climate change risks and opportunities under the strategy pillar, aligning with TCFD guidance. However, commercial banks, government banks and insurance companies provide only partial disclosures. This disparity is likely driven by differences in internal capacity, regulatory pressures, and the extent to which climate considerations are integrated into strategic planning.

Key insights

In summary, the discrepancies in TCFD disclosure performance among various sub-sectors of the financial industry are primarily attributed to differing levels of external pressures. Commercial banks, and their asset management subsidiaries, face significant regulatory requirements from the BOT. In contrast, insurance companies experience less external pressure, contributing to their slower pace of TCFD adoption. Governmental banks, overseen by the State Enterprise Policy Office (SEPO), have fewer disclosure requirements compared to commercial banks, resulting in less robust climate-related transparency.

• Thailand’s asset management firms, particularly those subsidiaries of commercial banks, lead in TCFD disclosures.
  • This alignment is largely due to shared governance and strategic objectives within these financial groups. As a result, these asset management firms benefit from the established practices and regulatory compliance frameworks of their parent firms, enabling more effective implementation of TCFD recommendations.
  • Notably, some Thai asset management firms that are subsidiaries of commercial banks have published separate TCFD reports detailing their alignment with TCFD guidelines and the United Nations Principles for Responsible Investment, resulting in more detailed and framework-specific disclosures. As a result, asset management firms’ TCFD maturity levels often ranked higher in certain areas than their own parent companies.
• Following asset management firms, commercial banks in Thailand are the second-leading adopters of TCFD disclosures.
  • This is primarily driven by regulatory pressure from the BOT, which mandated that climate stress testing must be completed by the end of 2023. There also is rising investor demand to understand how banks are managing climate risks. Banks recognise that effective risk management, particularly of climate-related risks, is crucial for long-term sustainability and operational resilience.
• Thai governmental banks have been making progress towards their climate reporting, although they have yet to achieve the level of disclosures seen in commercial banks.
  • This discrepancy is largely due to the limited pressures they face from regulatory bodies and stakeholders compared to their commercial counterparts. While they are beginning to adopt these practices, the pace and depth of their disclosures aren’t as advanced, reflecting a need for stronger external drivers to enhance their climate-related transparency.
• Insurance companies in Thailand are in the nascent stages of sustainability reporting. Compared to other financial sectors, they have limited disclosures aligned with the TCFD recommendations.
  • This indicates broader challenges the insurance sector faces in integrating climate considerations into their business models. As the impacts of climate change become more significant, there’s an increasing need for insurance companies to develop robust sustainability frameworks to address these emerging risks.
     

Please stay tuned for the next episode, where we will share more on disclosure maturity of the Taskforce on Nature-related Financial Disclosures (TNFD) of Thai financial sector
 

Authors:

Chayathorn Chanruangvanich
ESG and Corporate Sustainability Leader, PwC Thailand

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