Clean energy gap presents investment opportunities for banks

Krungsri and CIMB Thai explore use of emerging tech to monitor risks better.

There is still a gap between the production of clean and renewable energy in Thailand and targets, and banks are challenged with bridging this to meet Thailand’s sustainability-related goals.

The Bank of Thailand (BOT) has identified the transportation and energy sector as the focus of local banks for greener financing and activities, which in turn presents opportunities for investments in the sectors.

But despite Thai banks being willing to invest in greener projects, there aren't enough sustainable projects to finance, said Jamjun Siriganjanavong, head of Debt Capital Markets and ESG Finance Department, Bank of Ayudhya (Krungsri). 

“I would say that it's never enough because we have our ambitious target,” Siriganjanavong told attendees of the Asian Banking & Finance Forum held in Bangkok, Thailand in May 2024 during a panel hosted by Saurabh Dhingra, EY-Parthenon Asean Financial Services Strategy Leader.

Fellow panelist Dr. Nongnuch Tantisantiwong, head of Enterprise Risk and Infrastructure, CIMB Thai Bank, echoed this. Tantisantiwong noting that the share of renewable energy in ASEAN countries remains low.

The annual investment required to achieve the next year or 2050 and say that the annual investment would require about like $14t USD a year.That's quite a lot,” Tantisantiwong said.

Beyond the number of projects available, the lack of knowledge on driving greener financing activities is a big issue.

“One of the issues that I find quite challenging is the capacity and the knowledge of the staff. Another issue is about the pricing of the products,” she said. 

Customers who are going to transition face having higher costs. This meant that they would require support from banks.

One way that lenders can encourage companies to transition is to offer incentives, such as lower pricing, or offering termas and conditions that favor their projects,  Tantisantiwong said.

The problem is identifying how to price them.

“How could we know the right price? We don't know the size of the impact. We don't know whether the project will produce new technology successfully to reduce carbon emissions; or how much carbon emissions reduction could be created from the project itself,” she said, on the challenges of offering incentives.

Risk monitoring is another issue. 

Both Tantisantiwong and Siriganjanavong, however, said that technology will be a key enabler in monitoring climate change risks and opportunities.

“We are adopting a lot of new technologies, whether it's artificial intelligence or machine learning, to be able to monitor climate change risks and opportunities. We are also investing in new technologies to be able to monitor the climate change risks and opportunities,” Tantisantiwong said.

Siriganjanavong added that they are exploring hte use of blockchain and distributed ledger technology to enhance the transparency and traceability of sustainable finance transactions.

“We are investing a lot into our technology infrastructure to be able to collect, analyze, and report the climate-related data that is required for regulatory reporting as well as for decision making,” she said.

“I think technology is going to play a very important role in driving the sustainable finance agenda forward,” she concluded.