SEC confirms Thailand ESG funds investment compliant with rules

The Securities and Exchange Commission (SEC) has confirmed that Thailand ESG Funds are in compliance with investment regulations. Notably, shares of Energy Absolute (EA) make up 0.35% of the Net Asset Value (NAV) of these funds. Despite EA being removed from the SET ESG Ratings due to allegations of fraud against its executives, the funds continue to adhere to the established guidelines.

Bangkok, 15 July 2024 – The Securities and Exchange Commission (SEC) reaffirms the investment practices of all Thailand ESG Funds comply with the diversification and investment rules, with the investment proportion in shares of Energy Absolute Public Company Limited (EA) accounting for 0.35 percent of the net asset value (NAV) of all Thailand ESG Funds combined. Following the recent criminal complaint filed against EA directors and executives, the SEC is emphasizing that all asset management companies are required to strictly comply with the Principles of Integrity, Diligence and Fiduciary Duty when selecting companies with good corporate governance to invest for Thailand ESG Funds as well as other types of mutual funds.  

Pursuant to the SEC’s rules, all Thailand ESG Funds are required to invest in companies operating sustainably and receiving SET ESG Ratings as eligible assets* at an average proportion of at least 80 percent of the NAV during any financial year. This is part of the mechanism driving Thailand’s sustainable development. However, in any event that an asset management company considers that any company has inappropriate corporate governance practice despite having received SET ESG ratings, as required, the asset management company must exercise its fiduciary duty and not consider such company as eligible asset for ESG investment in the average proportion of 80 percent of the NAV. In any case, the remaining ESG investment must remain in compliance with SEC’s investment rules for Thailand ESG Funds.

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In any event that an investee company is found to be lacking sustainability qualifications according to the rules governing Thailand ESG Funds, such investee company may remain in the Thailand ESG Fund portfolios as non-eligible assets at an average proportion of not more than 20 percent of the NAV during any financial year.  

At the end of May 2024, all Thailand ESG Funds have the collective NAV of 6,844 million baht. Of this, the investment value of EA shares totaled 24 million baht, accounting for 0.35 percent of the total NAV of all Thailand ESG Funds. The public can rest assured that all Thailand ESG Funds comply with the SEC’s investment rules regardless of EA shares not considered eligible assets for Thailand ESG Funds.  

For other mutual funds, the investment value in EA securities is equivalent to 0.06 percent of the total industry AUM. In all cases, asset management companies must exercise caution when considering appropriate investments. 

Mrs. Waratchya Srimachand, SEC Deputy Secretary-General, said: “Today, the Stock Exchange of Thailand (SET), by the Sustainable Investment Committee, has resolved to remove EA securities from the SET ESG Ratings List due to the company’s failure to meet the criteria. However, this will not affect investments of Thailand ESG Funds under the specified criteria. The SEC has been monitoring the situation and found that Thailand ESG Funds as well as other types of mutual funds have only a small proportion of investment in EA securities comparing to the AUM of the whole industry. But in any case, asset management companies must exercise discretion when selecting companies to invest, as deemed appropriate.” 

Source : SEC confirms investment of Thailand ESG funds complies with the governing rules