ESG Due Diligence
Presented by Picharn Sukparangsee
At the conference on Due Diligence Top Secrets for M&A, JV & IPO
Arranged by OMEGAWORLDCLASS
On 18 March 2025 At Grande Centre Point Ratchadamri Bangkok
Download: ESG Due Diligence presentation slides dated 18 March 2025_Bangkok Global Law
What is ESG?
Evolution of ESG
Why does ESG matter?
International ESG goals
UN Sustainable Development Goals (SGDs)
- 17 global goals set by the UN to address social, environmental, and economic challenges by 2030.
- Aligning with SDGs enhances corporate sustainability, improves brand reputation, attract ESG investors, and ensures compliance with evolving global regulations
International ESG standards
Global Reporting Initiative (GRI)
One of the most widely used sustainability reporting frameworks
- Focus on stakeholder-driven reporting by providing standardized guideline for companies to disclose ESG impacts.
- Aligns with global sustainability goals (SDGs, other ESG frameworks).
- Many Thai-listed companies use GRI for sustainability reports.
Key GRI Reporting Standards
International ESG standards
Task Force on Climate-related Financial Disclosures (TCFD)
- Established by the Financial Stability Board (FSB) in 2015 to improve transparency in financial markets
- A global framework for climate-related financial risk disclosure
- Commonly conducted by investors, financial institutions, and large corporations.
- Thai banking and energy companies use TCFD in disclosures.
Core Disclosure Areas
- Governance: How a company’s board and management oversee climate-related risks and opportunities.
- Strategy: The actual and potential impacts of climate-related risks on business strategy, financial planning, and resilience
- Risk Management: How a company identifies, assesses, and manages climate-related risks.
- Metrics and Targets: The specific metrics, targets, and performance indicators used to assess and manage climate risks.
International ESG standards
Corporate Sustainability Reporting Directive (CSRD) & European Sustainability Reporting Standards (ESRS)
- CSRD is an EU regulation replacing the NFRD (Non-Financial Reporting Directive).
- ESRS are mandatory standards under CSRD.
- Focuses on double materiality (financial + societal impact)
- Thai exporters to the EU (e.g., food, manufacturing) might need CSRD-aligned reporting.
- Some Thai firms are adopting ESRS voluntarily to meet investor expectations.
Key Features:
- Mandatory for EU companies & large non-EU companies
- Requires third-party assurance (audit)
- Aligns with GRI and TCFD
International ESG standards
The Corporate Sustainability Assessment (CSA)
- A framework developed by S&P Global to evaluate a company’s ESG performance.
- It is primarily used for determining companies’ inclusion in the Dow Jones Sustainability Indices (DJSI) and other ESG-related investment indices.
- Assesses industry-specific ESG performance.
Features:
- Voluntary but highly valued by investors
- Evaluates ESG risks, strategy, and impact
- Many Thai listed companies participate in CSA for DJSI rankings
- Thai firms use CSA to enhance ESG credibility for global investors
ESG in Thailand
Key government initiatives and regulations:
The SET has introduced the Bio Circular Green (BCG) model based on the philosophy of sufficiency economy and ESG model. Various sectors are encouraged to adopt these models on a voluntary basis.
The ESG and BCG models both address SDGs in different buy complementary ways
ESG in Thailand
Key government initiatives and regulations:
THSI and SET ESG Ratings
In 2015, Stock Exchange of Thailand (SET) has launched the Thailand Sustainability Investment (THSI) which comprises of the listed companies that create long-term returns by valuing their ESG performance.
In 2023, THSI changed to “SET ESG Ratings” and announced the SET ESG assessment results to provide more comprehensive information to support investment decisions.
- Companies must pass the Eligibility and Qualification Criteria.
- Assess listed companies’ sustainability performance in 4 aspects: Policy, Process, Performance, and Disclosure.
- In accordance with the GRI standards and the SDGs.
- Encourage listed companies to disclose their ESG aspects on voluntary basis.
Benefits from SET ESG Ratings
- A benchmark for comparing ESG performance to invest or improve
- Support stock analysis, valuation, and investment advisory
- Provide insights for developing ESG-focused investment products
- Facilitate engagement with companies to promote ESG considerations
- Strengthen competitiveness and attract investors by demonstrating sustainability commitments
Securities and Exchange Commission (SEC) measures on ESG
1.ESG disclosure guidelines and requirements
- One Report and 56-1 One Report: Since 2022, the SEC has required listed companies to disclose and report ESG information in their Annual Report to reflect sustainable business practices.
2.ESG disclosure standards and international standards alignment
- The SEC encourages listed companies to disclose ESG risks following the TCFD, GRI, and SASB frameworks for ESG reporting.
3.Sustainable finance and green taxonomy
- The SEC is developing the “Thai Green Taxonomy” in collaboration with the BOT and the Ministry of Finance.
- Promotes the issuance of ESG-related bonds for companies seeking funding for sustainability-related projects
4.Corporate Governance (CG Code) guidelines
- The SEC mandates listed companies to follow the Principles for Good Corporate Governance (CG Code).
- Encourages companies to disclose Net Zero and Carbon Neutrality Targets in their reports.
5.Regulatory enforcement and support measures
- The SEC reviews ESG disclosures of listed companies and take legal action on false or misleading information
- The SEC has initiatives to support SMEs integrate ESG practices into their business operations
Bank of Thailand (BOT) ESG-related financial policies
1.Sustainable Banking Guidelines
- Encourages ESG integration in banking operations, focusing on responsible lending and financial literacy
- Promotes sustainable finance
- Thailand Taxonomy in collaboration with SEC
2.ESG risk integration into supervisory framework
- Incorporates ESG factors into supervisory framework, including climate-related risk assessments and scenario analysis
3.Development of a National Taxonomy for sustainable activities
- Classifies environmentally sustainable economic activities, starting with energy and transportation sectors
4.Promotion of ESG data disclosure
- Encourages financial institutions to align ESG disclosures with international standards.
5.Participation in International ESG initiatives
- Engages in initiatives to address climate-related financial risks.
6.Internal sustainability practices
- Publishes annual sustainability reports detailing the BOT’s ESG efforts
Specific ESG regulations:
Environment aspects (1)
- The Energy Conservation Promotion Act B.E. 2535
- Fundamental energy management law in Thailand.
- Designated factory or building is required to appoint person responsible for energy and implement energy management system.
- Enhancement and Conservation of National Environmental Quality B.E. 2535
- Fundamental environmental law in Thailand to regulate pollution issues (air, water, waste management), noise and vibration, and Environmental Impact Assessment (EIA) scheme, which is an obligation for specific type of industrial projects.
Specific ESG regulations:
Environment aspects (2)
- Clean Air Management Bill / Climate Change Bill
- Marks a significant milestone in Thailand’s environment and public health policies by recognizing the right to clean air as a fundamental right in order to address PM 2.5 pollution
- Emphasizes public participation, stringent control mechanisms and utilization of economic instruments and measures
- The Bill include mandatory reporting requirements, emission caps, and penalties for non-compliance.
- Create financial incentives for companies to reduce their emissions
Climate Change Bill
- Reduce GHG emissions and establish a legal framework to address GHG emissions
- Introduces the Emissions Trading System (ETS), carbon credits, and a carbon tax
Specific ESG regulations:
Governance aspects
- Corporate Governance (CG) Code for Listed Companies (2017)
- Outlines best practices for board structure, transparency in decision-making, and risk management.
- Public Limited Companies Act (1992)
- Mandates the companies to establish clear governance frameworks, including the formation of audit committees and the implementation of internal control to prevent fraud and corruption.
- Organic Act on Anti-Corruption B.E. 2542 and the United Nations Convention against Corruption (UNCAC)
- Thailand ratified UNCAC in 2011 to combat bribery and corruption.
- Companies must ensure compliance with these laws to avoid penalties, including hefty fines and criminal prosecution for executives involved in unethical practices.
- Anti-Money Laundering Act and Anti-Corruption Act
- Promotes corporate transparency, ethical business conduct, and accountability
- Helps create a fair and ethical business environment, ensuring equal opportunities, protecting stakeholders.
ESG implementation in Thailand
ESG adoption trends in Thailand:
- Rising ESG integration
Thai businesses increasingly embrace ESG for sustainability and investment appeal, led by large corporations in energy, banking, and manufacturing. SMEs are gradually adopting but at a slower pace.
- Regulatory alignment
Thailand is aligning ESG regulations with global standards, adopting frameworks like TCFD (2021) and promoting UN SDGs in corporate strategies.
- Financial sector initiatives
The Bank of Thailand and SEC encourage responsible lending and ESG-aligned investments, mirroring global trends like the EU SFDR, strengthening Thailand’s position in sustainable finance.
Example of Environmental aspect: PTT Global Chemical PCL’s Environmental TCFD report
PTT Global Chemical (GC) PCL has produced TCFD report which enables stakeholders to have a good understanding of how the business is managing climate change and how the company might perform in a changing climate world.
- The report contains all the TCFD recommendations – Governance, Strategy, Risk Management, and Metrics and Targets. The report also presents the GHG emissions.
Source: sustainability.pttgcgroup.com/storage/document/climate-change-strategy-and-target/tcfd-report-2021-en.pdf
Example of Social Aspect: Kasikornbank’s sustainability report (2020)
Kasikornbank provides a clear statement on its responsibility to manage human rights and has a commitment that its operation will be run align with the United Nations Guiding Principles (UNGP) on business and human rights.
- The report publishes the steps of the UNGP, stating its operations are in line with the framework.
Example of Governance aspect: Airports of Thailand PCL’s board skills matrix
The Airports of Thailand (AOT) PCL’s board skills matrix is effective in competencies each board member has and how those competencies feed into each of the board committees. It is noted that the skills explicitly features sustainable development.
Source: airportthai.co.th/wp-content/uploads/2020/05/Skill-matrix-22-April.20.pdf
Challenges in ESG implementation
Inconsistent enforcement
- Some sectors face weak enforcement of ESG regulations leading to compliance gaps.
- Small businesses may bypass environmental regulations due to inadequate monitoring.
Regulatory compliance challenges
- Companies struggle with evolving ESG regulations and unclear industry-specific guidelines.
- Global standards may conflict with local policies, complicating compliance.
Cost implications and financial constraints
- ESG initiatives require high investment in technology, training, and reporting systems.
- SMEs face financial challenges and may need government support for ESG compliance
Data collection and reporting difficulties
- Companies lack standardized data and infrastructure for accurate ESG reporting.
- Ensuring consistent ESG data across supply chains remains a significant challenge.
ESG Due Diligence
What is ESG Due Diligence (DD)?
- A process to assess ESG risks and opportunities before investments, mergers, or business decisions.
- It is considered as the potential partner selection and assessment whether the target align with their own ESG goals.
- Ensure compliance with sustainability regulations and responsible business practices.
- The result of ESG DD is a critical component in the decision-making process and value assessment of the M&A transaction.
ESG DD serves multiple functions in a business environment, such as:
- ESG DD in investment decision
- Companies with strong ESG metrics/standards often attract favorable investment terms
- Strategic and financial investors with long-term value creation seek companies with ethical, sustainable, and well-governed policies.
- ESG DD in supply chain
- The effective ESG strategies help mitigate long-term risks for the organization.
- ESG DD should be applied to validate existing suppliers and in onboarding new suppliers.
Advantages and benefits of conducting ESG DD
For investors:
- Price negotiation and ESG premium
Investors can leverage ESG DD findings to negotiate better pricing, either obtaining a discount for ESG risks identified or justifying a premium for companies with strong ESG performance.
- Value enhancement opportunities
Identifying ESG improvement areas allows investors to add value post-investment by implementing strong and sustainable practices, improving operational efficiency, and strengthening stakeholder relationships.
- Quantification of post-acquisition cost in M&A process
ESG DD provides clarity on potential post-acquisition costs (e.g., environmental remediation, compliance upgrades, or reputational recovery, allowing for better risk assessment and integration planning)
- Better return, compensation expected
Companies with strong ESG performance tend to demonstrate lower volatility, better risk management, and stronger long-term financial returns, making them attractive investment opportunities.
For companies:
- Risk mitigation – By complying with the ESG standards, companies can key risks as following:
- Reputation risk – ESG compliance builds trust with key stakeholders, enhancing brand value, and reducing the risk of reputational damage
- Regulatory risk – ESG DD ensures adherence to strict regulatory standards, avoiding penalties and legal consequences, as sustainability becomes a major global regulatory focus.
- Financial risk – Compliance with ESG standards mitigates the financial losses from fines, legal actions, and operational inefficiencies.
- Strategic risk – ESG-driven businesses attract long-term strategic partnerships, enhance market positioning, and support inorganic growth through sustainable mergers, acquisitions, and joint ventures.
- Competitive advantage and improved stakeholder relations
Embedding ESG principles into a company’s culture creates a competitive advantage, leading to greater market share, stronger customer loyalty, and heightened investor interest. In addition, it also fosters trust, creditability, and collaboration with key stakeholders.
- Sustainability goals
By conducting ESG DD, it helps achieve the United Nations’ Sustainable Development Goals (SDGs), which also offer the benefit of gaining recognition and attracting new customers and investors.
General key steps of ESG DD:
1.Verification of documents and Q&A sessions
- The ESG DD process begins with the target company providing relevant documents and data in a virtual data room for review.
- These documents include environmental reports, labor policies, corporate governance frameworks, regulatory compliance records, and sustainability reports.
- After document verification, a Q&A session follows to clarify ESG-related concerns, ensuring transparency in the company’s sustainability practices.
2.Discussion with key personnel
- Meetings with key stakeholders, including executives, sustainability officers, and compliance teams, are essential to assess how ESG principles are embedded in corporate strategy.
- This step helps evaluate leadership commitment, corporate policies, and real-world ESG impact across the organization.
- Background Inspection
- Conducting a background check on key personnel and company history ensures no prior ESG violations, unethical practices, or ongoing legal issues related to environmental, social, or governance misconduct.
- This includes reviewing litigation records, regulatory sanctions, and ethical concerns that could pose risks to investors and business partners.
- Review of Financials and Transactions
- A financial assessment is conducted to identify any hidden ESG liabilities, such as environmental fines, litigation costs, or operational risks from unsustainable practices.
- Transactions are analyzed to check if they align with ESG principles or involve questionable practices, such as funding from unethical sources or transactions linked to high-risk industries (e.g., fossil fuels, deforestation, exploitative labor).
- Background Inspection
- On-site inspections are critical, particularly for manufacturing and industrial operations, to assess actual compliance with environmental regulations, labor laws, and corporate governance standards.
- This step ensures that the company’s ESG reports accurately reflect real-world conditions, preventing greenwashing or misrepresentation.
- ESG Risk Assessment
- The final step involves conducting a comprehensive ESG risk assessment, identifying potential risks related to environmental sustainability, social responsibility, and governance integrity.
- A risk matrix is prepared to quantify ESG risks and opportunities, helping investors and businesses make informed decisions regarding risk mitigation strategies, compliance frameworks, and future ESG improvements.
Examples of check list questions for environmental aspect
- Does the company disclose its total water withdrawal, proportion of water recycled, and total energy consumed?
- Does the company disclose its total waste from its operations?
- Does such organization have an internal policy that manages climate change, sustainability, waste management etc?
- Is there any specific team that looks after Environment component of ESG? It is headed by whom? And who looks after the routine aspects of such segment?
- Please illustrate the waste management process in detail.
- Were there any regulatory breaches that have harmed the environment? If yes, then what were the mitigatory steps taken to curtail the same in future?
Examples of check list questions for social aspect
- Does the company disclose its workforce composition by gender?
- Any survey conducted among employees regarding their satisfaction, complaints etc.? How frequently is the survey conducted?
- Please confirm if the organization adheres to the minimum wage and other regulatory requirements.
- Does the company disclose its wages paid, injury rate, fatality rate?
- Does the organization have an internal health and safety policy and how often does it get renewed?
- Does regular inspection take place regarding product quality and health. Any instances incurred regarding product deterioration ?
Examples of check list questions for governance aspect
- Does the company disclose the proportion of women on the Board?
- Does the company disclose on decentralization of authority of the President/CEO?
- Does the company disclose if the Board receives training on ESG issues?
- What are the corporate governance policies in place? Were there any violations in implementing the same?
- What is the composition of board? Are there any dedicated members from the board who look after ESG matters?
- Has there been any corruption, bribery or any other fraudulent charge imposed in the past or any ongoing litigation on the matters mentioned?
- Does the company have a published anti-corruption policy?
- Does the company have a published insider trading policy?
- Does the company have a published conflicts of interest management policy?
- Has any training session been conducted to educate the employees on corporate governance and anticorruption/fraud policies?
Future of ESG in Thailand
Progressive Legal Developments
- New environmental regulations (e.g., Climate Change Bill , Clean Air Management Bill ) will impose stricter obligations on businesses.
- Stricter limitation of GHG emissions, report pollution data, and comply with higher accountability standards.
- More legal actions and obligations as business adapt to new compliance requirements.
Proactive Enforcement
- Regulators are actively enforcing laws, especially on listed companies that impact public interests.
- Non-compliance will be swiftly identified and penalized through effective legal actions.
- Business must strictly adhere to regulations to avoid accusations, fines, and sanctions.
Global Trends and Stakeholder Activism
- Investors, consumers, and NGOs are increasingly focused on ESG compliance and corporate responsibility.
- Stakeholder activism is rising, leading to lawsuits against companies which are unethical or illegal.
- Companies must adopt stronger ESG measures to mitigate legal risks and align with international sustainability trends.
Emerging ESG Opportunities
- Green finance & sustainable investments – Thailand is experiencing a surge in green finance, with growing investments in eco-friendly projects, green bonds, and sustainable infrastructure, driven by the Green Taxonomy and government policies.
- Carbon Credit Markets & Renewable Energy – The expansion of Thailand’s carbon credit market and renewable energy policies presents opportunities for businesses in emission reduction, solar, wind, and bioenergy sectors.
- ESG-Driven innovation & technology – Companies are adopting green technologies (e.g., EVs, smart grids, and carbon capture solutions, to enhance environmental performance and competitiveness)
The role of businesses in driving ESG forward
- Public – Private Collaboration – Cooperation between the government and private sector is key to advancing ESG goals through sustainable policies, green finance initiatives, and technological innovations.
- Continuous ESG Education & Training – Businesses will invest in ESG literacy to equip employees and stakeholders with the knowledge and skills to implement sustainable practices effectively.
- Integration of ESG into Business Strategies – Companies should embed ESG principles into their core strategies to foster long-term resilience, enhance stakeholder trust, and align with global sustainability standards.
Conclusion
- ESG compliance is crucial – In 2025, ESG compliance is essential for Thai businesses to stay competitive, responsible, and legally compliant. Adopting sustainable practices helps mitigate risks while unlocking market opportunities and investor interest. Beyond regulatory adherence, ESG drives long-term growth, builds consumer trust, and supports a sustainable future.
- ESG DD is essential in M&A transaction – Conducting ESG DD helps businesses identify and mitigate ESG risks, ensuring compliance with Thailand’s evolving regulatory landscape (e.g., the Clean Air Management Act)
- ESG as competitive advantage – Currently, strong ESG practices improve public perception, attract responsible investors, and build long-term trust with consumers, employees, and regulatory bodies.
- Driving sustainable business growth – ESG integration promotes long-term resilience by aligning business operations with SDGs, reducing operational risks, and increasing efficiency through responsible resource management.
- Alignment with global standards and market competitiveness – As global supply chains and investors demand higher ESG compliance, Thai businesses must adopt robust ESG frameworks to remain competitive in both domestic and international markets.