(Kasikorn Research Center) The Ministry of Finance has proposed a transition of investment units from the Long-Term Equity Fund (LTF) to the Thai ESG fund, to be discussed in the Cabinet meeting on March 3, 2025. This move aims to alleviate pressure on the capital market and stimulate investment in the Thai ESG fund, which currently has a relatively small value of only 32 billion baht.

Additionally, this measure will allow investors to automatically convert their existing investment units to the new fund, providing more investment options beyond the Retirement Mutual Fund (RMF) and the Savings Fund (SSF), which are the primary choices for tax reduction, reflecting fund values of 1.93 trillion baht and 1.39 trillion baht, respectively, for investors looking to manage their own investments.

Upon reviewing the fund conditions, it is found that the LTF primarily invests in the stock market without considering ESG principles, mainly to stimulate the domestic capital market, while the Thai ESG fund invests only in companies that adhere to ESG standards.

 

The Kasikorn Research Center estimates that 1) stocks and bonds of companies that do not meet ESG standards, particularly many small-cap companies, are at risk of being sold off and missing out on additional investment opportunities from this measure. However, this will not impact the overall money market due to the relatively small value. In 2024, there were over 695 companies in the stock market that did not meet ESG standards, accounting for 75% of all companies in the stock market, but representing only 18% of the total market capitalization. 2) Investment funds will flow into and concentrate in large-cap companies that meet ESG standards, of which there are only 288 companies or 25% of all companies in the stock market, but this group has a combined market capitalization of over 82% of all companies in the stock market, or 14.87 trillion baht.

Therefore, small businesses must adapt to meet ESG standards for sustainable fundraising and investment in the future, and may consider starting to implement the following: