Article by: Thanakon Sukuman
Green bonds have become a powerful financial instrument in the global fight against climate change, yet not all deliver on their promises. Despite global green bond issuance reaching a record $269.5 billion in 2020, concerns over greenwashing—where financial instruments claim environmental benefits without real impact—continue to grow. Understanding the difference between green investments and greenwashing is crucial to ensuring that sustainability goals are met.
Green bonds are financial instruments designed to raise funds exclusively for environmentally friendly projects, such as renewable energy, sustainable infrastructure, and pollution control. Issuers, including governments and corporations, use these bonds to finance sustainability-driven initiatives. However, the effectiveness of green bonds depends on transparency and accountability.
Greenwashing, on the other hand, refers to misleading claims about the environmental benefits of financial instruments, including green bonds. Companies and institutions may label projects as “green” to attract investors, while failing to deliver substantial sustainability improvements. Weak regulatory oversight and inconsistent environmental standards enable these practices to persist, undermining the credibility of green finance.
One of Thailand’s most notable successes in green bond financing is the Hanuman Wind Farm in Chaiyaphum, funded through Energy Absolute’s 2019 green bond issuance. The company raised 10 billion baht, with the Asian Development Bank (ADB) investing 3 billion baht. The project, which consists of 260 megawatts of wind power capacity, became Thailand’s largest wind energy initiative, significantly reducing annual carbon emissions by 200,000 tons.
The project’s success was built on strong regulatory alignment and clear environmental objectives. Energy Absolute’s bond complied with the Climate Bonds Standard, a globally recognized certification system that ensures green bonds finance projects with measurable environmental benefits. This framework requires issuers to meet rigorous criteria for transparency, impact reporting, and allocation of proceeds. Moreover, the company implemented rigorous impact reporting, providing investors with clear evidence of emissions reduction and sustainable energy production.
According to the Asian Development Bank, “the project represents a milestone for Thailand’s green finance ecosystem, showcasing how private sector investments can drive large-scale renewable energy transitions.”
While green bonds have funded successful renewable energy projects, some cases highlight the dangers of greenwashing. The Xayaburi Hydropower Project in Laos, financed by Thai banks, serves as a cautionary example. Marketed as a clean energy initiative, the project raised concerns over its significant environmental and social impact.
Although positioned as a renewable energy investment, the Xayaburi Dam has disrupted fish migration, altered sediment flow, and negatively affected local communities dependent on the Mekong River.
Environmental experts argue that the fish passage technology used in the project was designed for salmon species rather than Mekong’s diverse fish populations, resulting in potential biodiversity loss. “Nowhere in the tropics has a successful fish passage been built for a dam the size of Xayaburi,” said Dr. Eric Baran of the World Fish Centre, highlighting the project’s environmental shortcomings.
The Mekong River Commission also warned that “the construction of the Xayaburi Dam will result in irreversible environmental impacts,” underlining the failure to mitigate ecological damage. “These changes are destroying our way of life. The river is not just water to us—it is our food, our income, and our culture,” said a local fisherman from northern Thailand.
Additionally, changes in water levels and sediment distribution threaten downstream agriculture and food security, impacting farmers who rely on stable water flows for their crops. “The rise and fall of the river are not normal anymore. The rapid fluctuations of the river are impacting aquatic ecosystems and fisheries. I am worried that fisheries, which are important for our food and income, will continue to decline.” said Channarong Wongla, one of the plaintiffs from northern Thailand.
NGOs have also voiced concerns over the lack of proper consultation with affected communities. Large-scale hydropower projects like Xayaburi continue to ignore the voices of those most impacted, according to a report of EarthRights International. Instead of bringing progress, these projects displace families, disrupt livelihoods, and degrade ecosystems. There must be stronger accountability for financiers who back such projects without ensuring real sustainability.
Despite these concerns, Thai banks provided financial backing without conducting adequate environmental due diligence. Critics argue that these institutions, which are signatories of sustainable banking guidelines, failed to uphold rigorous ESG (Environmental, Social, and Governance) assessment standards. “What is interesting is that it is an indicator that whoever is financing the dam is aware of how controversial the projects are and want to avoid scrutiny,” said Sarinee Achavanuntakul, head of research for Fair Finance Thailand (FTT), a coalition of civic society organisations (CSOs) monitoring the impacts of Thai banks’ lending activities.
Existing frameworks, such as the International Capital Market Association (ICMA) Green Bond Principles and ASEAN Green Bond Standards, have played a critical role in shaping the market but remain voluntary, with inconsistencies in reporting and enforcement.
The EU Green Bond Standard (EU GBS) offers a more stringent approach by mandating alignment with the EU Taxonomy, requiring detailed impact reporting, and ensuring external review under regulatory supervision.
By adopting similar principles, Thailand and other markets can strengthen their green finance sector, providing investors with greater confidence that green bonds genuinely contribute to environmental sustainability. Implementing stronger regulatory frameworks, requiring full environmental impact assessments before financing approval, and holding issuers accountable for post-project sustainability metrics can ensure that cases like Xayaburi do not repeat.
However, for green bonds to be truly impactful, local voices and affected communities must be included in the decision-making process. Large-scale projects often neglect the perspectives of those who are directly impacted, leading to unintended social and environmental consequences. Ensuring that green bond frameworks require meaningful stakeholder engagement—from local communities to independent environmental groups—can help prevent greenwashing and improve long-term sustainability outcomes.
References
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