Thailand’s Commercial Banks’ Role in Financing Dams in Laos and the Case for Sustainable Banking

Carl Middleton, International Rivers
Tuesday, December 1, 2009

Thailand’s commercial banks are increasingly lending to neighboring Mekong countries, including to hydropower projects in Laos. The dams that they have financed to date, namely Nam Theun 2, Nam Ngum 2, and the Theun-Hinboun Expansion Project, have all inadequately addressed social costs and environmental impacts. This paper finds that:

  • All major Thai commercial banks have some form of Corporate Governance and Corporate Social Responsibility (CSR) commitment on paper. Despite some commendable commitments, however, fundamental changes to the bank’s core business practices have not occurred and these policies are yet to be meaningfully implemented.
  • As a general trend in the global banking sector, many international banks have adopted some form of policy on environmentally-sensitive sectors, sustainability issues, and transparency and accountability, such as the Equator Principles. Analysis of the Thai banks’ policy performance compared to 45 influential international banks reveals that the Thai banks lag significantly behind these international banks. Yet, with the right commitment, Thai banks could take up – or even surpass – the international banks’ existing standards. 
  • Three Thai banks lending to hydropower projects in Laos have international strategic investors: GE Money (Bank of Ayudhya); ING Bank (Thai Military Bank); and the Bank of Nova Scotia (Thanachart Bank). These strategic investors have committed to a number of international standards that the Thai banks have not yet adopted, and should, therefore, accept a significant responsibility in strengthening their Thai bank partners’ social and environmental performance.

Commercial banks serve as important intermediaries that allocate resources from savers to investors across economic sectors. By adopting more sustainable banking policies and practices, Thailand’s commercial banks could contribute substantially towards a prosperous, sustainable and peaceful Thailand and Mekong Region for present and future generations. This would have the added benefit of minimizing their lending risk and increasing their profits from lending to emerging lucrative ‘green’ businesses.

Download the paper

More information: 

Download the Banktrack Network's report “Close the Gap” that audits the environmental and social performance of Kasikorn Bank and Bangkok Bank, alongside 47 other international banks.

View a PowerPoint presentation based on the report's findings, made to the International Workshop on Rural Studies in the Mekong Region, Bangkok, Thailand, 17 July 2009