Thailand’s Climate Policy and Taxonomy: A Game Changer for Real Estate Investors and Building Owners

Chakrapan Pawangkarat

Head of Property and Asset Management

JLL Thailand

21 March 2025

Introduction: A New Era for Real Estate Investment

Thailand is taking bold steps toward sustainability with the introduction of the Climate Change Bill and the Thailand Sustainable Taxonomy. These policies are set to reshape the real estate market, with rental property owners and investors facing new challenges—and opportunities.

With measures like carbon taxation, emissions trading, and stricter energy efficiency regulations, properties that fail to meet sustainability criteria could see rising costs, declining values, and difficulty securing financing. Conversely, investors who adapt early stand to benefit from green financing, higher tenant demand, and long-term asset resilience.

So, what exactly do these changes mean for building owners and investors? Let’s break it down.

1. Carbon Tax: A Cost Pressure on Building Operations

What’s Changing?

• Thailand’s Climate Change Bill proposes a carbon tax on goods and services based on their emissions.

• This tax will affect energy-intensive sectors—including real estate—by increasing the cost of utilities, materials, and construction.

• Building owners who rely on high-emission energy sources (e.g., fossil fluel based electricity) will see higher operational costs.

Impact on Building Owners and Investors

• Higher utility bills: Buildings with poor energy efficiency will pay more for electricity, cooling, and heating.

• Expensive renovations: Retrofitting non-compliant buildings to reduce carbon exposure may become a necessary cost to maintain value.

• Lower valuations for non-green assets: Investors will start pricing in carbon liabilities, making energy-inefficient buildings less attractive.

Strategic Response

✔ Invest in energy-efficient HVAC systems and lighting to reduce energy consumption.

✔ Explore renewable energy options (solar, district cooling) to offset future carbon tax costs.

✔ Consider building certifications (LEED, TREES, EDGE) to improve asset value and attract green financing.

2. Emissions Trading System (ETS): A Market for Carbon Credits

What’s Changing?

• Thailand is setting up a cap-and-trade system where large emitters must buy or trade carbon credits.

• Properties with high carbon footprints (e.g., energy-inefficient office towers, shopping malls) may be required to participate in emissions trading.

Impact on Building Owners and Investors

• Higher compliance costs: Owners of non-green buildings may need to purchase carbon credits to offset their emissions.

• Potential revenue stream: Green-certified or net-zero buildings could sell excess carbon credits, creating a new financial incentive for sustainability.

• Influence on asset pricing: Investors will favor low-carbon properties as ETS compliance becomes mandatory.

Strategic Response

✔ Assess the carbon footprint of your property portfolio and identify assets at risk.

✔ Invest in green upgrades (e.g., smart energy management, low-carbon materials) to reduce emissions.

✔ Monitor ETS regulations to understand how they will apply to commercial real estate.

3. Green Financing: A Shift in Investment Preferences

What’s Changing?

• Thai banks and financial institutions are integrating sustainability metrics into lending decisions.

• Green bonds and sustainability-linked loans (SLLs) are emerging as the preferred financing options for real estate projects.

Impact on Building Owners and Investors

• Better financing for green buildings: Banks will offer lower interest rates for ESG-compliant properties, making sustainability a financial advantage.

• Stricter lending criteria for non-green assets: Properties that do not meet taxonomy guidelines may face higher borrowing costs or difficulty securing financing.

• Stronger investor interest in green assets: Institutional investors are prioritizing low-carbon real estate portfolios, shifting capital away from inefficient buildings.

Strategic Response

✔ Engage with lenders on green financing options to secure better loan terms.

✔ Prioritize sustainability retrofits for older properties to improve financial attractiveness.

✔ Consider ESG-focused REITs and funds that support green real estate.

4. Regulatory Compliance: Stricter Standards for Buildings

What’s Changing?

• The government is aligning with international climate commitments, meaning stricter regulations for new and existing buildings.

• New standards may include mandatory energy audits, carbon reporting, and net-zero targets for large properties.

Impact on Building Owners and Investors

• Rising compliance costs: Owners of large commercial or rental properties may need to invest in sustainability reporting and audits.

• Risk of stranded assets: Properties that fail to meet future standards may become unmarketable or lose value.

• Competitive advantage for early adopters: Investors who future-proof assets today will avoid last-minute compliance costs.

Strategic Response

✔ Stay ahead of regulatory changes by monitoring updates from Thailand’s Department of Climate Change.

✔ Implement energy monitoring systems to track carbon performance and streamline compliance.

✔ Educate tenants on sustainability to improve operational efficiency and maintain marketability.

5. Tenant Demand and Market Shifts

What’s Changing?

• Corporate tenants now have ESG mandates requiring them to lease sustainable office and retail spaces.

• Residential tenants, particularly millennials and Gen Z renters, prefer eco-friendly, energy-efficient homes.

Impact on Building Owners and Investors

• Higher demand for green-certified buildings: Companies and renters will prioritize low-carbon spaces, increasing occupancy rates for sustainable assets.

• Declining interest in outdated properties: Buildings that lack green credentials may struggle with longer vacancy periods and rental price pressure.

• Increased rental premiums for sustainable properties: Green-certified buildings could command higher rental prices due to cost savings and compliance benefits.

Strategic Response

✔ Market your property’s sustainability features (energy savings, better air quality, low-carbon footprint).

✔ Offer incentives for tenants to adopt green practices (e.g., rebates for lower energy consumption).

✔ Future-proof your assets by integrating smart energy solutions and low-carbon materials.

Conclusion: Sustainability as a Competitive Advantage

The Thailand Climate Change Bill and Sustainable Taxonomy are not just regulatory shifts—they are market transformations.

For building owners and investors, adapting to these changes is not optional—it’s essential. Properties that embrace green certifications, energy-efficient upgrades, and carbon-conscious operations will benefit from lower costs, higher valuations, and stronger tenant demand.

On the other hand, those who ignore sustainability risks may face declining asset values, regulatory penalties, and financing difficulties.

Now is the time to align your real estate portfolio with Thailand’s climate goals—because the market rewards those who invest in the future today.

Acknowledgement:

"This article was generated with the assistance of ChatGPT, an AI language model by OpenAI, and subsequently reviewed and edited by the author."