Thailand Taxonomy and the Future of Green Buildings

Thailand’s financial system is entering a new phase. With the launch of the Thailand Taxonomy, the country is creating a science-based framework to define which economic activities are environmentally sustainable. For the building sector, this is more than a reporting exercise, it is a structural shift that will influence design standards, financing access, and asset value. 

The Thailand Taxonomy is currently entering Phase 2, expanding beyond energy and transport to cover additional sectors, including activities relevant to the building sector. This marks a critical step in aligning sustainable finance with building performance standards.

As sustainable finance grows across Asia, understanding the Thailand Taxonomy is now essential for developers, engineers, asset owners, and financial institutions working in green buildings.

What Is the Thailand Taxonomy?

The Thailand Taxonomy is developed by the Bank of Thailand together with the Thailand Development Research Institute and other public agencies. It provides a classification system that determines which activities are aligned with Thailand’s climate goals. 

The framework supports the country’s commitment to carbon neutrality by 2050 and net zero greenhouse gas emissions by 2065. It aims to channel capital toward low carbon activities and reduce greenwashing in sustainable finance.

For the building sector, taxonomy alignment is becoming a prerequisite for green loans, sustainability linked financing, and ESG disclosure.

Why It Matters for Green Buildings

The building sector sits at the centre of Thailand’s climate and energy transition, which explains why energy and carbon performance have become defining issues for green buildings.

• Buildings account for approximately 25% of Thailand’s total electricity consumption, making the sector a major driver of national energy demand, operating costs, and emissions

• Thailand’s commitments to carbon neutrality by 2050 and net-zero greenhouse gas emissions by 2065 place sustained pressure on building energy and carbon performance across both new and existing assets

• Globally, buildings are responsible for around 37% of energy-related CO₂ emissions, reinforcing international expectations for measurable decarbonisation in the sector

• High-performance green buildings typically achieve 20–30% lower operational energy use than conventional buildings, directly reducing emissions and exposure to rising energy costs

• These dynamics explain why energy and carbon performance are now central to how buildings are regulated, financed, and valued

Against this backdrop, the Thailand Taxonomy introduces technical screening criteria that determine whether a building activity can be labelled as environmentally sustainable. These criteria typically relate to:

• Energy performance thresholds

• Carbon intensity benchmarks

• Resource efficiency

• Climate resilience

In practical terms:

• Not all certified green buildings automatically qualify under taxonomy definitions

• Alignment depends on demonstrating measurable, asset-level performance against defined thresholds, supported by documentation

Key Implications for the Building Sector

1. Green Finance Becomes Performance-Driven

Green finance in Thailand is shifting decisively from intent to outcomes. For the building sector, access to green and sustainability-linked finance is increasingly conditioned on quantified, verifiable performance, not labels, narratives, or design intent.

Under taxonomy-aligned frameworks, financing decisions are increasingly based on whether a building activity can demonstrate measurable environmental outcomes, including:

• Energy performance improvements, measured against a defined baseline

• Reductions in greenhouse gas emissions intensity, expressed at the asset level

• Compliance with technical screening thresholds relevant to the activity type (e.g. new construction, renovation, operation)

• Documented and verifiable data, suitable for lender, investor, or regulatory review

• Asset-level assessment, rather than portfolio averages or corporate commitments

For renovation activities in particular, the taxonomy expects significant performance improvement, commonly defined as around a 30% or greater reduction in energy use or greenhouse gas emissions intensity relative to a clearly defined pre-renovation baseline.

For new buildings, the logic is different but consistent: rather than demonstrating improvement, projects must show that absolute energy and emissions intensity levels are aligned with low-carbon pathways from the outset, avoiding the lock-in of inefficient or high-emissions performance over the asset’s lifetime.

Together, these requirements illustrate a broader principle of the taxonomy: material performance must be demonstrated through measurable outcomes, not assumed through design intent, certification, or relative claims.

Projects that meet these performance expectations are more likely to access:

• Lower-cost capital through sustainability-linked or green loans

• Green bond eligibility

• Institutional capital with ESG or climate mandates

• International and multilateral climate finance

Conversely, projects that cannot evidence measurable performance improvements increasingly face higher financing costs, tighter lending conditions, or exclusion from green capital pools.

In practice, the taxonomy is reinforcing a clear market signal: performance data now underpins access to capital across the building sector, not just for retrofits, but across the full building lifecycle.

2. Energy and Carbon Metrics Are Redefining Asset Quality

Energy and carbon performance is increasingly assessed through a small set of core metrics that act as proxies for asset quality and transition readiness, particularly:

• Energy Use Intensity (EUI) (kWh/m²/year)

• Operational carbon emissions intensity (tCO₂e/m²/year)

These indicators are now central to:

• Financing eligibility and sustainability-linked loan structures

• Asset valuation, due diligence, and portfolio risk assessment

• Regulatory compliance and long-term transition planning

Energy efficiency and carbon intensity are no longer treated as environmental add-ons. They are increasingly used to assess operational cost exposure, regulatory risk, and long-term asset resilience in a decarbonising economy.

3. Retrofit Activity Accelerates.. But Only for Deep Improvements

New construction alone cannot deliver national climate targets. Existing buildings dominate current energy demand, making retrofits essential.

The taxonomy explicitly prioritises renovations that deliver material performance gains, not incremental upgrades. In practice:

• At least 30% reduction in energy use or greenhouse gas emissions intensity for buildings under 10,000 m² and 20% reduction for buildings 10,000 m² or larger

• A Whole Life Carbon Assessment (WLCA) must be conducted and reported in line with current WLCA guidelines.

• Performance assessment is conducted at the asset or activity level, not based on portfolio averages or corporate commitments.

This is accelerating demand for:

• Deep retrofit packages rather than single-measure upgrades

• High-performance envelope improvements

• HVAC system replacement and optimisation

• Building controls and energy management systems

• On-site renewable integration where viable

The market signal is clear: retrofits must be comprehensive, data-driven, and performance-proven to be financeable.

4. New Buildings Must Be Low-Carbon from the Start

For new building construction, the taxonomy allows two alternative compliance pathways.

One pathway is based on demonstrated alignment with Thailand’s building sector decarbonisation trajectory for building emission intensity.

The second pathway allows alignment to be demonstrated through compliance with specified national or international green building certification schemes, subject to additional technical conditions set out in the taxonomy.

In addition a whole life carbon assessment must be completed and reported in line with the current WLCA guidelines.

5. Role of Green Building Certifications Under the Thailand Taxonomy

The alignment with the taxonomy can be achieved through obtaining local and internationally recognised green building labels. Accepted certifications range from the local TREES system to the international LEED and EDGE rating systems. However these certifications need to be met to a certain level of achievement. 

For example, for TREES and LEED, Gold needs to be achieved at a minimum along with a 30% improvement above the levels in the latest version of ASHRAE 90.1 . 

For EDGE, advanced or net zero certification needs to be met with no carbon offsets.

Even where certification is used as the compliance route, it does not remove other mandatory obligations. A whole life carbon assessment (WLCA) must still be conducted and reported in line with current WLCA guidelines, and relevant performance data must be reported in accordance with recognised measurement and verification protocols where applicable.

6. Buildings Must Prove They Can Withstand Climate Risks

In highly climate-exposed markets such as Thailand, climate resilience is now a quantified requirement for financing and classification, not a qualitative sustainability claim.

Taxonomy-aligned frameworks increasingly require buildings to:

• Identify material physical climate risks using forward-looking scenarios

• Quantify exposure and damage pathways. Demonstrate adaptation measures that materially reduce risk and cost impacts

Resilience is assessed using engineering, energy, and cost metrics that directly affect insurability, operating costs, and asset value.

Implications for New Buildings

New developments are expected to be designed for future climate conditions across their full asset life, not historical baselines. In practice, this translates into measurable requirements such as:

• Flood resilience

  • Design protection to at least a 1-in-100-year flood event

  • Freeboard allowances (e.g. +0.5–1.0 m above projected flood levels)

  • Elevation of critical electrical and mechanical systems above maximum modeled flood depth

• Heat and energy resilience

  • Envelope and passive design strategies to reduce peak cooling demand by 10–20% under extreme heat scenarios

  • Limiting indoor overheating risk during heat waves (e.g. maintaining acceptable indoor temperatures without full mechanical cooling)

  • Reduced exposure to peak electricity tariffs driven by rising cooling loads

• Water resilience

  • On-site stormwater retention sized for high-intensity rainfall events

  • Measures to reduce potable water demand and manage runoff under extreme precipitation

Buildings that fail to meet these benchmarks increasingly face higher capital costs, insurance exclusions, and long-term stranded-asset risk.

Implications for Existing Buildings

For existing assets, taxonomy alignment focuses on measurable risk reduction achieved through upgrades, not original design intent. Typical metrics include:

• Flood risk reduction

  • Protection or relocation of critical systems above known or projected flood levels

  • Flood-proofing and drainage upgrades designed to reduce expected annual damage and downtime

• Energy and heat adaptation

  • Envelope retrofits and system upgrades delivering 10–30% reductions in cooling energy use

  • Lower exposure to volatile electricity prices during peak demand periods

  • Improved thermal comfort during extreme heat events

• Operational continuity

  • Backup power or system redundancy supporting critical loads for 24–72 hours during extreme events

• Water efficiency

  • Measured reductions in potable water use, lowering exposure to supply disruptions and tariff increases

Where material risks are identified but not mitigated, lenders and insurers increasingly reflect this through higher insurance premiums, tighter loan conditions, or exclusion from sustainable and transition finance.

Strategic Considerations for Building Owners and Developers

To remain competitive under Thailand’s sustainable finance landscape, the building sector should:

1. Conduct taxonomy gap assessments

2. Align design targets with energy intensity benchmarks

3. Document carbon performance rigorously

4. Engage financiers early in project structuring

Green building strategy is now directly connected to capital access.

The Broader Market Impact

The Thailand Taxonomy is not simply a compliance tool. It is a signal to investors, banks, and international partners that Thailand is aligning with global sustainable finance standards.

For the building sector, this means:

• Stronger scrutiny of environmental claims

• Greater transparency requirements

• Increased demand for measurable ESG performance

• Competitive advantage for high performance buildings

In a market where capital increasingly prioritises climate aligned assets, taxonomy readiness may determine which projects move forward.

Conclusion

Thailand’s taxonomy marks a turning point for sustainable buildings. It transforms sustainability from a marketing attribute into a financial and regulatory criterion.

For developers, consultants, and asset owners, the question is no longer whether to build green, but whether projects can demonstrate taxonomy alignment through measurable performance.

In the coming years, taxonomy compliant buildings will likely attract stronger financing, greater investor confidence, and long term value resilience.

Sources

1. Bank of Thailand, Thailand Taxonomy Framework

2. Thailand Development Research Institute, Sustainable Finance Research

3. International Energy Agency, Buildings Sector Energy Data

4. United Nations Environment Programme, Global Status Report for Buildings and Construction

Climate Bonds Initiative, Green Finance Standards