Unlocking Finance for SDG Localization in Thailand

In 2024, Thailand became the first country in Asia and the third in the world to issue a sovereign-backed sustainability-linked bond targeting institutional investors committed to a green, low-emission future. The bond ties interest rate adjustments to two national goals: reducing CO₂ emissions and incentivizing the use of zero-emission vehicles by 2030.

Such bold move from the Ministry of Finance sent a very clear signal: Thailand is serious about achieving Net Zero greenhouse gas emissions by 2050 and the Sustainable Development Goals (SDGs), and it is ready to innovate in collaboration with investors to make it happen.

Unlocking sustainable and innovative finance is central to Thailand’s pathway toward the SDGs. Based on the Development Finance Assessment conducted by UNDP, in partnership with the Ministry of Finance and the National Economic and Social Development Council in 2023, Thailand requires an additional Thai Baht 1.4 to 2.5 trillion annually to deliver on the 2030 Agenda.

While innovative development financing is gaining momentum nationally, subnational finance, which is the lifeblood of local, inclusive, and sustainable development, remains structurally under-resourced. This represents not just a challenge but also a major opportunity, especially as Thailand prioritizes SDG localization, in partnership with UNDP and the European Union. Inequalities are most visible at the local level and where vulnerable groups are often left behind.

As Thailand’s Foreign Minister emphasized at the UN General Assembly, “Sustainable development is not just growth — it is also about values…  we must strengthen partnerships at all levels and confront the inequalities and financing gaps that still hold back our common future.”

The Triple Challenge

At the subnational level, SDG financing is constrained by three interlinked challenges:

1. Limited revenue autonomy. Most provinces depend heavily on central government transfers. They have limited capacity to generate own-source revenue through sustainable and inclusive mechanisms.
    
2. Institutional capacity constraints. The ability of local administrations to design, implement, and evaluate SDG-aligned investments varies widely. This limits both the quality of spending and the ability to attract more financing.
    
3. Lack of financing innovation. Traditional public budgets remain the dominant source of development finance. Innovative instruments, such as blended finance, public-private partnerships, and community-based financing remain underutilized at subnational levels.

These structural constraints weaken the ability of subnational entities to respond to local needs, exacerbating inequality and slowing progress on climate resilience and inclusive growth.

Financing as an Accelerator

To address these challenges, UNDP supports Thailand in advancing a subnational financing agenda that positions finance as an accelerator of sustainable development. Adopting a multi-pronged approach, the key areas of innovation include:

• Promoting alternative local revenue generation. Koh Tao’s tourist user charge demonstrates how well-designed local fees can directly support conservation efforts while engaging visitors in sustainability.
   
• Aligning local investments with the SDGs. Local development project concepts, such as Phuket’s wellness economy, Trang’s marine biodiversity-linked livelihoods promotion, and the use of carbon markets to boost community income, demonstrate how subnational investment pipelines serve economic, social, and environmental goals while addressing area-specific development demands.
   
• Formulating new financing instruments. The BIOFIN crowdfunding initiative helped local communities recover from the pandemic.  Meanwhile, blended finance solutions for MSMEs with nature-positive impacts are being structured to diversify the resource base beyond public budgets.
   
• Aligning SDG investment with investor demand. The Thailand SDG Investor Map highlights viable private sector opportunities in renewable energy, sustainable packaging, and eco-tourism, providing clear entry points for impact-oriented investors. 
   
• Signaling to Investors. Thailand’s sustainability-linked bond KPI verification, supported by the UK via UNDP’s Climate Finance Network, demonstrates that that transparency and accountability can catalyze, rather than constrain,  investment towards ambitious climate action. 

From National Framework to Local Action

Since 2019, SDG localization has been a national priority, recognizing that sustainable development cannot be achieved from the top down alone. The Integrated National Financing Framework (INFF) serves as the strategic policy backbone for coordinated resource mobilization.

Now, the INFF approach is being localized in Phuket, Udon Thani, and Surat Thani, equipping provincial governments with tools to mobilize diverse financing—local revenue generation, budgeting, debt instruments, and private investment attraction—to implement their development plans. Complementing this, SDG Profiles, which is tested in 15 provinces, help track local SDG progress, guiding financing towards development impact.

Policy Recommendations

To fully unlock the potential of subnational finance to drive SDG progress, Thailand should prioritize the following:

1. Expand locally own-source revenue options and introduce incentives for SDG-aligned spending.
    
2. Institutionalize SDG-responsive budgeting at the local level guided by national taxonomies and policy frameworks.
    
3. Scale innovative financing tools through regulatory support and technical assistance across provinces.
    
4. Enhance data systems and performance tracking to link financing with SDG outcomes.
    
5. Strengthen multi-level, participatory governance platforms to facilitate effective cross-sector coordination between national and subnational actors.

Thailand has shown bold leadership by linking finance to sustainability through its pioneering sustainability-linked bond. The next frontier now lies in empowering local governments as engines of transformation. Subnational financing is where inequalities are best tackled, climate resilience is built, and the vision of leaving no one behind becomes a reality. By aligning local financing strategies with national priorities and global commitments, Thailand’s development progress will be measured not just in gross domestic product or investment flows, but in the resilience, equity, and well-being of every community across the country.

Dr. Dadanee Vuthipadadorn is a Senior Development Economist in UNDP Thailand, working on sustainable finance. Before joining the UNDP, she served as the Director of Tax Policy and Planning Division at the Revenue Department, Ministry of Finance.  She holds an MA and a Ph.D. in Economics from Vanderbilt University, and a B.E. from Thammasat University.

Dr. Anuk Serechetapongse is Development Economist in UNDP Thailand, working on sustainable finance.  Her prior roles include serving at the Bank of Thailand and the IMF as an economist as well as at Bangkok Bank as Assistant Vice President.  She holds a Ph.D. in Economics from Cornell University, and a B.E. from Chulalongkorn University.

Chomchanok Daengsakul is a Research Assistant at UNDP Thailand, supporting the work on sustainable finance. Prior to UNDP, she served as an Individual Contractor with the United Nations ESCAP, where she contributed to regional initiatives on sustainable development, gender equality, ageing, and migration. She holds a bachelor's degree in international relations with a minor in Political Science from Syracuse University.