Consideration of Environmental, Social and Governance (ESG) factors are becoming hard to ignore amongst businesses in the region and the evolving regulatory landscape is playing a significant role in shaping how companies approach and report on ESG related issues. This article explores the latest ESG regulatory developments across key markets in Asia and assesses what these mean to businesses.
In recent years, Asia has seen significant efforts by regulators to enhance the adoption of global sustainability and ESG standards through mandatory disclosure. The highly anticipated release of the International Financial Reporting Standards’ (IFRS) inaugural ISSB standards in June, placed renewed attention on the ESG regulatory landscape. The introduction of the ISSB standards will streamline the reporting process for companies, consolidating the fragmented landscape of sustainability standards.
The ISSB standards consolidates the guidelines of the Task Force for Climate-related Financial Disclosure (TCFD), the Sustainability Accounting Standards Board (SASB), the International Integrated Reporting Council, and the CDP’s Climate Disclosure Standards Board (CDSB).
It will also enhance the connection between sustainability disclosures and financial reporting, making it easier for investors and other stakeholders to assess the sustainability practices of companies. While adoption of the ISSB standards is voluntary, it is likely to become mandatory across several jurisdictions from 2025.
The key components of the ISSB standards are:
Businesses may soon be required to report on their nature-related financial risks through the TNFD disclosure framework. The final version of the framework will be released on 18 September with ‘nature-positive’ likely to become as important to investors as being ‘net-zero’.
The TNFD is an international initiative that builds on a model developed by the TCFD. The latter has been well received by companies and investors alike – almost 4,000 companies have expressed support for the TCFD guidance – and the same is expected of the TNFD framework. Once the final TNFD recommendations are issued, businesses and investors will have a common language to determine capital flows into nature positive pathways.
Several key Asian markets are formalising their regulatory standards. Here are some key highlights:
With ESG and green financing gaining momentum in Asia, companies wishing to drive sustainable growth and join the global push toward net zero should keep abreast of the changing regulatory landscape and be prepared for new developments. Here are four aspects that executives need to stay on top of:
As a company or an investor, you need to be aware of the latest regulations in the jurisdictions where you operate. Each market has a different set of ever-evolving policies and priorities, so it is vital to understand and be familiar with the details. You will need a clear plan on how your company and its operating markets will implement these principles and plan to view these as more than a box ticking exercise.
Before committing to an ESG strategy, it is critical that you clarify your rationale and your intended impact or outcome beyond regulatory fulfilment or profit. Ensuring intentionality is the only way to achieve meaningful, sustainable action and avoid greenwashing or superficial regulatory fulfilment.
Once you have made an ESG-related decision, your priority will shift to controlling and disseminating an authentic narrative. This will galvanise your company’s purpose and set the tone for external communications. To be effective and avoid accusations of greenwashing, your narrative needs to focus on initiatives that demonstrate real impact. This requires clear and transparent storytelling, backed up by credible data.