Skip to main content

Evolving ESG Regulatory Landscape in Asia

In order to slow down the global temperature rise and prevent disastrous climate impacts, the United Nation’s latest 2022 Intergovernmental Panel on Climate Change report stresses the rapid and concerted action needed to enable global transition to a low carbon economy.

The transition to a low carbon economy - namely the “net zero” initiatives will require a significant investment and that is where the financial sector has a vital role to play. Whilst Asia has always been regarded as lagging behind other regions in developing  sustainable finance, there is an increasing attention and expectation on ESG issues in recent years and this is set to continue. Asia ESG AUM is forecasted to increase from $90B in 2021 Q3 to more than $500B by 2025, which will become a critical booster to Global ESG AUM. All these circumstantial factors create a sense of urgency for policymakers and regulators in Asia and it is expected that they will continue to strengthen their ESG related regulations.

Zoom in on Hong Kong and Singapore

Regulators in Hong Kong and Singapore are spearheading on this front. Their strong commitment to achieve net zero before 2050 is demonstrated by the establishment of a subject-matter taskforce and the implementation of mandatory ESG-related regulations for the financial sector. Hong Kong and Singapore regulators of banks, listed companies and asset managers have introduced various requirements for ESG information disclosure and ESG investment. 

 

The following provides a summary of the ESG-related regulations in force in Hong Kong and Singapore.

Requirements and Impacts for Hong Kong Monetary Authority, Hong Kong Stock Exchange, Securities and Futures Commission
Requirements and Impacts - Monetary Authority of Singapore and Singapore Stock Exchange

A global ESG standard developed by the ISSB (“International Sustainability Standards Board”) is to launch soon, rolling out a single and consistent baseline for sustainability disclosure across sectors and jurisdictions. The Hong Kong and Singapore regulators, being the representatives of IOSCO, have clearly indicated the intention to incorporate this standard into the city’s audit framework and listing rules. Sia Partners will continue to keep abreast of the updates from the regulators.

Challenges of ESG Compliance

Financial institutions are at different stages of development when it comes to their ESG compliance journey. While more and more financial institutions have made their net zero commitments in recent years, the divergent, highly intertwined and constantly evolving ESG-related regulations are bringing extensive compliance challenges. These challenges could result in existing practices being degraded into regulatory gaps and non-compliance.

Some common challenges include:  

  • Confusion regarding the ESG standards due to the confounding flood of information
  • Lack of ESG expertises who have technical knowledge on ESG risks and compliance skill sets to apply the compliance framework into ESG risks
  • Lack of a comprehensive and consistent approach to ESG issues 
  • Difficulty to identify the applicable and suitable standard setters, ratings and data providers 
  • Data quality issues

How can we help?

As the regulatory landscape is constantly evolving in Asia, it is essential for financial institutions to be vigilant and adapt to changes in regulatory frameworks, standards, and disclosure requirements, as well as to be able to understand the implications these changes have on their investments and operations. 

Sia Partners support financial and non-financial institutions facing those changes and challenges through establishing  a customised and comprehensive ESG framework. 

ESG Regulatory Change Services

The ESG market is growing rapidly across the globe. Driven by a combination of investor demand and government regulation, organisations are scrambling to get their hands on the roadmap to comply with ESG regulations and requirements. With Sia Partners’ ESG Regulatory Change Services, you can understand your ESG responsibilities, build reporting capabilities, mitigate risks and unlock new opportunities as you build a sustainable future.

ESG Regulatory Change Services