ESG reporting across the ASEAN economies

South East Asia has been a driving force behind Asia’s rapid economic growth in recent decades. The ten Association of Southeast Asian Nations (ASEAN) economies are home to 650 million people and a three trillion USD economy, growing at an average 5% per year over the past 20 years. If the 21^st century is going to be ‘The Asian Century’, as leading commentators speculate[1], then ASEAN will become an even more influential intergovernmental block.

Yet sustainable development presents a fundamental challenge in this context of rapid economic growth. On the one hand, this growth is seen as fundamental to achieving the Sustainable Development Goals (SDG) linked to social issues, ranging from eradicating poverty (SDG 1) and hunger (SDG 2) to gender equality (SDG 5) and quality education (SDG 4). On the other hand, this rapid growth has brought dramatic increases in deforestation and carbon-intensive electricity generation, threatening biodiversity (SDG 15) and contributing to climate change (SDG 13).

Indeed, navigating these sustainability trade-offs will be a critical challenge throughout The Asian Century. Considering that South East Asia is also likely to be one of the regions most affected by the impacts of climate change, it is unsurprising that concerns are growing about the region’s exposure to environmental, social and governance (ESG) risk.

Stock exchanges in the six largest ASEAN member states (the ASEAN-6: Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam) are taking the lead by implementing ESG disclosure requirements for listed companies. While voluntary sustainability disclosures in Asia previously focused on social issues,[2] the new ESG disclosure requirements include more than twice as many environmental reporting provisions as social.[3]

Take the Singapore Exchange (SGX), for example, that emphasised that its government’s proactive response to the 2015 Paris Agreement on climate change had created a need “to be aware of how they may be affected by climate change in order to embed resilience into their strategies and risk management.”[4] In line with the other ASEAN-6 stock exchanges, the majority of SGX’s ESG reporting provisions are mandatory and must be communicated via specialist channels to the authority requesting the information, rather than in the companies’ sustainability or mainstream annual reports.

The Stock Exchange of Thailand (SET), ranked the ninth best stock exchange in the world for ESG disclosures, was an early mover in this space, with its 2017 Corporate Governance and Stewardship Code requiring disclosures that are “proportionate to the company’s size and complexity and meets domestic and international standards”.[5] The majority of SET-listed companies comply with these requirements by disclosing in line with the Global Reporting Initiative (GRI) Standards, which have similarly been recognised in formal reporting requirements in Vietnam and the Philippines.

However the GRI Standards are not the only international sustainability reporting framework that influences practice in the region. In particular, recommendations from the Task Force on Climate-related Financial Disclosures (TCFD) were integrated into the Philippines’ 2019 Sustainability Reporting Guidelines for Publicly-Listed Companies[6] and, in 2021, the Asian Development Bank formally declared its support of the TCFD.

What does this mean for the future of ESG disclosure requirements across the ASEAN block?

Clearly, international frameworks such as GRI and TCFD continue to shape ESG reporting in the region. However these provide generally applicable frameworks that must be made relevant and practical to sustainable development in different regions. For instance, TCFD reporting in ASEAN economies needs to and will be different to TCFD reporting in others, not least because the risks of climate impacts and the transition to zero-carbon economies differ considerably by region.[7]

Of course, climate change is only one of many interconnected aspects of sustainable development. It is less clear which reporting frameworks will become the de facto standards for disclosures across biodiversity loss, poverty, water quality, hunger, gender equality and access to education. Yet, rather than assuming we need a global standard on ESG reporting, it is worth recognising that ESG priorities will differ across regions and countries. ESG listing requirements across the ASEAN-6 recognise this and these countries should be commended for tailoring international best practice to their own domestic priorities.

One thing is for sure: the world has not yet reached ‘peak acronym’ in sustainability reporting[8] and the need for expert advice will continue to grow as reporting frameworks emerge and evolve across the sustainable development agenda.

[1] For a summary of views on The Asian Century, see the Asian Development Bank’s Asia 2050: Realizing the Asian Century

[2] https://www.conference-board.org/blog/sustainability/Asia-Sustainability-Reporting-Trends

[3] https://www.wbcsd.org/Programs/Redefining-Value/Resources/Corporate-and-sustainability-reporting-in-Singapore-and-Southeast-Asia

[4] Quoted on page 5 of the World Business Council for Sustainable Development (WBCSD) report, Corporate and sustainability reporting in Singapore and Southeast Asia 

[5] The Securities and Exchange Commission of Thailand (2017), Corporate Governance Code 2017, the Securities and Exchange Commission of Thailand

[6] Republic of the Philippines Securities and Exchange Commission (2019), Sustainability Reporting Guidelines for Publicly-Listed Companies, Republic of the Philippines Securities and Exchange Commission

[7] For more on the future of TCFD in Asia, see the report from the Asia Investor Group on Climate Change (AIGCC), Building on the Base: TCFD Disclosure in Asia

[8] As examples, just consider the new Taskforces for Nature-based and Inequality-based Financial Disclosures, or TNFD and TIFD respectively.