Building a solid ESG compliance inventory 

The ESG and sustainable investing agenda is already here in Asia with regulators in some key markets driving various initiatives in this area. Regulation for financial services and listed companies inevitably moves towards more complexity: thus, the elaborate ESG rules in the European Union are likely a preview for what asset managers and public companies can expect in Asia in the future.

Mainland China has been particularly active with new regulation, and its 14th Five-Year Plan — which provides a statement of the country’s social and economic goals for 2021–2025 — has a major focus on sustainability. In 2018, the Asset Management Association of China (AMAC) promulgated Green Investment Guidelines and wants its regulatees to perform a voluntary — for now — self-assessment on their green investing practices. Both the Shenzhen Stock Exchange and its larger sibling in Shanghai have long-standing and ever-evolving ESG disclosure requirements for listed companies.

Elsewhere in China, Hong Kong has also been busy, with the Hong Kong Exchange setting ESG disclosure recommendations for listed companies beginning as far back as 2012 leading up to strict requirements today. Hong Kong also boasts a list of “verified” ESG funds in an effort to guard against “greenwashing”, the nefarious practice of claiming green virtue without justification. Hong Kong authorities have stated that the territory is closely monitoring global developments in ESG with an aim to establish itself as a leader.

Singapore, too, has sprung into action in promoting green investment. Along with standards for listed companies, and the asset management, banking and insurance sectors, Singapore has offered an attractive sustainable bond grant scheme. The program is designed to encourage issuance of securities funding projects that have a positive environmental benefit.

In the wake of these developments, it may be wise to consult established experts to help your firm navigate the maze. And while the focus of this brief note has been on the “environmental” aspects of ESG, ESG covers a vast range of topics from carbon footprints to social issues like inequality to corporate governance considerations including remuneration. 

To address the ESG compliance requirements that may apply to your operations, we’d suggest that you start with a compliance inventory: working through the “E,” the “S” and the “G,” and, considering each of your relevant jurisdictions, draft a list of all of the areas that your policies must cover. With this in hand, you will have the foundation upon which you can build a solid ESG compliance program.