Key themes and observations across APAC

ESG reporting requirements

  • ESG reporting requirements being strengthened across much of APAC – Over the last year, the majority of covered jurisdictions have enhanced or are in the process of enhancing their ESG reporting requirements, whether through incorporation of the ISSB Standards or otherwise.
  • Significant take-up of the ISSB Standards with varying extent of alignment

o APAC is taking steps to align with the ISSB Standards, with 11 of the 16 covered jurisdictions having announced that they will incorporate, or consider the incorporation of, the ISSB Standards into local climate reporting or sustainability reporting rules. The rules will primarily target listed companies and (in some cases) financial institutions, with certain jurisdictions (Australia, Singapore and potentially Mainland China, Malaysia and Philippines) stating they will apply or consider applying the rules to large non-listed companies as well.

o Interoperability of ESG reporting rules and comparability of ESG information are therefore expected to improve over the region, with a common language and structure built around the four pillars of governance, strategy, risk management and metrics and targets.

o Some degree of fragmentation will however remain within the region as (a) some jurisdictions with more bespoke reporting requirements (e.g. Cambodia, Myanmar and Vietnam) have not made indications to incorporate the ISSB or TCFD standards (the latter being the conceptual foundation for the ISSB Standards); and (b) variations exist in how each ISSB-aligned jurisdiction will incorporate and apply the ISSB Standards. For example, some will initially apply the standards only to climate reporting (e.g. Australia, Hong Kong and Singapore) or financial institutions (e.g. India) and some may not mandate some of the more challenging disclosures such as Scope 3 emissions. Jurisdictions adopting the “single materiality” approach of the ISSB Standards will also be distinct from those that take a “double materiality” approach (like the EU and potentially Mainland China), as the ISSB Standards assess materiality by reference to financial materiality rather than a company’s external impact. These differences and fragmentation can create challenges for companies operating in multiple jurisdictions.

o Further alignment with the ISSB Standards will likely take place after jurisdictions and businesses become more familiar with the new requirements.

o In relation to the 11 jurisdictions that have announced steps to align with the ISSB Standards, the following is a high-level summary of where they are in the process and the expected scope of application and timing (where known). For many of the jurisdictions, the precise degree of alignment with the ISSB Standards is not yet confirmed as the rules are still under development and the relevant jurisdictional chapters of this publication will highlight the expected degree of alignment.

JURISDICTION

STATUS OF INCORPORATING ISSB STANDARDS

Australia

Bill introducing ISSB-aligned climate disclosure rules has been tabled and is expected to apply to larger companies, high emitters and financial institutions in phases, starting with larger companies in respect of FYs commencing on or after 1 January 2025.

Hong Kong

ISSB-aligned climate disclosure rules for listed companies have been finalised and will apply (subject to a phased approach) in respect of FYs commencing on or after 1 January 2025. ISSB-aligned sustainability disclosure requirements are under development for application to regulated financial institutions and listed companies.

India

Draft climate disclosure rules for certain banks and financial institutions structured around the four pillars of IFRS S2 have been published and are expected to apply in a phased manner, starting with larger banks in respect of FY2025-2026 onwards.

Indonesia

In the process of incorporating IFRS S1 and IFRS S2 – no details on implementation timeline or scope of application.

Japan

Exposure drafts of sustainability disclosure standards based on IFRS S1 and IFRS S2 have been published. Scope of application and timing are under discussion.

Mainland China

Exposure draft of “Basic Standard – Corporate Sustainability Disclosure Standards” based on IFRS S1 has been published. The objective is to apply the Basic Standard and a Climate Standard to listed companies by 2027, and to expand to non-listed companies and shift from voluntary to mandatory in stages. 

Malaysia

Consultation on ISSB-aligned sustainability disclosure rules for listed companies and large non-listed companies has been published, with a proposed phased approach (starting with Main Market listed companies in respect of FYs ending on or after 31 December 2027).

Philippines

ISSB-aligned sustainability disclosures for listed companies are under development and are expected to apply to FY2024 with reporting due in 2025.

Singapore

ISSB-aligned climate disclosures will apply to listed companies from FY2025 and large non-listed companies from FY2027. Proposed amendments to the reporting regime are under development.

South Korea

Consultation on draft sustainability disclosure standards based on IFRS S1 and IFRS S2 is under way to apply to listed companies in a phased manner after 2026.

Taiwan

Plans to adopt IFRS S1 and IFRS S2 for sustainability disclosures by listed companies in a phased manner from 2026 have been announced.

  • Emissions reporting requirements apply in most jurisdictions – 12 jurisdictions currently have GHG emissions reporting requirements in place (though the precise scope of the requirements vary). GHG reporting requirements are expected to be enhanced across much of APAC with the incorporation of the ISSB Standards.
  • Gradual movement towards external assurance – Currently, only New Zealand and Taiwan mandate reporting entities to obtain external assurance requirements for their GHG emissions disclosures. Australia, India and Singapore will be introducing such requirement (with India on a comply-or-explain basis for larger listed companies). More jurisdictions are expected to move towards external assurance requirements. For example, Japan is considering such a move, and Hong Kong has announced that it is developing local assurance standards with reference to international developments.

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Transition planning

  • Governments in all the covered jurisdictions have announced net zero and/or decarbonisation commitments.
  • Outside of specific high-emitting sectors, none of the jurisdictions have introduced mandatory requirements for businesses more generally to adopt or implement climate transition plans or set climate-related targets. Having said that, the following is worth noting.

o Enhanced transparency: Most jurisdictions have introduced, or will be introducing, reporting requirements for reporting entities to disclose aspects of their climate strategies. For jurisdictions that are implementing, or proposing to implement, the IFRS S2, the disclosure of any corporate transition plans and climate-related targets that are set will be a key aspect of ISSB-aligned reporting. The enhanced transparency is expected to have a knock-on pressure for entities to put in place credible transition plans and targets in order to demonstrate to stakeholders that they have developed a robust climate strategy; and

o Growth of carbon markets and other pricing tools:

i. The use of carbon pricing tools in APAC continues to grow. In Australia, Indonesia, Mainland China, New Zealand and South Korea, this primarily takes the form of compliance-based ETS for the power or industrial sectors. India, Japan, Philippines and Vietnam are making progress towards launching their ETS. Carbon tax for certain sectors and/or high emitters have been introduced in the Malaysian State of Sarawak and Singapore, with Indonesia and Taiwan planning to introduce carbon taxes as well. Malaysia and Thailand have both announced they will explore options for carbon pricing (including carbon tax and ETS). In addition to incentivising GHG reduction, these tools will help mitigate against the impact of the EU’s Carbon Border Adjustment Mechanism, which would otherwise impose a charge on certain goods to reflect the carbon emitted during their production; and

ii. We see the continued development of government-administered domestic carbon crediting mechanisms (which supply carbon credits generated through voluntary emission reduction activities). These are in place in Australia, Japan, Mainland China, South Korea and Thailand, and are under development in India, Indonesia, Taiwan and Vietnam. In particular, Mainland China recently relaunched its China Certified Emissions Reduction Scheme (CCER) and issued the first batch of CCER project methodologies. The growth of such mechanisms may reflect the plans of certain jurisdictions to link their domestic carbon market with international carbon markets (e.g. Vietnam) and/or to allow the use of domestic carbon credits to offset (with limits) compliance obligations under their ETS (e.g. Mainland China).

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Greenwashing

  • With the exceptions of Australia, and to a lesser degree, New Zealand, Singapore and South Korea, there are no known examples of material legal claims or regulatory enforcement against greenwashing across the covered jurisdictions.
  • Australia has been the most active in this regard – its securities regulator has brought three greenwashing civil penalty actions and has so far been successful in two, bringing it towards the top of the list of regulators globally taking enforcement actions against greenwashing. Actions have been brought on the grounds of false or misleading representations and conduct liable to mislead the public in relation to the purported application of criteria that would exclude certain securities from investment products badged as having ESG credentials.
  • In New Zealand, several NGOs have recently instigated proceedings against a large energy company for overstating its emissions reduction. New Zealand’s consumer regulator and financial markets regulator have taken some enforcement actions, primarily in relation to unsubstantiated environmental claims for certain products.
  • In Singapore, the Advertising Standards Authority made the nation’s first ruling against a company for misleading environmental claims about a product, and a complaint was made to the Singapore Stock Exchange last year by an Australian climate activist group against a power generator on misleading disclosures related to a bond issue on the Singapore Stock Exchange.
  • South Korea has seen a complaint lodged by an NGO against major companies for false and misleading advertisements related to statements on their GHG reductions, and an administrative guidance issued by the environmental regulator regarding a claim of carbon neutrality based on carbon credits.
  • Some minor actions have also been taken in Mainland China and the Philippines in relation to environmental claims related to consumer products.
  • All jurisdictions have grounds on which greenwashing proceedings or action can potentially be launched, with many answers noting that greater scrutiny against greenwashing conduct can be expected as disclosure requirements are enhanced.

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This material is provided for general information only. It does not constitute legal or other professional advice.