The latest developments in the ESG space.

A survey of 600 large multinational companies finds that although ESG considerations are moving up the agenda in Asia, integrating them effectively to comply with regulations needs more work. 

The study, from law firm Hogan Lovells, covered firms in Greater China, Singapore, Japan, Indonesia and Vietnam.

For 77 per cent of respondents, one of the main reasons for impeding ESG risk management in Asia is that it is difficult to embed ESG into existing risk practices – this was most prevalent in the Japanese companies surveyed (84 per cent),  and in Singapore (81 per cent). Some 74 per cent reported a lack of ESG knowledge and skills. The study said that 72 per cent reported that it was difficult to navigate in countries in which they (or third parties) operate. Singapore-based respondents highlighted this concern (74 per cent) more than other markets in Asia.

The findings come at a time when ESG investing has been a ubiquitous feature of financial services for several years. It is now almost damaging to a firm’s reputation if it doesn't have an ESG offering. The field remains controversial, as seen in concerns about greenwashing, as well as whether dissenting views about global warming costs will be given space, as a recent case at HSBC demonstrated.  

The study found that there was a gap between firms’ talk about ESG and their actual ability to incorporate it. 

Only 30 per cent of companies surveyed in Asia reported concerns about ESG risks posed by third parties. Strikingly, at present, just 2 per cent perceive third-party relationships as posing a great deal of ESG compliance risk to their business.

“In order to become ESG compliant, the legal and compliance teams of organisations in Asia still need a certain amount of education on where to start – this involves how to audit, prioritise and embed ESG practices into their risk and compliance frameworks,” Nick Williams, partner in the Investigations, white collar, and fraud practice in Singapore, said. “While companies across all sectors in the report acknowledge that this is required, they’re still at the beginning of their ESG journeys compared to businesses in Europe and North America.”