Asean players to partner standard bodies in aligning approach to ESG disclosures

PARTNERSHIPS have been formed to make data disclosures in the environmental, social and governance (ESG) arena more manageable, following agreement by capital markets, regulators, investors and businesses that sustainability reporting needs to be streamlined.

In light of this, the central banks and capital market regulators of five South-east Asian countries are working with the Sustainable Finance Institute Asia (SFIA) to align their approach on ESG data disclosures. (The SFIA is an independent institute set up to catalyse ideas on sustainable finance at the policy level in Asean, and to push for action to support those policy ideas.)

These five countries and SFIA have partnered a new platform launched by two international standard bodies for sustainability disclosures, namely, the Global Reporting Initiative (GRI) and the IFRS Foundation, which are jointly trying to iron out the sustainability reporting issues faced by supply and value-chain players.

The collaboration is significant, given that GRI is the reporting format adopted by 81 per cent of listed companies in the Asia-Pacific, and the IFRS Foundation is behind the International Sustainability Standards Board (ISSB), which just introduced new global standards in June.

The new platform under the GRI and the IFRS Foundation has been named the Sustainability Innovation Lab (SIL), set up on Nov 9 as the GRI and ISSB’s answer to the need for streamlining.

Speaking on Monday (Nov 20) at the conference where SIL was launched, SFIA chief executive officer (CEO) Eugene Wong said the Asean group’s work with SIL is important because what had started out as a consolidated effort to improve ESG disclosures had instead led to fragmentation. 

In their discussions, some parties concerned about being unable to meet the new standards took the “self-defence” route, and opted for standards that were more convenient for them; others decided unilaterally that the new standards were not for them, he said.

“Something like SIL is extremely important because it brings together all the different stakeholders on a common ground,” he added.

The Asean group is collectively known as the Single AccessPoint for ESG Data (SAFE) initiative. SFIA is the project lead for this group. When approached, Wong declined to name the five Asean countries that had joined SAFE, noting that more Asean states are still thinking about getting on board. 

Wong said the partnership between SIL and SAFE will support a standards or framework-agnostic approach towards building comparable, consistent and trusted data.

Apart from aligning reporting and disclosures, Wong said SAFE will also work with SIL on helping small- and medium-sized businesses report and disclose ESG metrics, and drive data use for sustainability. But for a start, SAFE will work with regional and global firms requiring support, before reaching out to the smaller players, he said.

Wong used the analogy of two lanes merging on a superhighway to describe the state of ESG reporting with the formation of SIL. 

Given that the ISSB set out to look at financially-relevant aspects of disclosures, while GRI is more geared towards impact, he said: “If they’re able to merge into the superhighway, we are looking at paradigm shifts.”

Data is important for the allocation of capital, he added, noting the credibility issue in play. He pointed out that 87 per cent of respondents in a PwC survey said they believed sustainability reports contained greenwashing.

He also cited a KPMG survey, which concluded that ESG due diligence had a great impact on deal making: More than half the deals studied were either dropped or had their closing conditions enhanced if insufficient due diligence had been carried out.

“It’s really important for us to do two things: The first is to have a universal baseline for disclosure that connects the financial sector to the real economy. And the second is to have it credible, comparable and easily accessible,” he said.