Asean’s new ESG rulebook faces a reality check

[KUALA LUMPUR] Markets rarely wait for regulation. As Asean rolled out its new environmental, social and governance (ESG) kit, major issuers and investors were already moving to a tougher standard: market-driven compliance.

The kit comprises Taxonomy v4, an updated small and medium-sized enterprise (SME) disclosure guide, fresh guardrails for voluntary carbon markets, and a White Paper tying adaptation to mitigation.

Last month, The Business Times reported that listed companies have begun requiring climate data from suppliers, creating a de facto regime that cascades through supply chains.

The Asean Capital Markets Forum (ACMF), a high-level grouping of capital-market regulators from all 11 Asean jurisdictions, unveiled a series of key initiatives on Nov 6 at its ACMF International Conference 2025, hosted by Securities Commission Malaysia.

These releases are meant to smoothen and standardise the region’s ESG transition, marking the next phase of Asean’s efforts under the ACMF Action Plan 2026-2030 (AP 2026).

The conference, officiated by Minister of Finance II Amir Hamzah Azizan, who delivered Prime Minister Anwar Ibrahim’s keynote remarks, positioned AP 2026 as a road map for credible, comparable disclosures in the region.

“A well-functioning capital market must uphold integrity, accountability and trust,” the prime minister’s prepared text said – a framing that ties disclosure quality directly to capital access.

What’s new

• Asean Taxonomy for Sustainable Finance Version 4: Now with the Plus Standard, it lays the groundwork for consistent labelling across markets.
• Simplified ESG Disclosure Guide for SMEs in Supply Chains: A framework to help SMEs enter sustainable supply chains.
• Voluntary Carbon Market Development Plan and Guidance: A road map for high-integrity carbon credit markets compatible with mainstream finance. 
• mARs White Paper: Sets out a way to recognise mitigation co-benefits within adaptation finance strategies.

The centrepiece of the conference was ACMF’s new action plan: a five-year road map that builds on the 2021-2025 plan and sets out 11 priorities and 24 initiatives to guide the region’s capital-market development.

It covers five areas: sustainability, resilience, inclusivity, regional integration and digitalisation.

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“The next five years will be pivotal for Asean’s capital markets,” said Mohammad Faiz Azmi, ACMF chair for 2025.

“Through AP 2026, we are building the foundations for a more connected, credible and competitive region – one that not only attracts global capital, but channels it towards inclusive and sustainable growth,” he added.

But frameworks are only as good as their implementation.

Version 4’s 2026 roll-out will test whether Asean can deliver the operational infrastructure – mapping tables, standardised templates, transparency dashboards – that turn guidance into useful market tools.

Without these basics, even the most detailed taxonomy risks becoming a box-ticking exercise instead of something that drives real capital flows.

One of the conference’s sharper moments came from a panel on voluntary carbon markets, connectivity and capital in Asean, which laid bare the gaps that still hold back the region’s ESG readiness.

The credibility test

The panel, moderated by Eugene Wong, CEO of the Sustainable Finance Institute Asia, brought together Istiana Maftuchah from Indonesia’s Financial Services Authority, Tamara Singh of The Nature Conservancy, and Ryan Ko from Hong Kong’s Securities and Futures Commission.

Wong acknowledged the difficulty of building credible carbon markets and asked whether Asean is taking “a multi-pronged approach” to identify shared goals, make trading platforms interoperable, and align financial products – much like how the Asean Taxonomy serves as a common language for member states.

“There’s so much to do and not enough of us,” said Singh, noting that experimentation remains the norm across the region. “What we’re actually doing is trying 30, 50, 100 different ways to get to common ground.”

Fragmentation is another issue, not least because there are more than 10 voluntary carbon markets in Asia-Pacific.

Ko suggested that cross-platform interoperability is key to reducing fragmentation. Mutual recognition of credits across jurisdictions is also essential.

Istiana said cross-border collaboration is crucial, in order to create coherence across Asean’s different systems, boost market confidence and foster an inclusive carbon market that contributes to net-zero goals.

On integrity and speaking about her organisation’s handling of questionable carbon credits, Singh said: “It wouldn’t have been trustworthy to allow low-quality credits to circulate. We had to cancel them to stay credible – with ourselves and with the market.”

Asean’s Transition Finance Guidance permits the use of carbon credits only as a last resort, said Wong, adding: “You must exhaust all other options first, and the credits used must be of high quality.

“If we are aligned on what constitutes credible carbon credits, we provide clarity to users, guidance to project developers, and confidence to investors and financiers.”

Ko outlined Hong Kong’s practical approach to decarbonisation, which aligns with China’s climate targets. The city is prioritising net-zero electricity, green buildings, green transport and waste reduction – sectors that together account for more than 90 per cent of Hong Kong’s emissions. The strategy has shown results: Emissions peaked in 2014 and by 2023 had declined 25 per cent.

But Ko cautioned that policy targets alone would not build functioning markets. “A functional voluntary carbon market needs every part of the ecosystem – from credit providers to intermediaries to asset managers,” he said. “Without them, it won’t run effectively.”

The panel discussion illustrated the gaps between Asean’s frameworks and the infrastructure needed to make them work. By 2026, these tools must evolve beyond guidance documents into operational systems – mapping tables, standardised templates and transparency dashboards – that make disclosure cheaper, comparable and financeable.

Regulation sets the floor; procurement is setting the pace. If Asean can deliver these working parts, 2026 could mark the year voluntary carbon markets gain credibility at scale. If not, as the panellists suggested, market forces will continue to fragment and the region’s coordination efforts will fall behind.

Frameworks versus market reality

While global logistics firms such as WeFreight are already receiving early ESG-related requests from clients, these remain limited mainly to large multinationals.

“Only multinational customers, particularly those headquartered in Europe, have begun integrating ESG or carbon-emission requirements into logistics tenders,” said Lynn Neo, managing director of WeFreight Malaysia. “For most Malaysia-based shippers, such disclosures are not yet mandatory or widely implemented.”

She told The Business Times that while labour and governance standards are already built into daily operations, environmental compliance remains the toughest area due to cost and market readiness.

“Malaysia’s logistics ecosystem is still developing measurable green-logistics infrastructure, from renewable energy to carbon-tracking systems,” she said. “The willingness is there, but the cost base and readiness still need time to mature.”

If Asean delivers, 2026 could be the year its ESG architecture becomes truly operational. If not, market fragmentation will persist – and coordination will remain aspirational.