The Business Times

Greater accountability needed for the social dimension of ESG

Published Wed, Jul 21, 2021 · 05:50 AM

'SUSTAINABLE finance' is a trending buzzword in the world of banking and finance. The practice of integrating environmental, social and governance (ESG) criteria into financial services to bring about sustainable development outcomes is the essence of sustainable finance.

At a conference in July 2019, the managing director of the Monetary Authority of Singapore, Ravi Menon, said the MAS was working on "a comprehensive, long-term strategy to make sustainable finance a defining feature of Singapore's role as an international financial centre, just as wealth management and fintech have become". It was quite typical of Singapore: identify a trend early and put in place the requisite plan, structure and guidelines/regulations to be fully aligned with, if not ahead of, the trend.

Fast forward to June 2021.

I came across an interesting report titled Directors' responsibilities and climate change under Singapore law. Initiated by the Commonwealth Climate and Law Initiative, a research, education and outreach project focused on Commonwealth countries, the legal opinion expressed in the report focused on the duties and disclosure obligations of directors in Singapore with regards to issues associated with climate change under Singapore law.

The study inferred that directors must ensure that their companies comply with all regulatory prescriptions relating to climate change. At the minimum, they should disclose the risks that climate change poses to the business of their companies, as required by the Singapore Stock Exchange Listing Rules.

Directors of Singapore companies must also be prepared for the possibility of being taken to court for enforcement of climate change-related compliance norms, including termination of certain business activities.

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"Given the seriousness and public concern over climate change, directors of Singapore companies must be aware that they will incur criminal and civil liabilities if they do not inform themselves on how their companies impact or are impacted by climate change and factor these into their decisions as directors," Jeffrey Chan, senior director of TSMP Law Corporation and lead author of the report, was quoted as saying.


Here is the problem, as I see it, with the above. If ESG is supposed to be holistic and encompass multiple criteria, why is the focus solely - or overwhelmingly - on the E (environment) of ESG? While there is no denying the impact of climate change, why is it that the S (social) and G (governance) aspects are being relegated to relative obscurity or footnote status in most ESG discussions? The question is whether we are underestimating the longer-term implications of those factors vis-a-vis the environmental factors or if they are being downplayed because they are difficult to quantify.

If the other aspects of ESG - environmental and governance risks and opportunities - are primarily concerned with a corporation's effects on the planet or on its internal and administrative functions, social factors are primarily those that will govern the relations between a company and the various stakeholders linked to it, be they inside or outside the organisation. Gender equality, diversity and inclusion at the workplace are integral and indispensable components of the 'social' dimension and in today's world, warrant significantly more and urgent attention and action.


The pace, scale and depth of the Covid-19 crisis is without parallel in our lifetime. We are now facing an economic outlook more uncertain than possibly at any time since World War II and with an impact that could equal, or exceed, the Great Depression.

Women around the world have been at the receiving end of the pandemic, which has also heightened the large and small inequalities - both at work and at home - that women face daily. In fact, the pandemic has had a near-immediate effect on women's employment.

According to research by the McKinsey Global Institute, women's jobs were found to be almost twice as vulnerable to the pandemic as men's jobs. In a gender-regressive, "do nothing" scenario - which assumes that the higher negative impact of Covid-19 on women remains unaddressed - global GDP in 2030 would be US$1 trillion below where it would have been if Covid-19 had affected men and women equally in their respective areas of employment.


If this is the reality on the ground and its impact on 50 per cent of the population is so acute, I will argue that there is a very strong case for "workplace gender equity" to be one of the fiduciary responsibilities of company directors. Why can't the same yardstick as recommended by the legal opinion on obligations of directors towards addressing climate change be applied to increasing women's representation at all levels in the workforce?

Despite calls from regulators, leading listed entities in most countries, including Singapore, aren't even getting close to fulfilling the requirement of women representation on boards. So how does one even plan to bring about gender equity across the entire workforce? The solution may lie in making it legally binding on at least the larger companies and their boards to have more transparency and disclosure when it comes to gender as well. This should not be limited to sharing on the number of women in the workforce but cover other substantive issues such as gender pay gap, non-monetary benefits, workplace recruitment and promotion practices, and all the other issues at hand!

It is time we adopt a strong carrot and stick approach, making it financially relevant for businesses to get serious on the whole of ESG and not just hop on to the bandwagon of climate change.

  • The writer is co-founder of, a Singapore-headquartered cause-driven global initiative to hasten the process of gender equality at workplaces.

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