Executive summary

Asian markets have experienced sustained growth since 2005. Today, Asian listed companies represent over half of the total number of companies listed around the world and one-third of global market capitalisation. By the end of 2022, there were almost 25 000 Asian listed companies with a total market capitalisation of USD 30 trillion, equivalent to 91% of the total GDP of the region. Given the size and relevance of Asian markets, the regulatory frameworks and sustainability practices of corporations will have a significant impact beyond Asia. This report presents a comprehensive overview of the main trends and issues related to sustainability policies and practices for corporate governance in 18 Asian jurisdictions. It focusses on the disclosure of sustainability-related information, responsibilities of company boards, shareholder rights and the role of regional capital markets in allocating resources to achieve net zero commitments.

Among a wide range of sustainability-related issues, climate change and human capital are the most prevalent issues in Asia and globally.

In Asia, companies that account for 62% of the regional market capitalisation are considered to face financially material climate change-related risks. The share at risk globally is similar, corresponding to 64% of the global market capitalisation. Human capital is considered to be a financially material risk for companies representing 59% of the market capitalisation in Asia, globally this number is 64%.

Companies included in major investable indices are more likely to disclose sustainability-related information.

Major Asian and global ESG/climate investable indices include to a greater extent larger companies and companies from the healthcare and technology sectors compared to the allocation of their parent indices. Importantly, companies included in major indices are more likely to disclose sustainability information than companies not included in indices.

Over the past decade, there has been a substantial growth in sustainable corporate bond issuances, although this still represents a small share of the market.

Sustainable bonds represent a small share of total corporate bond issuance, 6% in Asia and 8% globally in 2022. Green bonds are by far the dominant category of sustainable bonds, both in Asia and globally, representing roughly three-quarters of total proceeds. Social bonds are less common in Asia, representing only 4% of total proceeds compared to 9% globally.

All 18 Asian jurisdictions have a national legal framework requiring corporate sustainability disclosure.

Thirteen Asian jurisdictions have implemented, or are considering implementing, binding regulatory requirements for corporate sustainability disclosure. Four jurisdictions have a corporate governance code with a comply or explain approach for corporate sustainability disclosure, while one jurisdiction has issued recommendations on sustainability disclosure.

Several Asian jurisdictions have created local frameworks/standards for sustainability disclosure or provided guidance with respect to certain elements of internationally accepted standards.

Twelve Asian jurisdictions have already developed or are developing local disclosure frameworks/standards for companies to disclose sustainability-related information. Most of these jurisdictions include certain aspects of, or suggest the use of, international standards and frameworks. Two jurisdictions have created their own sustainability standards boards.

Companies disclosing sustainability-related information represent a small share of the number of listed companies and a higher share when measured by market capitalisation, consistent with the global trend.

In Asia, 13% of listed companies disclose sustainability information in the form of a sustainability report or an integrated report that includes sustainability issues, equivalent to 74% of total market capitalisation in 2021. Globally, these numbers are higher at 19% of all listed companies, representing 84% of global market capitalisation.

Assurance of sustainability-related information by an independent third party is less frequent in Asia.

Independent assurance is encouraged in several Asian jurisdictions and mandatory in two. In practice, the sustainability information disclosed by only 4% of all Asian listed companies (37% of the regional market capitalisation) was reviewed by a competent and qualified assurance service provider. Globally this compares to 6% of listed companies, representing 51% of market capitalisation.

Several Asian jurisdictions have introduced regulatory frameworks governing how boards should manage sustainability risks.

In 14 jurisdictions directors would have to consider stakeholders’ interests and the social and environmental stakes of a company’s activity, even while their core duty may be to act in shareholders’ best interests. The business judgement rule, or a similar safe harbour for directors in their decision making, is applied in 11 jurisdictions.

An increasing number of companies include sustainability-related metrics in their performance measures and establish committees for overseeing the management of sustainability issues.

Companies representing 66% of Asia’s market capitalisation have performance-based incentives for executives, with only 9% linking this to sustainability factors in 2021. Globally, this compares to companies representing 85% of global market capitalisation, with 44% of market capitalisation including a variable component of executive remuneration based on sustainability factors.

In Asia, companies representing around a third of the region’s market capitalisation have established a committee responsible for overseeing the management of sustainability risks and opportunities, representing only 6% of the number of Asian listed companies. Globally, this is around a half of the world’s market capitalisation, which is less than 10% of listed companies.

Sustainability matters in particular climate-related matters have become an important component of shareholder engagement.

Globally, there were 146 environmental shareholder resolutions voted on in 2022, representing a 22% increase compared to 2021. Around 55% of these proposals mentioned climate-related policies, strategies, targets and/or reporting. In Asia, shareholder resolutions related to climate are also becoming more common, but are still at a low number.

Asian jurisdictions made important commitments related to climate change, and a significant share of Asian companies disclose information on GHG emissions.

Fourteen Asian jurisdictions have made commitments to achieving carbon neutrality and/or net-zero GHG emissions by 2050. In 2021, 1 766 Asian companies representing 53% of the region’s total market capitalisation publicly disclosed scope 1 and 2 emissions, lower than share of companies disclosing at the global level. Companies representing 37% of Asia’s market capitalisation disclose their GHG emissions reduction targets, with the share being almost twice at the global level.

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