Expect More Regulation and Scrutiny in Asia’s Green Finance Sector, Report

According to the Asia edition of its ESG Legal Outlook 2023, which covers ESG trends, global law firm Linklaters expects the year ahead to be one of more regulation and scrutiny, despite ongoing geopolitical and economic headwinds.

On tackling greenwashing claims Linklaters says firms in Asia should continue to take steps to identify and mitigate potential risks across their businesses, as any false or misleading statements that products or services meet certain environmental standards, will continue to be a priority for regulators, particularly financial regulators, in Asia.

Linklaters also points out that a focus in 2023 will be on the adoption and interoperability of the new International Sustainability Standards Board (ISSB) climate disclosure standards with local Asian standards being developed.

Although the ISSB standards are voluntary, the SFC is working with the Hong Kong Stock Exchange to develop a climate reporting framework for listed companies which will align with the global baseline being developed by the ISSB.

Linklaters points out that Singapore’s regulators have also generally signaled support for the work of the ISSB, and there is a shift towards mandatory climate-related disclosure regimes, with listed companies needing to ensure processes are in place to comply with requirements from regulators when they are implemented.

Among other moves Linklaters expects to see this year include, more exchanges building out infrastructure for carbon trading, and further developments in compliance and voluntary carbon markets. The law firm sees investor demand for sustainable funds remaining strong in Asia, and in the M&A sector, a diversification of ESG assets will come to market.

The Linklaters report also states that despite Asia-based governments setting national climate targets and signaling significant policy shifts, the region faces major challenges to close the emissions gap.

And while there remains huge demand in carbon-intensive sectors which will need to transition for Asia to meet its climate targets – this will require a significant increase in energy-transition spending.

This will see new investors entering Asia, including strategic developers seeking new opportunities away from their existing markets, and an upsurge in interest from financial sponsor clients, including specialist energy and infrastructure funds.

#greenwashing #ISSB #sustainablefunds

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