Study Finds Lack of Clarity of ESG a Main Issue For Businesses and Investors in Asia

A new White Paper identifying the requirements of businesses and investors to meet their sustainability goals and how the legal sector can support them has revealed that among a number of challenges confusion over the definitions of Environmental, Social and Corporate Governance (ESG) and sustainability remains a major stumbling block for decision-making.

The study, titled ‘From Uncertainties to Opportunities: How lawyers can support Asia’s transition to a low-carbon economy‘ is a cross-discipline collaboration between law firm Stephenson Harwood’s Hong Kong office and PIE Strategy, a certified B Corporation.

It presents a snapshot of prevailing perspectives and challenges to sustainable development in the Asian market. The in-depth interviews with key decision-makers in the finance and business sectors highlight’s the difficulties, opportunities, and potential approaches to navigation towards a low-carbon economy.

All of the interviewees agreed that a low-carbon transition was inevitable but were unclear on how to achieve the transition, how fast to go, how much to invest, and how to do it profitably.

Widespread misconceptions over the definitions of ESG and sustainability were a major factor in the confusion, affecting investment decisions and hampering the pace of transition.

This divide was clearer between traditional investors and those with a clear interest in assimilating impact influences into their investments. While sustainability could be a mandate perceived as explicit, the implicitness of ESG left asset managers unsure if they should incorporate it into their portfolios.

Commenting on the paper Evangeline Quek, managing partner, Greater China at Stephenson Harwood said: “Clarifying these definitions could be a substantial first step in clearing up misunderstandings. This is where the legal profession could help clients understand the potential meanings of terms of regulations and documents, to better gauge their risk exposure and ensure their commitment to achieving this transition.”

The White Paper also revealed that interviewees agreed that legal advisors could play a more significant role in helping companies prepare not just for present regulations but provide foresight in anticipating a tougher regulatory environment and navigating the subsequent implications.

Natalie Chan, Principal Sustainability Consultant of PIE Strategy added: “This White Paper provides an Asian perspective to complement the international dialogue on ESG and climate transition. The research was conducted through in-depth interviews with industry experts and decision-makers to understand the practicability for driving change. It is significant to note that businesses and decision-makers know ‘why’, with this Paper we hope to help them resolve ‘how’.”

As a case study, PIE leveraged the network of Stephenson Harwood and focused on the shipping industry due to fast-changing fuel choices and the far-reaching implications of the shipping industry’s impact on logistics and supply chains.

By delving into an ecosystem perspective to understand the dynamics and explore opportunities to drive system change, the Paper highlighted the importance of common and differentiated responsibility within the industry ecosystem to facilitate change.