South Asian Giants in ESG - Sustainability Initiatives, Regulations and Policy Landscape in China, Japan, Singapore

Posted On Jun, 07, 2023


ESG (Environmental, Social, and Governance) investing is catching up with the pace in Asia and is expected to grow in the coming years. According to Accenture’s 2022 Wealth Management Survey in Asia ESG investing has the potential of becoming a popular choice amongst investors with 70% of investors in Asia having invested or planned to invest in assets and products related to ESG. Additionally, preference towards ESG investing can also be backed by the issuance of ESG bonds worth USD 144 billion issued in 2022 in the Asia-pacific region, a 1.3% increase compared to 2021 (USD 142 billion) as reported by Refinitiv. While Europe and U.S. saw a fair decline of 30% in the issuance of such bonds in 2022, the Asia Pacific region witnessed growth as compared to 2021.

Foremost South Asian Countries Focusing on ESG

Asia is also forecasted to act as a key driver in enhancing global ESG Assets Under Management (AUM) by three times between 2020 and 2025 of which Asia’s ESG AUM is expected to quintuple from USD 90 billion in 2021 to more than USD 500 billion by 2025. Hence, investors in Asia are showing an increasing preference for ESG investing. However, ESG investing is also subjected to potential risks such as information asymmetry and inconsistencies in data disclosures which can be caused due to fast transitioning of the Asian ESG landscape. The diverse ESG investing landscape of the countries in Asia also plays a barrier to the interests of investors. For instance, while countries in Asia are using green taxonomies for voluntary disclosures, China uses them for deciding on green bonds. Therefore, ESG investing in the Asian region should be considered as an evolving space that is subjected to changing ecosystems around opportunities and challenges.

ESG Regulations and Policy Landscape across China, Japan, and Singapore


China has committed to achieving carbon-neutral status by 2060 which has spurred the sustainable finance regulations in the country to support the ESG investment opportunities. According to the World Bank estimates, China requires USD 14 trillion to USD 17 trillion over this period to achieve carbon neutrality as it accounts for 27% of global carbon emissions.

The Implementation Plan for Synergistic Efficiency Improvement of Pollution Reduction and Carbon reduction, implemented in 2022 (under the 14th Five-Year Plan (2021-2025) of China), synergistically promotes carbon and pollution reduction policies for firms, whereas the Social Innovation and Entrepreneurship Development Fund (SIE Fund) established by the Commission of Poverty in 2021 aims to alleviate poverty and bring social inclusion in Hong Kong.

Laws and Regulations

A major ESG disclosure regulation in the country is The Environmental Protection Law, which mandates voluntary disclosure of environmental information by key-pollutant discharging units such as the chemical manufacturing industry in the country. Special laws such as Air Pollution Prevention and Control Law and Water Pollution and Control Law help improve the country’s environment by preventing air pollution, enhancing the development of ecological infrastructure, and protecting public health.

Policy Landscape

Various macroeconomic agencies backed by the government, such as the NDRC (The National Development and Reform Commission), The China Enterprise Reform and Development Society (CERDS), and The Ecological Environment Department establish standard disclosure procedures, provide guidance on ESG reporting, offer ESG-related training, and draft sustainability-related indexes specific to China-focused ESG priorities to promote sustainable operations in the country.  China’s Shanghai Stock Exchange has also implemented relevant features for ESG priorities since 2022 including mandates for annual sustainability reports.

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Instead of legal obligations, Japan’s ESG landscape comprises quasi-legal instruments like Stewardship Code (SS Code) and Corporate Governance Code (CG Code) and are distinctly driven by indirect laws. These amplify the importance of ESG in the country by developing recommendations and guidelines for institutional investors.

The quasi-legal instruments regulating ESG in Japan

On one hand, the SS Code, as amended in 2020 defines ‘Stewardship Responsibilities of institutional investors to focus on long-term investment return by amending companies’ corporate and sustainable growth value while the CG code focuses on governance factors such as women representation and securing shareholder rights. Any deviation from the CG Code requires an explanation from the listed companies as it has been incorporated into Tokyo Stock Exchange (TSE) as a listing rule, which is also a sustainable stock exchange. As per the General Principle 2-3 of the CG Code, companies are also advised to address environmental and social issues such as climate-change related issues and employee welfare by taking appropriate measures. Additionally, SS Code plays a significant role in setting accountability over institutional investors to enhance the corporate value of the investee company and foster sustainable growth by indulging in constructive in-depth engagements to bring consistency in investment management strategies.

On the other hand, indirect laws such as the Act on Promotion of Global Warming Countermeasures require corporations to disclose greenhouse gas emissions. In contrast, the Act on Promotion of Women’s Participation and Advancement in the Workplace seeks organizations to promote equal work opportunities for women.

Hence, it can be concluded that the Japanese concept of ESG has not been codified and is mostly driven by soft-law rulemaking.

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Singapore has a vast policy landscape regarding ESG-related issues. The country also has industry-specific regulations and codes of conduct.

The Environmental Protection and Management Act of 1999 is the main statutory legislation that establishes mandates for environmental protection and management of natural resources. The Energy Conservation Act of 2012 is another significant legislation that has set requirements for the disclosure of greenhouse gas emissions by businesses. Social issues regarding businesses are regulated by acts like The Workspace Safety and Health Act 2006 which applies to all workplaces and provides guidelines and mandates for employee welfare, and employee health and safety. The Employment Act, of 1968 is the main labor law of the land and covers all the employees under contract of service and sets forth the employment rights. Singapore’s corporate governance is governed by two important acts mainly The Companies Act of 1967, The Securities and Futures Act of 2001 along with the listing rules of Singapore Exchange Securities Trading Limited.

The above-mentioned regimes are further supported by various guidelines, directives, and codes of conduct, making Singapore’s ESG regulations ecosystem even more inclusive. Singapore Exchange is also one of the Sustainable Stock Exchange Initiatives in Asian economies which has also made ESG reporting as a listing rule. This comprehensive legal setup of Singapore makes it a prominent country in Asia to drive ESG integration within various industries.

ESG Initiatives across China, Japan, and Singapore in recent times


ESG investment in China originated with the development of environment-related instruments such as green bonds, sustainable bonds, green thematic mutual funds, and many more. In 2015, China developed a green bond market and became the world’s largest issuer of green bonds in 2016. Its green bonds account for 26% of sustainable bond issuance globally. Moreover, China has been investing intensively in renewable energy which accounts for 30% of global investment and further accounts for 27% of global investments in energy efficiency.

The domestic and international trend of thematic environmental investment coupled with stricter government regulations on company disclosure, especially environmental issues, are the main drivers of ESG investment in the country. However, China faces fundamental challenges such as misperceptions about ESG investment, limited capacity to fully integrate ESG investment, and insufficient guidelines and support from exchanges and the government. A limited understanding of ESG integration and ESG issues is the top barrier to ESG integration in both economies. The issues of partial ESG investment with a significant bias toward the “E” factor and lack of transparency are also common challenges in the country preventing complete integration of ESG.

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The Society 5.0 initiative, which aims at developing a human-centric society, by the Japanese government is working as a motivating factor behind the achievement of the United Nations Sustainable Development Goals and overall sustainability in economic activities. For instance, Government Pension Investment Fund (GPIF), which is Japan’s largest pension fund, has expressed an interest in investing more in problem-solving innovations and expediting the achievement of UNSDGs. Social Impact Measurement Initiative (SIMI) is another example of collaboration between nonprofit organizations, government agencies, investors, research organizations, and businesses that focuses on accelerating social-impact management. Japan also positions itself firmly in terms of decarbonization of the economy as the country has already achieved a 40% reduction in GDP-energy intensity from the 1970s to the 2010s. Japan’s pledge towards net-zero carbon emissions is estimated to attract more environment-dedicated investments in the country.


Singapore places a strong emphasis on sustainable investment and aims to be a source of growth in the ASEAN union. The Singapore Stock Exchange encourages its listed companies to be more sustainable through two initiatives. First, it requires all listed companies to publish sustainability reports on their ESG performance at least annually on a “comply or explain” basis. These reports are intended to allow investors to make more informed investment decisions and supplement the traditional reports that consist only of financial performance. Second, the stock exchange has launched four sustainability indexes. The indexes are in response to increasing demand for measurements of ESG factors amid climate change, labor, and governance issues, and the indexes give investors the ability to identify which companies lead in ESG performance.

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