As the voices surrounding environmental, social and governance (ESG) have grown louder, the managing partner of Singapore law firm WongPartnership, Ng Wai King, has seen financial institutions leading the conversations.
Ng, who set up a “sustainability and responsible business practice” in June, told Asia Business Law Journal that ESG issues had reached a tipping point worldwide, with global initiatives taking centre stage.
“Financial services institutions appear to be key players in driving the next wave of the net-zero transition and, given their ability to impact the businesses of companies directly, we expect that Asian companies will respond accordingly,” said Ng.
Ng used as examples JP Morgan’s recent decision to exclude Malaysian state-owned energy company Petronas and its Indonesian equivalent, Pertamina, from its ESG Emerging Market Bond Index due to their respective ESG scores falling below the required threshold, as well as a Hong Kong renewable energy fund’s lawsuit against the Japanese government for pulling back on a renewable energy subsidy scheme.
Meanwhile, in July, Germany pledged about USD170 million in the next two years to help Vietnam deploy a model for sustainable development and promote environmental protection. Banks in Singapore like DBS have also committed to financing SGD20 billion (USD14.7 billion) in renewable, clean-energy and green projects by 2024, while OCBC aims to grow its sustainable portfolio to SGD25 billion by 2025.
In addition, China Minsheng Bank has also stated in its 2020 ESG Report that it pays close attention to preventing environmental and social risks, and restricts credit placement to high-polluting and high energy-consuming industries.
“Our clients now have to deal with a myriad of issues, such as a greater need for transparency and accountability, disclosure and reporting, stakeholder activism, supply chain risks, and even climate litigation,” said Ng. “Across Asia, corporate and legal consequences for failing to consider, address and disclose ESG issues adequately are also areas where we have seen and will continue to see significant development.”
“Developments in ESG-related litigation in other jurisdictions and other parts of the world may also spill over into the Asian legal landscape, especially as we develop laws and regulations of our own to implement our global commitments, and seek to attract green investment from all over the world.”
While Asian jurisdictions have had regard for the regulations and practices in Western countries in formulating and shaping their own ESG and sustainability-related policies and regulations, Ng said that it would be inappropriate to adopt such regulations and practices wholesale, given the differences in cultures and developmental needs.
“In developing their own ESG and sustainability strategies and programs, it is important that Asian or Asian-based companies be sensitive to these differences, and it is here where the Asian legal market has an important role to play,” he said.