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Inconsistent ESG standards undermine Asean investment
Clear, consistent reporting framework will unlock triple dividend of avoided losses, economic gains, social environmental resilience
The Asset   29 Aug 2025

The Association of Southeast Asian Nations ( Asean ) region collectively is set to make up the world’s fourth-largest economy by 2030; however, without greater alignment of environmental, social and governance ( ESG ) standards, the region’s fragmented approach could undermine its long-term investment appeal, according to a recent report.

This matters because global investors are demanding reliable, comparable ESG data; and without it, Asean risks losing capital to markets where sustainability reporting is clearer and easier to assess, finds the report entitled Sustainability Reporting in Asean: an Overview of Current Developments, published by the Association of Chartered Certified Accountants ( ACCA ).

Having a clear, consistent, sustainability reporting framework, the report emphasizes, will enable Asean to unlock the triple dividend of avoided losses, economic gains and social environmental resilience.

In addition, Asean, one of the world’s most biodiverse regions – home to one-third of the world’s mangroves and seagrass ( important carbon sequestrators ), 80% of international aquaculture production and 15% of the world’s forestland – may be severely threatened by climate and nature risks.

Up to 35%, the report adds, of the region’s GDP could potentially be affected, climate migration may be in the millions, and labour productivity may face significant challenges from heat stress.

Response

How Asean responds to sustainability risks and opportunities is important in ensuring investor confidence and driving accountability. High-quality sustainability reporting is vitally important to fostering trust and enabling sound decision-making by investors and other stakeholders.

Drivers towards the adoption of sustainability reporting, the report points out, that are aligned with global standards include:

Recommendations

To end the Asean region’s fragmentation, the ACCA report recommends that it, first, push for only one set of global sustainability reporting standards – that is, the IFRS Sustainability Disclosures Standards issued by the International Sustainability Standards Board ( ISSB ) – in the same way that IFRS Accounting Standards are effectively the global standard for financial reporting purposes ( except in the US ).

Second, it recommends that Asean use ISSB standards as the global baseline and incorporate other necessary information requirements to achieve consistency and effectiveness across Asia, Europe and the Americas – utilizing a “building blocks” approach.

Third, the region should ensure the proportionality of reporting requirements to achieve high-quality and practical reporting that addresses the diverse needs of the relevant stakeholders and permits scalability.

Four, the region should strongly advocate that EU regulators and standard setters provide transition relief to Asean businesses from the obligation to report on the European Sustainability Reporting Standards ( ESRS ) until a single set of global sustainability reporting standards is formally recognised. EU regulators and standard-setters should also specify the standards that will be recognized as ‘equivalent’ to the ESRS as soon as possible. This deemed equivalence will ease the reporting burden ( especially on small and medium-sized enterprises ) of not having to prepare separate reports purely for ESRS compliance purposes.

Fifth, Asean should strongly advocate for adequate representation on the ISSB’s board, consultative bodies and other relevant bodies to ensure the voice of the region’s businesses and governments ( on behalf of their populations ) is heard to influence global policymaking and standard-setting. This is especially important given the size of the Asean economy and the disproportionately high risks it will likely face on climate, nature and societal issues.

As well, for markets in Asean that have not already done so, a sustainability reporting implementation roadmap should be developed to clarify expectations. And professional accountancy bodies should be encouraged to upskill finance and accountancy professionals on sustainability reporting requirements.

Finally, ethical requirements related to reporting and mandatory sustainability assurance, and related regulations, should also be considered. Asean-wide centralized sustainability intelligence platforms should be established to enable businesses to assess their carbon emissions. This will also enable policymakers and regulators to implement and track national-level sustainability initiatives, for example, energy transition and biodiversity roadmaps.