From the emergence of General Counsels taking on key roles as Chief Sustainability Officers, to the Green GC Powerlist: Southeast Asia 2023 recognising lawyers driving sustainability initiatives, the importance of sustainability and Environmental, Social, and Governance (ESG) has never been more apparent.
In this article, we explore how the evolving environmental landscape in the U.S. and Europe is setting the stage for significant changes in Asia’s sustainability regulations, what lawyers in the region should be prepared for, and how in-house counsels can be more effective commercial business partners in the realm of sustainability.
Learning from the U.S.: the shift towards ESG disclosures
The United States has witnessed a notable shift towards ESG disclosures, with the Securities and Exchange Commission (SEC) adopting new rules in 2022 requiring public companies to disclose climate-related risks and their impact on businesses.
Lawyers in Asia should prepare for potential changes in local disclosure requirements, as governments and regulatory bodies may follow the U.S. example in enhancing transparency around sustainability risks and opportunities. This shift is already evident in countries like Singapore and Japan, where the Monetary Authority of Singapore (MAS) and the Japanese government are actively promoting ESG reporting initiatives.
European influence: sustainable finance and the EU Taxonomy regulation
Europe’s ambitious sustainability initiatives, such as the European Green Deal, are setting new standards for sustainable finance and taxonomy. With a target to achieve carbon neutrality by 2050, the European Union’s (EU) actions will likely influence sustainability practices in Asia.
Lawyers should be prepared to assist Asian businesses with sustainable investments, considering the EU Taxonomy Regulation that categorizes economic activities based on their environmental sustainability. This approach may inspire Asian governments to develop their taxonomy frameworks, aligning their financial markets with international sustainability norms.
Take the example of a multinational Asian company that exports goods to Europe. As the EU introduces stricter environmental regulations, including carbon border adjustment mechanisms, this Asian company may face higher compliance costs. Lawyers in Asia need to be proactive in advising their clients on adapting to these changes to maintain their competitiveness in European markets.
Aligning Asian regulations with international best practices
Asian countries are increasingly recognizing the importance of sustainability and ESG considerations. Japan, for instance, aims to achieve net-zero greenhouse gas emissions by 2050. South Korea is also making strides in sustainable finance regulations, while Singapore actively promotes green finance initiatives.
The business case for sustainability: merging legal and commercial perspectives
Understanding sustainability isn’t just about compliance; it’s also a strategic advantage. Savvy lawyers who can merge legal insights with commercial acumen will empower clients to align their business models with sustainable practices. Whether it’s assisting with green investments or sustainable corporate governance, lawyers with a knack for sustainability will drive positive change for both their clients and the environment.
As sustainability and ESG become paramount in the global business landscape, lawyers in Asia must embrace their role as key advisors to commercial enterprises. The burgeoning laws in the U.S. and Europe will inevitably influence sustainability regulations in Asia, making it crucial for legal practitioners to be proactive in staying informed and prepared.
By keeping up to date with emerging legislation, and taking a proactive step to take on the ESG portfolio in their company, lawyers can position themselves as invaluable partners to businesses navigating the complex terrain of sustainability in the region.
For more information around the legal market in Asia or to discuss your next career move, please get in touch with Cassandra Lim.