Data Challenges and Opportunities for
ESG and Sustainable Finance in Asia PacificDecember 2020

REPORT PARTNERS

ASIFMA is an independent, regional trade association with over 140 member firms comprising adiverse range of leading financial institutions from both the buy and sell side including banks, asset
managers, law firms and market infrastructure service providers. Together, we harness the sharedinterests of the financial industry to promote the development of liquid, deep and broad capital
markets in Asia. ASIFMA advocates stable, innovative and competitive Asian capital markets that arenecessary to support the region’s economic growth. We drive consensus, advocate solutions andeffect change around key issues through the collective strength and clarity of one industry voice. Our
many initiatives include consultations with regulators and exchanges, development of uniform
industry standards, advocacy for enhanced markets through policy papers, and lowering the cost of
doing business in the region. Through the GFMA alliance with SIFMA in the US and AFME in Europe,
ASIFMA also provides insights on global best practices and standards to benefit the region.
www.asifma.org

There is now global acknowledgement that the climate crisis is a real and immediate threat, climate
concerns as well as broader environmental and social considerations need to start moving into
mainstream risk assessment and opportunity analysis. Capital markets are not understanding andintegrating material sustainability considerations into their investment decisions, often resulting in
capital being allocated to inefficient and even environmentally or socially damaging projects andassets. FoSDA has been formed to address this urgent situation from a data perspective and foster
collaboration in the ecosystem. https://futureofsustainabledata.com

Disclaimer
The information and opinion commentary in this Paper by the Asia Securities Industry and Financial Markets Association(ASIFMA) in to reflect the views of ASIFMA members as well as discussions and events organised as part of its partnershipwith the FOSDA alliance. The authors believe that the information in the Paper, which has been obtained from multiple
sources believed to be reliable, is reliable as of the date of publication. As estimates and commentary by individual sources
may differ from one another, estimates and commentary for similar types of discussions could vary within the Paper. In no
event, however, do the authors make any representation as to the accuracy or completeness of such information. The
authors have no obligation to update, modify or amend the information in this Paper or to otherwise notify readers if any
information in the Paper becomes outdated or inaccurate. The authors will make every effort to include updated information
as it becomes available and in subsequent Papers.

Contents
Executive Summary................................................................................................................................. 4
1.

Introduction .................................................................................................................................... 6
Future of Sustainable Data Alliance .................................................................................................... 6
ASIFMA Virtual Events on ESG Data Challenges in Asia ...................................................................... 6
Definition ............................................................................................................................................ 7

2.

Sustainable Finance in Asia ............................................................................................................. 8
Financing Gap.................................................................................................................................... 10International Cooperation ................................................................................................................ 11
IOSCO ............................................................................................................................................ 12
FSB ................................................................................................................................................. 13
Regulation and Policymaking ............................................................................................................ 13

3.

Data, ESG and Sustainable Finance ............................................................................................... 15
Data Practices Today......................................................................................................................... 15
Measuring E, S and G .................................................................................................................... 15
Data Sources and Analysis ............................................................................................................ 15
Data Challenges ................................................................................................................................ 16
Lack of Standardisation and Comparability .................................................................................. 16
Data Availability ............................................................................................................................ 18
Reliability of Third Parties ............................................................................................................. 19
Forward- vs Backward-looking Perspectives ................................................................................ 19
Accessibility and Interpretability .................................................................................................. 20
Interoperability with Financial Risk Assessment........................................................................... 20

4.

Digitalisation & Emerging Technologies ....................................................................................... 22
Data Collection and Analysis ......................................................................................................... 22
Auditing and Monitoring ............................................................................................................... 22
Risk Management ......................................................................................................................... 22
Energy Efficiency ........................................................................................................................... 23
Scaling ESG Enabling Technologies ................................................................................................... 23

5.

Conclusion ..................................................................................................................................... 24
Recommendations ............................................................................................................................ 24

Page 3

Executive Summary
The Covid-19 pandemic highlights the importance of ESG and sustainable finance, with inflows into
high-ESG products globally up 40% in Q1 2020 as ESG continues to become mainstream. At thesame time, climate risks are rising in Asia, with Bangladesh, China, Indonesia, Japan, India andVietnam all particularly exposed to rising sea levels and with potential exposure to higher credit risk.
Negative environmental and social impacts are starting to become evident in some sectors;
therefore ESG monitoring is becoming increasingly critical to management of financial risk also.
Sustainable Finance in Asia
ESG investing in East Asia trails other regions globally with just 5% of AUM invested in sustainableprojects, compared to 30% in North America; however, this is changing as institutions such as
Japan’s Government Pension Investment Fund and MUFG Bank adopted wide-scale ESG criteria, andmarkets like China, Hong Kong and Singapore look to scale green and sustainable finance markets.
The largest regional climate finance investment needed is in Asia, estimated at USD $66 Trillion overthree decades, which is over half the investment required globally to achieve a scenario of limiting
temperature rise to 1.5° Celsius. This is driven by the scale and pace of growth of Asia's economies,
growing population, increasing urbanisation, and rapid industrialisation in the region.
Data, ESG and Sustainable FinanceYet future growth of ESG investment in Asia is inextricably linked to data – its availability,
accessibility, reliability and comparability. When asked to nominate the greatest data challenge in
ESG and sustainable finance, 56% of respondents reported ‘inconsistent data’. Significantly, there is
no standardisation to measurement of E, S, and G factors. Additionally, individual ESG metrics vary
not only between industries and markets, but also between companies in the same industry, with
the quality of company disclosures differing widely.
Data Challenges
Firms and investors are navigating a confusing landscape of disclosure frameworks, incentive
structures, data collection methods, and external assessments developed and implemented invarious markets and jurisdictions by both the public and private sectors. Variation is evident not only
between markets, but also within markets.
There is also no single binding global taxonomy, and the industry wants to see greater harmonisation
yet a principles-based approach that allows for tailoring the each region’s specific conditions, such as
relative levels of economic development.
Even when data is available, 35% of respondents cite ‘poor quality data’ as the greatest challenge.
There are quality third party providers, however reliance on a single data source can resulting involatile indicators over time. Another concern lies in compatibility between the vendor’s
methodology and metrics, including in relation to what the investor is trying to monitor.
Digitalisation & Emerging Technologies
Technology is part of the answer, but not all of it. Technologies and associated business models are
evolving rapidly, spanning AI, robotics, big data, blockchain, and the Internet of Things (IoT) amongst
other solutions. Asked what is needed most to scale ESG and sustainable finance enabling
technologies, however, nearly half of respondents to a 2020 ASIFMA/FOSDA poll prioritise ‘policy
and regulation to support innovation’.

Page 4

Recommendations
ASIFMA offers the following 8 key recommendations, critical to supporting and enabling thefurther development of green and sustainable markets in Asia::
1. A greater convergence towards a principles-based global (or at least regional)
taxonomy
2. Higher, more consistent corporate disclosure standards between jurisdictions andsectors
3. Encouragement of higher standards of analysis, with incentives for more holistic androbust approaches to ESG measurement and analysis
4. Policy and regulation to support innovation and technologies that enable ESG andsustainable finance capabilities
5. A focus on education and skills to support ESG and sustainable finance capability
6. Higher standards and accountability for ESG ratings providers, potentially including
regulation, and clear and harmonised requirements for product disclosure
7. Harmonisation between ESG standards and frameworks such as UN SDGs, and policy
on climate change and bank supervision at systemic level, including on climate risk
8. Ongoing partnership and dialogue between the public and private sectors, as well as
between stakeholders such companies and investors on disclosure and reporting
standards

Page 5

1. Introduction
Future of Sustainable Data Alliance
The Asia Securities Industry and Financial Markets Association (ASIFMA) is a partner of the Future of
Sustainable Data Alliance (FOSDA) and is leading the Asia workstream, to understand data challenges
for environmental, social, and governance (ESG) and Sustainable Finance in the Asia Pacific region.
FOSDA seeks to address the following question:
What data do investors and governments need to meet the requirements of regulators,
citizens and market demand for sustainable investments and portfolios before 2030?
FOSDA’s key objectives are to:
1. Articulate future ESG data requirements of investors and governments to accurately
integrate ESG data into decision making;
2. Promote new technology capabilities and data by highlighting the key role that newtechnology and data sets must play in the transition to sustainable development; and3. Address UN Sustainable Development Goals (“SDGs”) related data needs and how to satisfy
them for investors wanting to take greater account of SDG-related risks and impacts.

ASIFMA Virtual Events on ESG Data Challenges in Asia
As part of its workstream on ESG data challenges, ASIFMA, in collaboration with FOSDA, organised
two virtual panel discussions ‘Navigating ESG and Sustainable Finance in Asia’ 1 and ‘ESG and
Sustainable Finance in Asia: the Fintech and Data Challenge’ 2 on 14 July and 28 October 2020,
respectively. The two events were attended by around 500 stakeholders, including market
participants from the buy and sell sides, specialists, consultants in the ESG and sustainable financefield, policymakers and regulators.
In addition to audience participants, ASIFMA is grateful to the following speakers and panellists who
took part in the two virtual discussions (listed in alphabetic order by organisation name):
12

Ramesh Subramaniam – Director General of the Southeast Asia Regional Department, AsianDevelopment Bank;
Matthew Chan – Head of Public Policy and Regulatory Affairs, ASIFMA;
Amar Gill – Managing Director and Head of Investment Stewardship, APAC, BlackRock;Gabriel Wilson-Otto – Global Head of Sustainability Research, BNP Paribas Asset Management;
Elree Winnett Seelig – Head of ESG, Markets & Securities Services, Citi;
Kamran Khan – Head of ESG for Asia Pacific, Deutsche Bank;
Jason Wincuinas – Senior Editor, Thought Leadership Asia, Economist Intelligence Unit;
Eugene Goyne – EY Asia-Pacific Financial Services Regulatory Lead, EY;
Helene Li – General Manager / Founder, Fintech Association of Hong Kong / Golmpact;
Helena Fung – Head of Sustainable Investment Asia-Pacific, FTSE Russell;Grace Hui – Head of Green and Sustainable Finance, Markets Division, Hong Kong Exchanges
and Clearing Limited;
Paul Andrews – Secretary General, IOSCO;

Video recording may be accessed here: https://youtu.be/E-SiPlJc8CM
Video recording may be accessed here: https://www.youtube.com/watch?v=TSbDcd-mfQI&feature=youtu.be

Page 6

-Wang Yao – Director General, International Institute of Green Finance, Central University of
Finance and Economics (Beijing);
Satoshi Ikeda – Chief Sustainable Finance Officer, Japan Financial Services Agency; andJulia Walker – member of the Cambridge Institute of Sustainable Leadership, advisor at the
Asian Institute of International Financial Law, and member of the United Nations Task Forceof Digital Financing of the Sustainable Development Goals

Whilst it does not purport to represent the views of these individuals, this paper draws fromdiscussion during the two events, plus research referenced during the sessions. We are grateful forthe insights and thought leadership provided by the various participants.

Definition
For the purposes of this report, we define ‘sustainable finance’ broadly to include climate, green andsocial finance; consideration of longer-term economic sustainability of organisations being funded;
as well as the role and stability of the overall financial system. As such, this broader definition also
includes ESG investment, and is in line with definitions used by IOSCO3, GFMA4 and ICMA5.

3IOSCO. Sustainable finance in emerging markets and the role of securities regulators. (2019)https://www.iosco.org/library/pubdocs/pdf/IOSCOPD630.pdf
4
GFMA and BCG. Climate Finance Markets and The Real Economy. (2020)
https://www.sifma.org/wp-content/uploads/2020/12/Climate-Finance-Markets-and-the-Real-Economy.pdf
5
ICMA. Sustainable Finance High-level definitions. (2020)
https://www.icmagroup.org/assets/documents/Regulatory/Green-Bonds/Sustainable-Finance-High-LevelDefinitions-May-2020-110520v4.pdf

Page 7

2. Sustainable Finance in Asia
The Covid-19 pandemic highlights the importance of ESG and sustainable finance, with high-ESG
product investment flows up 40% globally in Q1 2020 as ESG continues to become mainstream.6 At
the same time, climate risks are rising in Asia, with Bangladesh, China, Indonesia, Japan, India andVietnam all particularly exposed to rising sea levels and with potential exposure to higher credit
risk.7 According to some commentators, negative environmental and social impacts are starting tobecome evident in some sectors, and therefore ESG monitoring is becoming increasingly critical tomanagement of financial risk itself.8
In parallel, ESG and sustainability-related investment has become increasingly important in Asia,with EIU research, based on a 2019 survey of senior and C-suite drawn from sovereign and pension
funds, investment banks and insurance funds across Asia, noting 95% of respondents now believe
ESG investing is important to their firm, with 92% saying it will become even more important incoming years and 80% saying ESG has a positive impact on returns, in sharp contrast to sentiment as
little as a decade earlier9. In addition, policymakers and exchanges increasingly see sustainablefinance as a growth business.
The 2020 EIU report notes that regional distribution is uneven globally, with East Asia trailing othermarkets at just 5% of AUM invested in sustainable projects compared to 30% in North America;
however, the same report notes that this is changing as institutions such as Japan’s Government
Pension Investment Fund (“GPIF”) and MUFG Bank adopted wide-scale ESG criteria encourage theoverall trend of ESG integration into the investment process.
Though non-exhaustive, key developments in Asia include:••

Japan is taking a leadership position in Asia, with FSA (which is part of both the Network for
the Greening of the Financial System and IOSCO’s Taskforce Sustainable Finance), playing a
key role in promoting sustainable finance and ESG.
- Policy-wise, Japan has taken a principles approach, which has helped acceleratescaling of the market and is reflected in the FSA’s 2020 revision of its Stewardship
Code for corporate governance.10- Through the code and other measures, the FSA is encouraging institutional investors
to focus on ESG and corporates to enhance disclosure standards.
- The FSA has also been fostering dialogue between institutional investors andcorporates on implementing FSB Task Force on Climate-related Financial Disclosures(TCFD) standards for consistent climate-related financial risk disclosures, including
data challenges and the enablement of greater granularity in what is measured.
In Hong Kong, as part of its commitment to sustainability, HKEX has launched its Sustainable
and Green Exchange (STAGE), an online portal to provide information transparency onsustainable, green and social investment products.

6

ASIFMA/FOSDA. Virtual Event: Navigating ESG and Sustainable Finance in Asia. (2020)
https://youtu.be/E-SiPlJc8CM
7
EIU. Sustainable and actionable: An ESG study of climate and social challenges for Asia. (2020)
https://perspectives.eiu.com/sites/default/files/sustainable_and_actionable_report_2.pdf
8
ASIFMA/FOSDA. Virtual Event: Navigating ESG and Sustainable Finance in Asia. (2020)
https://youtu.be/E-SiPlJc8CM
7
EIU. Green Intelligence: Asia’s ESG investing, data Integrity and technology. (2019)https://eiuperspectives.economist.com/sites/default/files/green_intelligence_eiu_e_fund.pdf
10
FSA. Finalization of Japan’s Stewardship Code (Second revised version). (2020)
https://www.fsa.go.jp/en/refer/councils/stewardship/20200324.html

Page 8

-••This is intended to encourage dialogue between issuers, asset managers, investors
and professional advisers on sustainable and green finance.
- STAGE will promote transparency and accessibility across all product types and asset
class, and is believed to be one of the first of its kind in Asia.11- In addition, a cross-agency steering group as been set up by government agencies togrow and scale Hong Kong as a green and sustainable finance centre.
In Singapore, MAS is also working on a comprehensive, long-term strategy to makesustainable finance a defining feature of Singapore's role as an international financial centre,
alongside wealth management and FinTech.12- SGX is investing SGD 20 million in a multi-pronged expansion of its sustainability
capabilities and initiatives.
- Half of this will go towards new ESG-focused products, services and platforms, while
the other half will be channelled into capacity building for the financial ecosystem,
strengthening internal capabilities and increasing CSR commitments.
- All sustainability initiatives will be housed under a newly launched multi-partner,
multi-asset sustainability platform, SGX FIRST.
In China, ESG is increasingly a focus for investors and asset owners.13 From a policy
perspective, the PBOC consulted the market on updating its 2020 Green Bond Endorsed
Project Catalogue recently, with the proposed changes bringing it more in line with otherinternational taxonomies in relation to fossil fuels.14- This is part of China’s efforts to further promote green finance, starting with topdown policy with cross agency efforts being led by the PBOC.
- Other initiatives include standardising green credit guidelines, and green trust fundand insurance standards, whilst encouraging innovation, and green pilots spanningpolicy and other measures to foster green transition at the provincial level.15- Other efforts include supporting international cooperation, with PBOC active in
NGFS and platforms such as IFC’s sustainable banking network,16 and Green FinancePrinciples in ‘One Belt One Road’ countries.17- Disclosure of ESG is in transition from a voluntary to a mandatory regime, with CSRC
expected to launch settings on this soon, with ESG index providers now numbering.

11

HKEX. HKEX’s Sustainable & Green Exchange. (2020)
https://www.hkex.com.hk/eng/stage/index.htm
12MAS. Sustainable Finance. (2020)
https://www.mas.gov.sg/development/sustainable-finance
13
ASIFMA/FOSDA. Virtual Event: Navigating ESG and Sustainable Finance in Asia. (2020)
https://youtu.be/E-SiPlJc8CM
14
ASIFMA. ASIFMA Response to Consultation of 2020 Green Bond Endorsed Project Catalogue. (2020)
https://www.asifma.org/wp-content/uploads/2020/06/asifma-response-to-china-2020-green-bond-catalogueconsultation-final-eng-chn.pdf
15
ASIFMA/FOSDA. Virtual Event: Navigating ESG and Sustainable Finance in Asia. (2020)
https://youtu.be/E-SiPlJc8CM
16
IFC. Sustainable Banking Network. (2020)
https://www.ifc.org/wps/wcm/connect/topics_ext_content/ifc_external_corporate_site/sustainability-atifc/company-resources/sustainable-finance/sbn_whatsnew
17
The Belt and Road Initiative (BRI). The Belt and Road Initiative. (2019)https://green-bri.org/tag/green-investment-principles-gip

Page 9More generally, there is significant growing emphasis on integrating sustainability into generalbusiness and financial decision-making, with climate and sustainability risks considered increasingly
as part of the broader financial risks, with implications for cost and availability of capital for firms
and projects. There is also a broadening of perspective from looking at sustainability through a risklens towards seeking investments with explicit societal benefits and social upside from businessmodels.18
On the fixed income front, Asia stands at the forefront according another piece of EIU research,19with green-labelled instruments playing a role in funding renewable energy projects. According to
the EIU, The International Energy Agency estimates that emerging markets will add about 4,000GW
of new capacity by 2040, representing two-thirds of the global increase and of which half is
attributable to China and India alone.
Since 2013, a variety of green and social bonds have come to the market in Asia, including:• Social Bonds• Transition Bonds• Sustainability Bonds• Sustainability Bon• Sukuk Bonds

Financing Gap
According to a study by the Asia Development Bank (ADB) in 2017, Developing Asia would needapproximately $26 trillion in infrastructure investment from 2016 to 2030 (or $1.7 trillion per year)
in order to maintain growth, eradicate poverty, and respond to climate change (climate-adjusted
estimate). The UN estimates roughly $3-$5 trillion is needed annually and globally to reach the SDGs.
Even before the Covid-19 pandemic, the region in total faced a substantial investment gap of $459
billion per year ($907 billion p.a. if including social infrastructure).20 A GFMA/BCG report in 2020
found that the largest regional climate finance investment needed is in Asia, estimated at USD $66
Trillion over three decades, or over half the investment required globally to achieve a scenario oflimiting temperature rise to 1.5° Celsius. This is reflective of the scale and pace of growth of Asia's
economies, growing population, increasing urbanisation, and rapid industrialisation in the region. 21

18

ASIFMA/FOSDA. Virtual Event: Navigating ESG and Sustainable Finance in Asia. (2020)
https://youtu.be/E-SiPlJc8CM
19
EIU. Sustainable and actionable: An ESG study of climate and social challenges for Asia. (2020)
https://perspectives.eiu.com/sites/default/files/sustainable_and_actionable_report_2.pdf
20
Asia Development Bank. Meeting Asia’s Infrastructure Needs. (2017)https://www.adb.org/sites/default/files/publication/227496/special-report-infrastructure-highlights.pdf
21
GFMA and BCG. Climate Finance Markets and The Real Economy. (2020)
https://www.sifma.org/wp-content/uploads/2020/12/Climate-Finance-Markets-and-the-Real-Economy.pdf

Page 10

The Covid-19 pandemic has likely exacerbated these conditions, with increasing unemployment andheavier lockdown stress on private enterprises. Economic contraction in developing Asia is estimatedto be 0.7% – a 60 year high – and 3.8% in Southeast Asia alone. The post-Covid youth unemployment
figure is now estimated to be between 10 – 15 million across 13 APAC countries.22 The postpandemic economic strain is likely to widen the investment gap and lead to increasing credit risks
due to ESG factors.
According to the ADB, the gap should be filled by both public and private sectors. Public financereforms can generate additional revenues through prudent borrowing and by reorienting spending,while the private sector may need to mobilise considerable private capital which is available but not
yet tapped. The OECD noted that in 2019, private pension assets make up $32 trillion in OECD
countries and $0.7 trillion in 29 other non-OECD reporting jurisdictions.23 This data reveals that there
is potential for private capital to be mobilised, whether through ESG investments or other channels,
to bridge the financing gap; however, the key challenge remains in terms of how to stimulate
sufficient quantities of quality private investment, in light of the constrained flows for many ASEAN
countries.

International Cooperation
Over the course of several years, there has been a drastic increase in private and public sector-led
initiatives in response to the rising importance of climate and environment related issues. Within2020 alone, various governments and financial regulators around the world have pushed for thedevelopment of green and sustainable markets, and whilst this global response to the climate crisis
is a positive step forward in enabling the financial sector to scale green finance, the existence ofmultiple frameworks from different bodies could very likely lead to market fragmentation andunintended consequences.
In response to the shifts in both public and private sectors, global bodies have begun taking steps toharmonise the international response, with bodies such as IOSCO setting up a taskforce this year to
identify commonalities across different guidelines from across the world with a view to developing
harmonised sustainability disclosure standards, and the G30, which in October 2020 published areport with a series of recommendations to accelerate the global transition towards a net zero
22

Sustainable Development Report 2020 (J Sachs et al; Bertlesman, SDSN, Cambridge). (2020)
https://s3.amazonaws.com/sustainabledevelopment.report/2020/2020_sustainable_development_report.pdf
23
OECD. Pension Markets in Focus. (2020) https://www.oecd.org/daf/fin/private-pensions/Pension-Marketsin-Focus-2020.pdf

Page 11

carbon economy.24 In addition, the International Financial Reporting Standards Foundation (IFRS) in
September 2020 has also launched a consultation with an aim to establish a global approach tosustainability reporting that could help consolidate different initiatives and avoid fragmentation
across different jurisdictions.
In 2019, Argentina, Canada, Chile, China, the EU, India, Kenya and Morocco launched theInternational Platform on Sustainable Finance (IPSF), since joined by the, Indonesia, Japan, New
Zealand, Norway, Senegal, Singapore and Switzerland. A working group led by China and Europe
has been set up to explore harmonisation of sustainable finance taxonomies.

IOSCO
IOSCO has acknowledged the rising importance of ESG matters and sustainable finance moregenerally, and is focused on related investor protection and transparency in markets as well as in
mitigating systemic risks. In October 2018, IOSCO established its sustainable finance network (“SFN”)
as a platform to connect interested IOSCO members and to exchange information and experiences.
In January 2019, IOSCO issued a statement on ESG disclosures by issuers and published, 25 through its
Growth and Emerging Markets Committee a report related to sustainable finance in emerging
markets.26 A further report on the overarching role of IOSCO and securities regulators was publishedin April 2020,27 and identified three key concerns:
1.
2.
3.

Multiple and diverse sustainability frameworks and standards;
Lack of common definitions of sustainable activities; andGreenwashing and other investor protection challenges.

As a result of the SFN’s work, the IOSCO Board agreed in February 2020 to establish a Board-level
Task Force on Sustainable Finance (“STF”), aimed at enabling IOSCO to play a driving role in global
efforts to address the issues described in its 2020 report.28
IOSCO’s current efforts to address ESG and the above challenges include exploration by the STF of
the following:(i)

Improving sustainability–related disclosures by issuers (WS1). WS1 will explore
avenues for improving sustainability disclosures made by issuers – with a focus on
climate change-related disclosures in the first instance. This work will include engaging
with and influencing initiatives underway by sustainability disclosures standard settersthat are exploring ways to reduce fragmentation in disclosure frameworks andstandards and considering how existing standards can provide the basis for a unifying
system that can serve providers of capital and stakeholders more widely.

24

G30. Mainstreaming the Transition to a Net-Zero Economy. (2020)
https://group30.org/images/uploads/publications/G30_Mainstreaming_the_Transition_to_a_NetZero_Economy.pdf
25
IOSCO. Statement on Disclosure of ESG Matters by Issuers. (2019)https://www.iosco.org/library/pubdocs/pdf/IOSCOPD619.pdf
26
IOSCO. Sustainable finance in emerging markets and the role of securities regulators. (2019)https://www.iosco.org/library/pubdocs/pdf/IOSCOPD630.pdf
27
IOSCO. Sustainable Finance and the Role of Securities Regulators and IOSCO. (2020)
https://www.iosco.org/library/pubdocs/pdf/IOSCOPD652.pdf
28
IOSCO. IOSCO steps up its efforts to address issues around sustainability and climate change. (2020)
https://www.iosco.org/news/pdf/IOSCONEWS564.pdf

Page 12(ii)Promoting investor protection with regard to asset management matters, including
addressing greenwashing (WS2). WS2 will identify relevant practices and experiences inrelation to the consideration of climate change as a financial risk and the use ofsustainability-related factors in the investment decision process of asset managers. WS2
work will aim to result in specific metrics that can be arranged into relevant categories
of disclosures, which could support investor protection.

(iii) Addressing ESG ratings and data providers (WS3). WS3 will assist members inunderstanding the implications of the increasing activity of the ESG data providers,
including CRAs with regard to ESG ratings. WS3 will look into methodologies for ESG
ratings and indices and supervisory practices relating to ESG ratings, with a particularfocus on their climate-related aspects.
IOSCO is committed to work in collaboration with other international bodies in an effort to avoid
duplicative efforts and to enhance coordination of relevant regulatory and supervisory approaches.

FSB
The FSB established the Task Force on Climate-related Financial Disclosures (TCFD) to develop
recommendations for more effective climate-related disclosures in order to support more informed
investment, credit, and insurance underwriting decisions and, in turn, enable stakeholders tounderstand better the concentrations of carbon-related assets in the financial sector and thefinancial system’s exposures to climate-related risks.
A 2017 TCFD recommendations report outlines the TCFD framework for reporting climate-related
financial information29. The TCFD is currently holding a consultation forward-looking metrics
to be disclosed by financial institutions, with submissions due in January 2021.

Regulation and Policymaking
ASIFMA published a paper in March 2020, titled ‘Sustainable Finance in Asia Pacific: Regulatory Stateof Play’30. It calls for greater harmonisation of standards, frameworks and policymaking to shift thefinancial system to a more sustainable footing, in addition to industry participants having a role toplay alongside the official sector in developing capabilities and market structures to support thegrowth and scaling of sustainable finance and the transition to a low-carbon global economy.
To achieve this, ASIFMA encourages policymakers and regulators to:- Engage directly with the private sector in their own markets through transparent
consultation processes during the development stage of taxonomy, prudential
requirements, and ESG reporting and disclosure requirements; and- Ensure that they take a coordinated regulatory approach internationally, withcommitment from regulators in all major jurisdictions to achieve greater international
consistency, ranging from approaches towards taxonomies and corporate disclosure tomeasurement of climate related risks and use of incentives and other mechanisms toprevent market failure.

29

TCFD. Final Report: Recommendations of the Task Force on Climate-related Financial Disclosures. (2017)https://assets.bbhub.io/company/sites/60/2020/10/FINAL-2017-TCFD-Report-11052018.pdf
30
ASIFMA. Sustainable Finance in Asia Pacific Regulatory State of play. (2020) https://www.asifma.org/wpcontent/uploads/2020/03/sustainable-finance-in-asia-pacific.pdf

Page 13

In addition to consistent and representative taxonomies, the paper calls for coherent disclosure
frameworks on key material factors connecting all segments of the investment cycle – fromcompanies to investment management companies, to their shareholders and clients. This will ensuretransparency and comparability between sustainability metrics throughout the economy, but
requires clear thinking between the private and public sector about the data needed to support this.

Page 14

3. Data, ESG and Sustainable Finance
Data Practices Today
In broad terms, investors and investment managers in Asia use a combination of information to
inform ESG investment, including disclosed information, data from third parties, and raw data whichneeds to be sourced and analysed in-house. This is then further analysed to inform investment
decisions. Approaches to data analysis can be a source of competitive advantage for asset managers.

Measuring E, S and G
For ESG investment specifically, according to the EIU’s 2019 study,31 nearly half (48%) of the 2019
EIU survey respondents said they weight Environmental (E), Governance (G), and Social (S) factors
equally. 24% said they weight E factors highest, 19% weigh S factors highest, and 15% weight G
factors highest. A major driver, as noted by EIU, is mainland China’s increasing focus onenvironmental protection, perhaps more so than other jurisdictions in the region.
According to the 2019 EIU study, the top metrics used to quantify E factors include:• Environmental technology contribution (47% of survey respondents);• Environmental information disclosure (35%); and• Climate action (31%).
Meanwhile the same study found the top S metrics include:• Safety Management (44%);• Diversity and Inclusion practices (44%);• Sustainable cities and communities goals (42%);• Standard certification (37%);• Health and Wellbeing (35%); and• Quality education (30%).
Top metrics to quantify G factors include:• Efficiency of capital (51%);• Anti-money laundering (AML) compliance 36%;
• Related party transactions (conflict of interest) (36%); and• External Auditing (33%).
The 2019 EIU study notes significant overlap between E, S, and G factors in practice. For example,
climate change can have both E and S implications and, as a result, some practitioners may resistclassifying metrics into separate categories,32 suggesting a fundamental divergence in analytical
approach.

Data Sources and Analysis
Today, according to the EIU research, ESG data is gathered from a wide range of sources, fromofficial disclosures and third-party sources, to NGO reports, bilateral meetings and social media.
Other sources include government and non-government organisation (NGO) databases. Whilst
public data offers a more holistic picture, it is largely underutilised due to formatting that is often
incomprehensible. Since much of the information from these sources is unstructured, Artificial
31

EIU. Green Intelligence: Asia’s ESG investing, data Integrity and technology. (2019)https://eiuperspectives.economist.com/sites/default/files/green_intelligence_eiu_e_fund.pdf
32
Ibid.

Page 15

Intelligence (AI) is becoming more prevalent in translating extensive unstructured data intomeaningful and useful information.
When asked what type of data their firms are using for ESG assessment, nearly half of respondents
to a 2020 ASIFMA/FOSDA poll reported using an equal amount of in-house and third-party sources,
whilst 17% used mostly in-house and 19% used mostly third-party ratings.33
Figure 1. If your firm is undertaking ESG assessment, what type of data is it using? (Source: ASIFMA Virtual Event Poll, July
2020)

16%

17%

19%

48%

Mostly in-house research
About 50/50 in-house research and third party
Mostly third-party ratings
Mostly third-party other (e.g. research)

Data Challenges
According to the 2019 EIU study, future growth of ESG investment in Asia is inextricably linked todata. When asked to list the general obstacles to further developing ESG integration, respondents
continually refer to data challenges overall:• 32% nominated inadequacy of ESG data;• 31% said there is not enough ESG data to make consistent decisions;• 30% said a lack of clarity around ESG standards, terminology and metrics; and• 26% mentioned ESG ratings and data applications being inconsistent; and• 24% mentioned low transparency with regard to ESG-data sources.
In contrast, the only two non-data related barriers raised by respondents were lack of awarenessand understanding of ESG (36%) and lack of client demand (20%).34

Lack of Standardisation and Comparability
Significantly, there is no standardisation to measurement of E, S, and G factors. According to the2019 EIU study, S factors in particular are the most difficult to measure, with analysts needing toweigh the value of very unstructured data (e.g. a complaint on social media, which may or may notportend fundamental issues).35 Additionally, individual ESG metrics vary not only between industries
and markets, but also between companies in the same industry, with the quality of company

33

ASIFMA/FOSDA. Virtual Event: Navigating ESG and Sustainable Finance in Asia. (2020)
https://youtu.be/E-SiPlJc8CM
34
EIU. Green Intelligence: Asia’s ESG investing, data Integrity and technology. (2019)https://eiuperspectives.economist.com/sites/default/files/green_intelligence_eiu_e_fund.pdf
35
Ibid.

Page 16

disclosures differing widely.36 This results in difficulties in a lack of comparability between projects,
companies, industries and markets as well as market distortions and skewed investment
decisions,37,38 while the 2020 EIU report notes this also leads to greenwashing, against whichinvestors perceive a lack of contractual protection.39 This is compounded when third-party data isused, with vendors using different methodologies for even the same metric.40
When asked to nominate the greatest data challenge in ESG and sustainable finance, 56% ofrespondents to a 2020 ASIFMA/FOSDA poll reported ‘inconsistent data’41. The EIU notes that thiscomplexity in itself is a disincentive for companies to issue green securities.42
Figure 2. What is the greatest data challenge for ESG/sustainability? (Source: ASIFMA Virtual Poll, July 2020)

9%

35%
56%
Missing data

Poor quality data

Inconsistent data

The industry notes the UNDP’s current work with the NGFS to tighten the UN SDGs, capturing theevolution and growth of sustainable finance since 2016, and tightening of reporting standards. In
this area as well, there has been a proliferation of standards and initiatives, resulting inaccountability concerns, efficiency challenges and comparability issues.
Disclosure
Firms and investors are navigating a confusing landscape of disclosure frameworks, incentive
structures, data collection methods, and external assessments developed and implemented invarious markets and jurisdictions by both the public and private sectors. From a disclosure
perspective, this variation exists in both substance and form. Variation is evident not only between
markets, but also within markets. As an example, in China, the 2019 EIU report notes that while

36

ASIFMA. ASIFMA Response to Bank Negara Malaysia’s Discussion Paper on Climate Change and Principlebased Taxonomy. (2020)
https://www.asifma.org/wp-content/uploads/2020/04/asifma-response-to-bnm-climate-change-taxonomydp-v20200331-final-draft-clean4.pdf
37
ASIFMA/FOSDA. Virtual Event: Navigating ESG and Sustainable Finance in Asia. (2020)
https://youtu.be/E-SiPlJc8CM
38
Green Intelligence: Asia’s ESG investing, data integrity and technology. (2019)https://perspectives.eiu.com/sites/default/files/green_intelligence_eiu_e_fund.pdf
39
EIU. Sustainable and actionable: An ESG study of climate and social challenges for Asia. (2020)
https://perspectives.eiu.com/sites/default/files/sustainable_and_actionable_report_2.pdf
40
Ibid.
41
ASIFMA/FOSDA. Virtual Event: Navigating ESG and Sustainable Finance in Asia. (2020)
https://youtu.be/E-SiPlJc8CM
42
EIU. Sustainable and actionable: An ESG study of climate and social challenges for Asia. (2020)
https://perspectives.eiu.com/sites/default/files/sustainable_and_actionable_report_2.pdf

Page 17there are different reporting requirements by province, the format in which data can be provided
also varies between PDF, Word and JPG file formats.43
Other issues relate to the quality and integrity of data provided by corporates themselves. For
example, an international power utility may provide only metrics of its carbon emissions in one
market that it operates, where standards may be higher (e.g. Hong Kong), whereas metrics fromother markets (e.g. China) representing the majority of its activities may be excluded. This gives a
distorted and misleading account of its activities.44 This can only be partially addressed throughmore direct engagement between, say an investment manager and investee companies.
Tightening disclosure standards will improve quality issues, which was nominated by over a third of
respondents to the 2020 ASIFMA/FOSDA poll, above. The 2020 GFMA/BCG report recommends
mandatory disclosure of corporate-specific, financially material, decision-relevant data relating toclimate risks and opportunities on the basis that consistent global disclosure frameworks, developedin consultation with industry participants and with adequate runway for implementation, will
strengthen the transparency and comparability of climate risk data.45
Taxonomy
Currently, there exists no single binding global taxonomy, and classification systems for ‘green’
assets or products differ widely across jurisdictions and industries. While the EU’s leadership inestablishing its taxonomy is a step forward in scaling green finance, there is uncertainty as to how
this, which has been constructed from a European perspective, may impact the Asia Pacific region if
it were to become the de facto global standard without taking into account the needs and nuancesof a region like Asia where there are countries of varied levels of economic development. Also, EU
taxonomy and disclosure regulations have been described as binary, classifying economic activities
as ‘green’ and ‘non-green’, but providing no incentive for transitional activities.46
The industry welcomes leadership of jurisdictions like China and Malaysia’s efforts to definetaxonomies, but calls for greater regional and global harmonisation, interoperability between
jurisdictions, and principles-based approaches, alongside clear and detailed definitions ofsustainable activities.47 We welcome efforts the EU and China to explore commonalities between
existing taxonomies. An international approach will help address the data-comparability concerns of
the 56% of respondents to the 2020 ASIFMA/FOSDA poll above.

Data Availability
When asked to nominate the greatest data challenge in ESG and sustainable finance, 35% cited ‘poor
quality data’.48 The 2019 EIU study notes that ‘S’ factors, in particular, are hardest to quantify, yet iscurrently thought to have the most capacity to drive negative returns in Asia. On the other hand, ‘G’
43

EIU. Green Intelligence: Asia’s ESG investing, data Integrity and technology. (2019)https://eiuperspectives.economist.com/sites/default/files/green_intelligence_eiu_e_fund.pdf
44
ASIFMA/FOSDA. Virtual Event: Navigating ESG and Sustainable Finance in Asia. (2020)
https://youtu.be/E-SiPlJc8CM
45
GFMA and BCG. Climate Finance Markets and The Real Economy. (2020)
https://www.sifma.org/wp-content/uploads/2020/12/Climate-Finance-Markets-and-the-Real-Economy.pdf
46
ASIFMA. Sustainable Finance in Asia Pacific Regulatory State of play. (2020) https://www.asifma.org/wpcontent/uploads/2020/03/sustainable-finance-in-asia-pacific.pdf
47
ASIFMA. ASIFMA Response to Consultation of 2020 Green Bond Endorsed Project Catalogue. (2020)
https://www.asifma.org/wp-content/uploads/2020/06/asifma-response-to-china-2020-green-bond-catalogueconsultation-final-eng-chn.pdf
48
ASIFMA/FOSDA. Virtual Event: Navigating ESG and Sustainable Finance in Asia. (2020)
https://youtu.be/E-SiPlJc8CM

Page 18

factors are subject to a greater degree of mandatory disclosure, resulting in greater availability ofuseable data. Therefore, there is a mismatch between data availability by factor vis-a-vis which
factors are weighted highest (E) and/or thought to drive negative returns (S).49 This can manifest in alack of comparable data that is essential to compare different projects (i.e. data is available for one
project but not another).
Another issue raised in our virtual discussions was the imbalance between data on ESG risk to ESG
return. Increasingly, the investment community holds the view that equitable business andinvestment practices, coupled with good risk management, may be intrinsically linked with longterm profit returns. The imbalance in ESG risk-to-return data poses to be an ongoing challenge as
firms increasingly want to assess the upside social return of investments, whereas the historicalemphasis in ESG evaluation has been on downside risk.50

Reliability of Third Parties
The 2020 EIU report notes that third-party data from vendors can be problematic, starting withreliance on a single data source often resulting in volatile indicators over time. In addition, data fromsome vendors can be more accurate or reliable than others. Another source of error lies in thecompatibility between the vendor’s methodology and metrics, and what the investor is trying tomonitor. At times there is limited clarity on methodologies underpinning ratings. In our virtual event
discussion, one of the speakers spoke of the trade-off between data quality, sector coverage, andspecificity within sectors and geographies.51 There is an imperative for investment decision makers
to ensure they understand the implications of ESG ratings and data employed in the investment
process. Greenwashing can occur when in accurate data from ESG rating firms is used by asset
managers to make “green” investment decisions.
The EIU notes that whilst credit rating agencies are regulated, ESG ratings agencies are not. To
overcome some of the reliability issues, some investors have started to create their own in-house
ESG scores, an avenue mostly only open to larger investors.52 The EU has introduced requirementsthat impose transparency and disclosure requirements on financial products through EU benchmark
regulations Sustainable Finance Disclosure Regulation (SFDR). Some commentators anticipate Asia’s
regulators considering similar approaches.

Forward- vs Backward-looking Perspectives
A fundamental issue is the fact that current data is backward-looking (e.g. existing or pastenvironmental impact), with limitations at play when historical data is used to predict future factors.
However, according to the 2019 report by EIU, more predictive and forward-looking data is
becoming available, such as supply-chain factors and other lead indicators.53

49

EIU. Green Intelligence: Asia’s ESG investing, data Integrity and technology. (2019)https://eiuperspectives.economist.com/sites/default/files/green_intelligence_eiu_e_fund.pdf
50
ASIFMA/FOSDA. Virtual Event: Navigating ESG and Sustainable Finance in Asia. (2020)
https://youtu.be/E-SiPlJc8CM
51
Ibid.
52
EIU. Sustainable and actionable: An ESG study of climate and social challenges for Asia. (2020)
https://perspectives.eiu.com/sites/default/files/sustainable_and_actionable_report_2.pdf
53
EIU. Green Intelligence: Asia’s ESG investing, data Integrity and technology. (2019)https://eiuperspectives.economist.com/sites/default/files/green_intelligence_eiu_e_fund.pdf

Page 19

Accessibility and Interpretability
Given the complexity of ESG data, interpreting it for research and analytical purposes can beparticularly challenging. Some commentators have noted that much data exists in unstructured form
(for example, information gleaned from site visits, or even those methodically recorded in callreports), while public and government data sources obtained through regulatory disclosure
requirements are often incomplete and disorganised. The 2019 EIU study further notes that data to
support interpretation of ‘S’ factors in particular was the most difficult to obtain. To that end,
investors and firms are looking increasingly for commercial advantages, and of the 300 respondents
surveyed by EIU, a vast majority said they were using artificial intelligence (AI) either always or often
to improve ESG analysis and increase efficiency by helping to consolidate data and analyse
unstructured and structured data in meaningful ways.54
According to the study, 85% of asset and wealth management firms use AI always or often,
compared to 65% of investment banks, (re)insurance companies and global financial firms, whilenumber of analytics firms are now offering a range of AI tools.55 Fintech companies are also seeking
new ways to correct inefficiencies in government data sources through the use of AI technology. In
fact, commentators during the virtual events noted that large potential in the use of AI software
tailored for data analysis and collection to alleviate these issues.56

Interoperability with Financial Risk Assessment
The EIU notes that while credit rating agencies assess the material impact ESG factors may have on
probability of default, ESG scores may profile an issuer, and not an individual issue, and do notnecessarily capture the financial implications of factors such as credit risk exposure to ESG factors.57
There is a need for harmonisation and interoperability between ESG standards, green finance andclimate-risk management standards to which financial institutions are increasingly being held.58
Commentators during the virtual events elaborated on the potential of alternative data sources andemerging technologies that could assist credit institutions with risk assessment. For example, drones
and geo-mapping technologies are currently being used to assess natural environmental risks torelevant assets. This could assist asset managers and insurers in their assessment of a client’s asset
risk before making transaction decisions. Consideration of such technologies may be particularly
relevant to the insurance sector as losses to insurance companies have recently hit $150 billion perannum, much of which could be linked to the impact of climate change.59

54

Green Intelligence: Asia’s ESG investing, data integrity and technology. (2019)https://perspectives.eiu.com/sites/default/files/green_intelligence_eiu_e_fund.pdf
55
Ibid.
56
ASIFMA. Virtual Event: ESG and Sustainable Finance in Asia: the Fintech and Data Challenge. (2020)
https://www.youtube.com/watch?v=TSbDcd-mfQI&feature=youtu.be
57
Sustainable and actionable: An ESG study of climate and social challenges for Asia. (2020)
https://perspectives.eiu.com/sites/default/files/sustainable_and_actionable_report_2.pdf
58
ASIFMA. Sustainable Finance in Asia Pacific Regulatory State of play. (2020) https://www.asifma.org/wpcontent/uploads/2020/03/sustainable-finance-in-asia-pacific.pdf
59
ASIFMA. Virtual Event: ESG and Sustainable Finance in Asia: the Fintech and Data Challenge. (2020)
https://www.youtube.com/watch?v=TSbDcd-mfQI&feature=youtu.be

Page 20

In a response to the MAS’s consultation on environmental risk management for banks, ASIFMA
noted data challenges that would benefit from further supervisory guidance, including the need forstandardised environmental and climate related data (or minimum standards) that banks should
require corporate clients to disclose (including data from corporate clients), environmental andclimate related metrics that banks should look towards assessing and in turn, what banks would be
required to disclose, and benchmarks for environmental risks and key climate scenarios which could
be used for risk management purposes.60 In addition, further tools and guidance on scenario analysis
would be helpful in enabling financial institutions to better understand this developing requirement
for risk management.

60

ASIFMA. ASIFMA Response to The Monetary Authority of Singapore's Consultation Paper on Proposed
Guidelines on Environmental Risk Management (Banks). (2020)
https://www.asifma.org/wp-content/uploads/2020/08/asifma-response-to-mas-erm-guidelines-banksv20200807-final.pdf

Page 21

4. Digitalisation & Emerging Technologies
As identified by the ADB and other global bodies, one important element to drive sustainable
development and help close gaps in the availability, reliability, and adequacy of ESG data is‘digitalisation’61. Indeed, a number of technologies and associated business models are evolving
rapidly in this area, spanning AI, robotics, 3D printing, big data, blockchain, and the Internet ofThings (IoT) amongst other solutions, which offer opportunities to rethink how the public andprivate sectors could work together to drive green and sustainable development.
The following section identifies several use cases of technologies and innovation in the field of ESG
integration and sustainability practices.

Data Collection and Analysis
Fintech companies are increasingly utilising AI software to compile data in a comprehensive mannerand remove non-essential information to deliver factual and relevant data to investors. AI
technology is also used to scan large amounts of government records for evidence of company
failings such as non-compliance fines, regulatory breaches, non-sustainable practices, andcybersecurity violations. This not only helps investors gain a more holistic understanding of investee
companies, but also increases corporate accountability and transparency, which together helps
further enable and support the mobilisation of private capital.

Auditing and Monitoring
Fintech companies have also developed techniques of directly monitoring companies’ operational
processes and their impacts, such as through geospatial data and heatmapping technologies, thatallow users to monitor the environmental impacts of manufacturing processes. New technologies
also allow firms to now measure the carbon concentration levels in a factory’s surroundings andallow monitoring of corporate activities using satellite imagery, which may serve as a reliable
alternative to self-disclosed corporate data. The use of blockchain technology and cryptocurrencies
may also increase transparency in auditing.62

Risk Management
Asset managers and insurance companies that often require alternative means of assessing
environment and weather-related risks may also use emerging technologies in the process of risk
management. Technologies such as geo-mapping, satellite imagery, drone imagery, and seismic
detection tools may allow firms to assess risks related to unstable land surrounding assets of areas inrelation to their proximity to fault lines, asset proximity to beaches and the ocean vis-à-vis risk
related to rising sea level, and other factors relevant in consideration of certain risky investments.63
Additionally, corporations are increasingly utilising natural language processing technology(algorithms that process human language input and convert it into understandable representations)
to collect sentiment analysis data by employing handwriting recognition technology and voicerecognition devices. AI recognition of human linguistic communication allows the analysis ofsentiment towards products and other objects or concerns, allowing companies to predict market

61

United Nations ESCAP. Frontier Technologies for Sustainable Development in Asia and the Pacific. (2020)
https://www.unescap.org/sites/default/files/publications/Frontier%20tech%20for%20SDG.pdf
62
ASIFMA. Virtual Event: ESG and Sustainable Finance in Asia: the Fintech and Data Challenge. (2020)
https://www.youtube.com/watch?v=TSbDcd-mfQI&feature=youtu.be
63
Ibid.

Page 22trends and make corporate financing decisions with regards to product marketing, advertisements,
and any other expenses.64

Energy Efficiency
Technologies may be used to integrate ESG principles and sustainable practices into the day-to-day
conduct of business, which is notably being developed by the property and supply chain sectors
within their environmentally sustainable practices.65 In recent years, development of energy efficientarchitectural designs, increased use of solar panels, and implementation of smart energy systems
have all significantly helped lower total carbon output of buildings and urban infrastructure. New
technologies, such as IoT, are spreading rapidly in use in energy systems, vehicles and transportation
systems, smart buildings and cities, and manufacturing operations which not only helps cost-cuttingof total energy use, but also allows companies and organisations to actively monitor and manage
energy efficiency within their business practices. Similarly, supply chains are now shifting towards
eco-friendly energy sources in their distribution channels.

Scaling ESG Enabling Technologies
Asked what is needed most to scale ESG and sustainable finance enabling technologies, nearly halfof respondents to a 2020 ASIFMA/FOSDA poll prioritise ‘policy and regulation to support innovation’,whilst 30% indicated ‘industry-driven efforts and market structures’ are more important.
Figure 3. What is needed most to scale ESG and sustainable finance enabling technologies? (Source: ASIFMA Virtual Poll,
October 2020)

8%
11%

30%

51%

No intervention

Cash-based interventions

Policy and regulation to support innovation.

Industry-driven efforts and market structures.

With the pace at which new technologies and innovation are being used to narrow data gaps insustainable finance and ESG, the poll result highlights the importance of effective policy andregulatory measures supporting innovation, which in turn will help enable the scaling of green andsustainable investments. Policymakers and regulators are encouraged to think about innovative
policy actions that utilise technologies and avoid stifling innovation, and should also be prepared to
put in place responsive and adaptive regulatory and policy frameworks for the next generation of
ESG-enabling technologies. In a similar vein, result also suggests that industry-driven efforts, which
when undertaken by a private sector that pursue responsible technological development with a goal
to tackle environmental and social concerns, are equally crucial.
64

ASIFMA. Virtual Event: ESG and Sustainable Finance in Asia: the Fintech and Data Challenge. (2020)
https://www.youtube.com/watch?v=TSbDcd-mfQI&feature=youtu.be
65
Ibid.

Page 23

5. Conclusion
As the private and public sectors plan ahead for post-Covid recovery, we are at a critical juncture to
identify data gaps and obstacles to scaling ESG and sustainable finance development, and to work
towards developing and accelerating green recovery strategies. ESG-based performance, both interms of investment inflows and asset performance, has been positive during these troubling times,
and many regulators and investors have recommitted to sustainable development, with greater
focus on systemic risks related to climate and social concerns.
It is therefore important for Asia to focus on the data requirements for supporting ESG to ensure
data asymmetries do not stall further efforts to developing and scale sustainable finance in theregion, vis-à-vis other regions such as the EU which are further progress in their ESG and sustainablefinance agendas and related data standards.

Recommendations
ASIFMA offers the following 8 key recommendations, critical to supporting and enabling the further
development of green and sustainable markets in Asia:
1. A greater convergence towards a principles-based global (or at least regional) taxonomy
2. Higher, more consistent corporate disclosure standards between jurisdictions and sectors
3. Encouragement of higher standards of analysis, with incentives for more holistic and robust
approaches to ESG measurement and analysis
4. Policy and regulation to support innovation and technologies that enable ESG andsustainable finance capabilities
5. A focus on education and skills to support ESG and sustainable finance capability
6. Higher standards and accountability for ESG ratings providers, potentially including
regulation, and clear and harmonised requirements for product disclosure
7. Harmonisation between ESG standards and frameworks such as UN SDGs, and policy on
climate change and bank supervision at systemic level, including on climate risk
8. Ongoing partnership and dialogue between the public and private sectors, as well as
between stakeholders such companies and investors on disclosure and reporting standards

Page 24