Widening the scope: How to find the opportunity in Asia’s climate reporting challenge

Sustainability is one of the most rapidly evolving areas of regulation in business and finance today. Local regulations in Asia are proliferating with the adoption of international standards such as the Global Reporting Initiative (GRI)¹, the International Sustainability Standards Board (ISSB)² and the Task Force on Climate-Related Financial Disclosures (TCFD).³

As elsewhere in the world, the region is moving from a voluntary approach to climate disclosure to one mandated by policymakers and regulators. According to S&P Global data as of September 2024, 14 jurisdictions in Asia had either adopted or had announced plans to adopt ISSB-based disclosure requirements.⁴

Two challenges make this change tough for businesses operating in Asia.

First is the fact that ISSB standards mandate the reporting of Scope 3 emissions – those that are generated indirectly by a company in the course of doing business, for instance by companies in its own supply chains. These are by definition more difficult for a company to evaluate, report and mitigate since they are outside the direct control of the reporting entity. But they can account for as much as 90% of a company’s emissions.⁵

Second, while many countries are imposing the toughest requirements on listed companies first, starting with the biggest, they are also then extending their regimes to smaller listed companies and to unlisted companies which may lack the resources to meet more onerous requirements.

Australia has been particularly energetic in implementing reporting requirements. The country’s National Greenhouse and Energy Reporting (NGER) Scheme⁶, introduced in 2007, is a national framework for company-level reporting of Scope 1 and Scope 2 greenhouse gas emissions as well as levels of energy production and energy consumption.⁷

From January 2025, the Australian Sustainability Reporting Standards (ASRS) regime will require entities to report their Scope 1, 2 and 3 emissions, as well as their climate plans and risks on the basis of climate scenario analysis that must include warming scenarios of 1.5 degrees and 2.5 degrees above pre-industrial levels.⁸

Australia’s requirements cover companies with annual revenues all the way down to AUD50 million. Reporting requirements under ASRS will be phased in, with the biggest entities reporting from 2025, the next grouping from 2026 and the smallest from 2027.

New Zealand has been a pioneer in climate regulation, having been the first nation to commit to mandatory TCFD reporting. Its Climate-related Disclosure (CRD) legislation, which covers about 200 private sector entities, was passed in 2021⁹ and also includes Scope 3 reporting. Among those entities required to report since the beginning of 2023 are listed companies with a market capitalisation of at least NZD60 million. Regulators are assessing whether any changes are needed to align them more closely with ISSB standards, so that New Zealand businesses do not suffer by comparison with international peers.¹⁰

The adoption of ISSB-aligned standards is spreading rapidly through the rest of the region. In Singapore, for example, listed companies have been required to make TCFD-based disclosures since 2022, but from 2025 listed companies will need to report on Scope 1 and 2 emissions, with Scope 3 likely to be introduced for the biggest entities in 2026.¹¹

Singapore’s Scope 1 and 2 reporting requirements will be extended to unlisted companies from 2027, but initially only to those with revenues of at least SGD1 billion and assets of SGD500 million. Scope 3 reporting may follow in 2029.¹²

Since the 2022-2023 financial year, India’s stock market regulator Sebi has mandated that the top 1,000 listed companies file a Business Responsibility and Sustainability Report (BRSR).¹³ Scope 3 disclosures are voluntary, but in the most recent financial year 51 of India’s 100 biggest listed companies chose to do so.¹⁴

Additionally, the regime has been enhanced in the 2023-2024 year with an additional set of requirements called BRSR Core, which include specific value chain disclosures, and which are being rolled out progressively between now and 2026.¹⁵

Hong Kong, meanwhile, will require all listed companies to report their Scope 1 and Scope 2 emissions from 2025 onwards. It is also introducing ISSB-based disclosure requirements for companies listed on the Main Board from the same date, with LargeCap Index constituents to follow one year later. For smaller growth companies listed on the “GEM” segment, the ISSB-based disclosures will be voluntary.¹⁶

Malaysia, through its National Sustainability Reporting Framework (NSRF), is introducing ISSB-based climate disclosures from 2025.¹⁷ These will include Scope 3 emissions but the requirements are being phased in, starting with the biggest listed companies.

Those listed on Bursa Malaysia’s high-growth segment, as well as non-listed companies with revenues of at least MYR2 billion will have to report one year later, in 2027-2028.

An important factor for Asian exporters to consider is the implementation of the European Union’s Carbon Border Adjustment Mechanism (CBAM), which is in a transitional phase now but will formally be in place from 2026.¹⁸

CBAM is intended to impose a cost on the carbon that is emitted during the manufacturing of high carbon-intensive materials and goods entering the EU, and determines that cost based on the difference between the price of carbon in the market of origin and a price based on the EU Emissions Trading System (ETS).

The implications for Asian exporters, particularly those operating in sectors such as aluminium, iron and steel, cement, and fertilisers, are significant. In Malaysia, for example, Bank Negara Malaysia has estimated that the 2026 CBAM regime would have affected 57% of the country’s exports to the EU if it had been in force in 2022, rising to 74% in the longer term.¹⁹^,²⁰ Malaysia’s EU exports were RM126.3 billion in 2022.²¹

The CBAM regime means that exporters need to meet their EU trading partners’ demands for monitoring and reporting of embedded emissions. But it also offers an opportunity because the risk of EU-based importers preferring to trade with exporters that can demonstrate lower emissions acts as an incentive for Asian exporters to invest in lower-carbon technologies and processes.

While many international businesses in Asia may already be meeting climate disclosure requirements, smaller companies may find compliance with fast-moving and extensive requirements more challenging.

HSBC has already helped many companies in the region to address their emissions and other aspects of their climate impact. In certain markets, companies can measure their own performance and set goals by using the HSBC Sustainability Tracker. They can also obtain an ESG rating from our partner, EcoVadis, which can then be used to support an application for an HSBC Sustainability Improvement Loan (SIL).²²

In Hong Kong we have partnered with technology company diginex to offer streamlined ESG reporting software to our Corporate and Institutional Banking clients at a discounted cost.²³

The introduction of Scope 3 reporting requirements helps enhance data capture and improve reporting. This can pave the way for more businesses to introduce sustainable supply chain finance (SSCF) initiatives. SSCF is a financing mechanism that uses Key Performance Indicators to incentivise suppliers to improve their sustainability performance. It gives suppliers access to more competitive financing or funding terms when they deliver against predetermined sustainability measures.

HSBC Indonesia has helped one of Indonesia’s largest premix mortar producers, PT Cipta Mortar Utama, part of Saint Gobain group, introduce a sustainable supply chain finance programme.²⁴

For larger companies, these programmes can demonstrate climate commitment to investors and other stakeholders and that can translate to a competitive advantage in the marketplace.

More sustainable practices can translate to financial benefits for businesses in both categories. To secure this will require innovative thinking, strong financial partnerships and a commitment to progress across all sections of the value chain. At HSBC, we aim to provide and facilitate $750 billion to $1 trillion of sustainable finance and investment by 2030 to support our customers in their transition to net zero and a sustainable future.