• DirectoryGlobal directory
Thomson Reuters
Business Insight
  • Discover Thomson Reuters

    Tax solutions

    • Tax planning
    • Tax preparation
    • Tax automation
    • Disclosure management
    • All tax solutions

    Trade solutions

    • Customs & duties management
    • Global trade compliance & management
    • Product & service classification
    • All global trade solutions

    Risk solutions

    • Regulatory compliance
    • All risk solutions

    Know today. Navigate Tomorrow

    New brand

    Clarifying the complex

    Trusted expertise, powerful technology, advanced AI and industry-leading insights
    Discover now
    • Leadership & Strategy Leadership & Strategy
        • Business Transformation
        • Crisis Management
        • Strategy
        More
        Future of Professionals Report 2026 – Thomson Reuters  Report

        Future of Professionals Report 2026 – Thomson Reuters 

        What’s driving digital transformation for tax and finance professionals? Report

        What’s driving digital transformation for tax and finance professionals?

        Charting technology’s effectiveness for tax and finance professionals Report

        Charting technology’s effectiveness for tax and finance professionals

    • Global Trade & Supply Chains Global Trade & Supply Chains
        • Business Continuity
        • Global Trade Strategy
        More
        The Hidden Counterparty Report

        The Hidden Counterparty

        Canada-US tariffs are bilateral. Their commercial effects may not be. Blog

        Canada-US tariffs are bilateral. Their commercial effects may not be.

        Navigating the New Tariff Reality: How APAC Businesses Can Turn Uncertainty into Opportunity Blog

        Navigating the New Tariff Reality: How APAC Businesses Can Turn Uncertainty into Opportunity

    • Global Tax & Reporting Global Tax & Reporting
        • BEPS
        • Corporate Tax
        • E-invoicing
        • Global Reporting & Compliance
        • Indirect Tax
        • Statutory Reporting
        More
        From GST Pioneer to Global Leader: How Indian Multinationals Can Export Their Compliance Expertise Worldwide Whitepaper

        From GST Pioneer to Global Leader: How Indian Multinationals Can Export Their Compliance Expertise Worldwide

        What three years of data reveal about <br> AI in corporate indirect tax Blog

        What three years of data reveal about <br> AI in corporate indirect tax

        Thomson Reuters named a leader in worldwide e-invoicing Report

        Thomson Reuters named a leader in worldwide e-invoicing

    • Governance, Risk & Compliance Governance, Risk & Compliance
        • Compliance
        • Regulatory Intelligence
        More
        The point-to-point trap: how fragmented e-invoicing stalls global growth Blog

        The point-to-point trap: how fragmented e-invoicing stalls global growth

        Future of Professionals Report 2026 – Thomson Reuters  Report

        Future of Professionals Report 2026 – Thomson Reuters 

        Navigating the New Tariff Reality: How APAC Businesses Can Turn Uncertainty into Opportunity Blog

        Navigating the New Tariff Reality: How APAC Businesses Can Turn Uncertainty into Opportunity

    • Solutions
      • Checkpoint
      • Compliance Learning
      • ONESOURCE Global Trade Management
      • ONESOURCE Indirect Tax
      • ONESOURCE Statutory Reporting
      • ONESOURCE Transfer Pricing
    • Home
    • Governance, Risk & Compliance
    • Compliance
    • Regulatory approaches to ESG diverging in Europe and Asia
    Governance, Risk & Compliance

    Regulatory approaches to ESG diverging in Europe and Asia

    Thomson Reuters | 26 May 2023

    Regulators in Asia and Europe have taken divergent approaches towards marketing environmental, social and governance-related (ESG) investment funds in their respective jurisdictions.

    The strategies reflect the different regulatory focus areas between authorities in various jurisdictions, as well as the local financial and economic priorities.

    In the European context, the European Union wants to promote sustainable investment, said Eugenie Shen, managing director and head of asset management at the Asia Securities Industry & Financial Markets Association (ASIFMA). 

    “The disclosures under the Sustainable Finance Disclosure Regulation (SFDR) [from Europe] is very focused on how managers disclose their investments. What are the principal, adverse impacts or effects, or the negative impacts of investment decisions. So, they’re very focused on promoting sustainable investments,” Shen said.

    “In Asia, our observation is that Asian regulators are more concerned with risk management. They’re not so much into promoting sustainable investment. Ultimately, they would like to do that but their focus is more on risk management.”

    Environmental risk management in Asia

    The Monetary Authority of Singapore (MAS) has launched environmental risk management guidelines for asset managers, as well as for banks and insurers. For asset managers, the guidelines set out MAS’s expectations on environmental risk management for all fund management companies and real estate investment trust managers.

    Items covered in the guidelines include governance and strategy, research and portfolio construction, portfolio risk management, stewardship and disclosure of environmental risk information.

    “This is why, for example, you see the MAS in Singapore come out with these environmental risk management requirements for asset managers,” Shen said.

    “In Hong Kong, [regulators] narrowed to just climate-related risks. At some point they’ll probably expand it to environmental issues beyond climate. So, obviously the concern is really how fund managers and asset managers manage risks related to climate-related or environmental risk.”

    Fund labelling

    Two of the major focuses for regulators in Asia are investor protection and greenwashing, Shen said. MAS has rolled out guidelines to help reduce greenwashing risks and enable retail investors to better understand the ESG funds they invest in. The guidelines will take effect in January 2024. Greenwashing is the act of making false or misleading claims that products or investments are more environmentally sound, or green, than they are.

    Investment funds under the ESG label will now have to provide relevant information to better substantiate the label. Some of the information required to be disclosed under the guidelines include details on the ESG fund’s investment strategy; the criteria and metrics used to select investments; and any risks and limitations associated with the fund’s strategy. 

    Such disclosures are required to be made on a continuing basis. Investors will also receive annual updates on how well the fund has achieved its ESG focus.

    “You’ll see a whole slew of regulation on what is an ESG fund?” Shen said.

    “In fact, in that sense Europe is lagging behind. It’s only now that the European Securities and Markets Authority (ESMA) is starting to look at fund labelling. But in Asia, we’ve already gotten both the Securities and Futures Commission (SFC) and MAS coming out with rules on what an ESG fund is.”

    ESG funds in Europe and Asia

    The EU sets out mandatory ESG disclosures requirements for asset managers. Under the SFDR, funds that promote environmental or social characteristics (light green) are categorised as “Article Eight funds”, while funds that have sustainable investment as their objective are categorised as “Article Nine funds”.

    “In Asia, we don’t have that [Article Eight and Article Nine] distinction. It’s all focused on what is an ESG fund,” Shen said. “We’re seeing the trend between MAS and SFC is that ESG has got to be a key investment focus of the fund.”

    In Hong Kong, an Article Eight fund can be marketed in the city without changing its name, which might include “sustainability” or “sustainable” or “green” etc. The SFC, however, requires a disclaimer to be added following the fund’s name clarifying that this is not an SFC-recognised ESG fund. In Singapore, an Article Eight fund cannot be marketed in the city-state.

    “MAS thinks that it’s either an ESG fund or not an ESG fund,” Shen said. “So, in Asia, we don’t have an equivalent of Article Eight; we only have Article Nine type of funds.”

    To be qualified as an ESG fund in Hong Kong, the fund should invest at least 70% of its net asset value in the companies that satisfy “green” or “sustainable” requirements. In Singapore, at least two-thirds of the fund’s net asset value should be invested in “green” or “sustainable” companies.

    The European perspective is all about promoting sustainable investments while the Asian perspective is more focused on risk management.

    “How do you take into consideration climate related environmental risk?” Shen said. “The European regulations tend to be much broader. It has a much bigger impact. For example, their proposed Corporate Sustainability Due Diligence Directive, which is…not only looking at their own sustainability situation, but the whole supply chain.”

    The European Commission proposed the Corporate Sustainability Due Diligence Directive in February 2022. It is still moving through the EU legislative process and is unlikely to come into force until 2025 at the earliest, according to KPMG.

    The directive highlights that sustainability can go beyond just climate-related issues. This means that businesses should play an important role in protecting both the environment and supporting broader issues such as human rights, which has caught the wider attention of politicians, investors, consumers and other stakeholders.

    China’s concerns

    China has committed to having carbon dioxide emissions peak by 2030 and achieving carbon neutrality by 2060. The country’s economic condition, in the meantime, just showed signs of recovery with the first quarter GDP growth rate hitting 4.5%, after the authorities had abruptly ended its draconian zero-Covid policy in late 2022. The pace of increase was the fastest in a year and beat the 4% rise forecast from analysts polled by Reuters.

    Despite the positive reopening and the country’s pledge of net-zero commitment, the Asset Management Association of China, a self-regulatory association, told Shen during her recent mainland China trip that “they’re worried about their industries”.

    “What they see is companies that [spend] a lot of money to become sustainable, that’s going to be costly to their corporates. There’s the question of whether they’re going to be able to generate a good return or profitability, and whether that gives a good return to retail investors,” Shen said.

    “So, to me, I actually find this refreshing that they are kind of looking at all of this from different angles, and there’s a balancing of what it is…I wish regulators [in Hong Kong] would focus more on that.”

    It is of utmost importance for asset managers that operate in multiple jurisdictions to have alignment and harmonisation in terms of regulations in their respective operating jurisdiction, Shen said. Asset managers tend to gravitate towards adopting the strictest rules.

    “The [ultimate] challenge for asset managers is, depending on which jurisdictions rules are the strictest, we actually have to gravitate towards that,” Shen said. “So far, European standards are quite high. But now we’re really seeing Asia deviating [from Europe] and then coming up with some stricter rules than Europe.”

    This article was written by Yixiang Zeng and first appeared on Thomson Reuters Regulatory Intelligence.

    Related:
    Cost of compliance 2023 report examines the top three operational insights
    Globalisation under siege: Culture, geopolitics, supply chains, and security

    Thomson Reuters

    By: Thomson Reuters

    Thomson Reuters, a worldwide trusted provider of answers, helps professionals make confident decisions, run better businesses and gain competitive advantage in complex arenas – law, tax, compliance, government and media.

    __PRESENT

    1 June 2023
    Chief Risk OfficerComplianceCompliance / Risk ManagerCompliance OfficerEnvironmental, social & governanceGovernance, Risk & ComplianceRegulatory IntelligenceRisk and Compliance

    You May Also Like

    The point-to-point trap: how fragmented e-invoicing stalls global growth
    The point-to-point trap: how fragmented e-invoicing stalls global growth

    September 9, 2026

    Future of Professionals Report 2026 – Thomson Reuters 
    Future of Professionals Report 2026 – Thomson Reuters 

    June 22, 2026

    Navigating the New Tariff Reality: How APAC Businesses Can Turn Uncertainty into Opportunity
    Navigating the New Tariff Reality: How APAC Businesses Can Turn Uncertainty into Opportunity

    April 20, 2026

    2026 Global Trade Report: Tariff turbulence is elevating strategic role of trade departments
    2026 Global Trade Report: Tariff turbulence is elevating strategic role of trade departments

    February 27, 2026

    Regulatory compliance in the Asia Pacific: 2024 risk report
    Regulatory compliance in the Asia Pacific: 2024 risk report

    February 16, 2024

    Related Posts

    The point-to-point trap: how fragmented e-invoicing stalls global growth

    The point-to-point trap: how fragmented e-invoicing stalls global growth

    September 9, 2026

    Future of Professionals Report 2026 – Thomson Reuters 

    Future of Professionals Report 2026 – Thomson Reuters 

    June 22, 2026

    Navigating the New Tariff Reality: How APAC Businesses Can Turn Uncertainty into Opportunity

    Navigating the New Tariff Reality: How APAC Businesses Can Turn Uncertainty into Opportunity

    April 20, 2026

    Recent Posts

    • What three years of data reveal about
      AI in corporate indirect tax
    • Your eight-step e-invoicing
      implementation roadmap
    • The point-to-point trap: how fragmented e-invoicing stalls global growth
    • Canada-US tariffs are bilateral. Their commercial effects may not be.

    Job Roles

    • Accountant
    • Accounts / Finance Professional
    • Administrator / Office Manager
    • Business Manager
    • Chairman
    • Chief Executive Officer
    • Chief Financial Officer
    • Chief Information Officer
    • Chief Marketing Officer
    • Chief Operations Officer
    • Compliance / Risk Manager
    • Consultant
    • Executive Assistant

    Resources

    • Case Study
    • Full Guide
    • Full Report
    • Guide
    • Infographic
    • Podcast
    • Q&A
    • Report
    • Sample Chapter
    • Toolkit
    • Video
    • Webinar
    • Whitepaper

    Solutions

    • Solutions
      • Checkpoint
      • Compliance Learning
      • ONESOURCE Global Trade Management
      • ONESOURCE Indirect Tax
      • ONESOURCE Statutory Reporting
      • ONESOURCE Transfer Pricing

    Business Insight

    • About us
    • Contributors
    • Contact us

    Regional Insights

    • Australia
    • China
    • Japan
    • Korea
    • New Zealand
    • Middle East / North Africa
    • South East Asia

    Connect With Us

    Thomson Reuters
    • Cookie Policy
    • Privacy Policy
    • Copyright