Businesses across the Asia-Pacific region have increased efforts to improve the quality of their environmental, social and governance (ESG) reporting, but significant challenges remain.

Most Chinese businesses said they were adopting ESG data because of regulatory requirements (25 per cent), followed by the demands of onshore clients (21 per cent), offshore clients (21 per cent), and internal risk management (22 per cent), according to a survey of Chinese companies by Bloomberg.

Data trouble

The biggest challenge was to link ESG data content to existing internal systems, the survey said. Almost two thirds of respondents (62%) said their main ESG data challenge revolved around their company’s data coverage and quality. Combining ESG with other sources of data was the second biggest challenge (26%). “These results align very closely with the European survey indicating there is still a way to go for standardized ESG data reporting by firms globally before financial market participants are fully comfortable with the results,” said the survey.

“There is a growing synergy between the demands of investors and regulatory drivers when it comes to the use of ESG data for Chinese market participants,” Patricia Torres, Global Head of Sustainable Finance Solutions at Bloomberg, said. “Now, more than ever, the firms that are building capacity to incorporate and thoughtfully manage ESG data as part of their investment decision-making processes will have a positive point of difference.” 

Skills deficit

There is a global skills shortage of ESG professionals, which means that organisations could find it difficult to effectively implement new regulatory requirements and to avoid reputation risk.

Firms in Asia-Pacific are impacted and need to adopt a two-year plan to build capacity, Emmanuel Rondeau, visiting professor and senior advisor of MENA studies at the London Institute of Banking and Finance, said in an interview with Asian Banking and Finance.

“Fostering in-house talent both tackles the immediate needs around ESG capabilities and feeds into strategies for long-term ESG objectives,” he said. “It has the additional benefit of boosting staff satisfaction by enabling them to make a meaningful contribution to the green transition.”