The stock exchanges of Malaysia, Indonesia, Thailand, and Singapore have partnered to advance sustainability in ASEAN through the development of an interregional ESG ecosystem.

By Paul A. Davies, Farhana Sharmeen, Michael D. Green, James Bee, and Kevin Mak

On February 15, 2024, Bursa Malaysia Berhad (Bursa Malaysia), Indonesia Stock Exchange (IDX), The Stock Exchange of Thailand (SET), and Singapore Exchange (SGX Group) released a joint statement announcing their collaboration on the development of the ASEAN-Interconnected Sustainability Ecosystem (ASEAN-ISE).

The ASEAN-ISE initiative was ratified at a recent meeting between the four participating exchanges, with parties reaching a consensus on the ecosystem’s administrative structure and operational blueprint.

Intended Outcomes of the ASEAN-ISE

The ASEAN-ISE initiative serves to:

• create an integrated environmental, social, and governance (ESG) ecosystem to advance sustainability in ASEAN;
• enable participating exchanges to reap the benefits of economies of scale and to reduce the period of time it takes for a company to list; and
• empower participating exchanges to create business value for ESG-compliant companies through enhanced disclosure regimes.

The participating stock exchanges will further aid ESG-compliant corporates by:

• encouraging cross-jurisdiction trade flows facilitated by developing infrastructure solutions;
• bridging companies’ supply chains with ESG-oriented investment capital; and
• providing suppliers with good ESG practices and disclosures to obtain more competitive financing rates.

The implementation of the ASEAN-ISE will account for local considerations and consider the maturity levels of each respective market. In addition, the participating exchanges will work toward standardizing data to create interoperable datasets for bolstering the sustainability efforts and for addressing climate change, within the ASEAN region.

Notably, the participating exchanges have also demonstrated their collective commitment to integrating the “ASEAN Exchanges Common ESG Metrics” in their ESG reporting platforms, which are published sets of ESG metrics recommended for disclosure by listed companies.

Next Steps

Each of the participating exchanges will reconvene in Malaysia to finalize the implementation details of the ASEAN-ISE initiative, ahead of formalizing the ISE Governance Framework and Operating Structure at the 37th ASEAN Exchanges CEOs Meeting scheduled for July 2024.

Latham & Watkins will continue to monitor developments relating to ESG regulatory updates in the region.

This post was prepared with the assistance of Ein Le Lim.