This document summarizes a presentation given by Felicia Liu, David Demeritt, and Samuel Tang at the American Association of Geographers Annual Meeting in New Orleans on April 12th, 2018. The presentation compared mandatory sustainability reporting regulations introduced in 2015 by the Hong Kong Stock Exchange and in 2016 by the Singapore Exchange. While both markets drew from international standards, Hong Kong took a rules-based approach requiring specific ESG indicators, while Singapore used a more principle-based style focusing on qualitative assessments. Differences in the effectiveness of reporting and unique features of the two markets were also discussed, such as political agendas, hostility from local firms, and the developmental state model in Singapore. The presenters concluded by calling for expanded research on non

1. Accounting for Sustainability in Asia
Stock Market Regulation and Reporting in Hong Kong and Singapore
Felicia Liu, King’s College London, National University of Singapore
David Demeritt, King’s College London
Samuel Tang, Queen Mary University of London
American Association of Geographers Annual Meeting
New Orleans, 12th April 2018

2. Source: Business Insider Source: The Strait Times

3. Setting the scene
● Development of sustainability reporting
● Emergence of mandatory sustainability reporting
Year Jurisdiction Regulation
2008 Denmark The Danish Financial Statement Act mandates large companies to include ESG information with their annual reports.
2008 Shanghai
The stock exchange recommends all companies to engage in ESG reporting, with environmental information disclosure being mandatory for
the extractive sector.
2010 US The Securities and Exchanges Commission requires companies to disclose their exposure to climate risks in their annual filings.
2013 UK The Climate Change Act and the Companies Act requires all UK-quoted companies to disclose their GHG emissions.
2014 Australia
Australian Securities Exchange recommends listed companies to disclose any material exposure to economic, environmental and social
sustainability risks.
2014 EU
EU Directive 2014/95/EU on non-financial reporting requires large companies across the EU to disclose a host of information about their
ESG policies and performance.
2015 Hong Kong HKEx mandated ESG reporting as a listing rule.
2015 Malaysia The stock exchange requires all companies to provide a 'sustainability statement' in their annual reports.
2016 South Africa
Succeeding previous King Codes that requires sustainability reporting, the newest King IV Code requires all listed companies to conduct
integrate reporting.
2016 Singapore SGX mandated sustainability reporting as a listing rule.
2017 France Article 173 of the French Energy Transition Law requires all investors to disclose the climate risks of their investment portfolios

4. Rationale
- Hong Kong Stock Exchange
(HKEx) and Singapore Exchange
(SGX) implemented mandatory
non-financial reporting regulations
in 2015 and 2016
- The effectiveness of sustainability
reporting and regulations two
Asian economies
- Climate-related risk disclosure

5. Theoretical framework
● Regulatory style
○ Nudge (Thaler and Sunstein 2008)
○ Corporate reporting (Weil et al. 2006; Fung et al. 2007)
● Varieties of Asian capitalism
○ Acknowledge the variety and uniqueness amongst Asian economies (Carney et al. 2009)
○ Relationship between the state, firms and society (Ritchie 2009)
○ Unique corporate cultures (Yeung, 1997; Kiong and Lee, 1999; Chau and Gray 2002)
● Asian developmental state
○ Weak civil society, government-driven economic development (Deans 2002; Holden and
Demeritt 2008)

6. Methodology

7. Findings I: Institutional isomorphism
● Institutional isomorphism: both markets ‘borrowed’ ideas from international
standards, but ultimately took different regulatory styles

8. HKEx (2015b): Environment,
Social and Governance
Reporting Guide
SGX (2016c): sustainability
reporting Guide
Reporting
style
Rules-based: quantitative and
qualitative ESG indicators
Principle-based: qualitative
assessment of sustainability
Content
requireme
nts
12 general policy and legislative
compliance disclosures
32 environmental and social key
performance indices (KPIs), with the
9 quantitative and 3 qualitative
environmental KPIs falling under
'comply or explain'
Five primary reporting
components:
(1) Material ESG factors
(2) Policy and practice
(3) Past performance, quantitative
indicators and future targets
(4) sustainability reporting
framework
(5) Board statement
Reporting
principles
Material
Consistency
Board responsibility
Comply or explain
Report risks as well as
opportunities
Balanced reporting
Performance measurement system
Global standards comparability
Stakeholder engagement
Independent Assurance
Complianc
e standard Comply or explain Comply or explain

9. Findings (II): Reputation and competitiveness
● Driven by international reputation and competitiveness
“It's a global trend and we cannot ignore it. Hong Kong, as an
international financial centre, we need to keep up with international
development, but we also need to be seen as keeping with international
regulatory developments” (Regulator, HKEx).
“We regularly conduct jurisdictional comparison with the largest stock
exchanges in the world that we deem as competitors, including London,
New York, Shanghai, Shenzhen and Singapore...We either try to catch
up or do better than them.” (Regulator, HKEx).
“Neighboring jurisdictions such as Hong Kong and Malaysia are
mandating similar requirements, it is important to maintain regional
competitiveness in the eyes of the investors.” (Regulator, SGX)

10. Findings (III): Political Agenda
● Political agenda affected the style of regulation
“They urged us to do things. I mean Hong Kong laws are very difficult to
pass, the government is relatively chaotic... in other countries GHG
emissions is normally regulated by law but in Hong Kong, the government
basically said HKEx you go do something about it, so we are more effective
in making companies sit up and listen than the government” (Regulator,
HKEx).
“Part of the pain is the thinking, the reflection of materiality, but this is
also the best outcome expected from this endeavour, which is how
sustainability fits into the corporate strategy rather than merely
completing a compliance exercise without considering the impact.”
(Regulator, SGX)

11. Findings (IV): hostility from local firms
● Hostility from listed companies reflects unique features of the markets
“Culture, especially amongst SMEs, is an issue. They take on a
‘defensive’ mindset, so they're more interested in fending off the
regulation, and they're often lacking an ‘entrepreneurial’ mindset, as in
how can I make money out of this shift to sustainability discourse.”
(Company 7, HKEx)
“Reporting is a very western concept...the market culture of Asia is
different. Stakeholders are usually closer to the operational core of the
company and therefore the demand for information, financial and non-
financial alike, is lower.” (Practitioner 6, SGX)

12. Findings (V): The Singapore Developmental State
“In Europe and the US there is a larger social responsibility engraved into
the culture and mindset not only of corporates but also of individuals,
whereas in Asia that’s less of an issue. Looking after the public good is a
domain of government rather than something consumers and companies
should try for individually.” (Company 2, SGX)
“There is an inherent trust in well-established institutions, including large
companies and government to ‘know what they are doing’ or ‘to know
better’, so they are unwilling to challenge the actions of these institutions.”
(Practitioner 18, SGX).

13. Conclusion
● “Nudge” has failed
● Varieties of Asian capitalism reflected in non-financial regulations
● Rethinking sustainability reporting in non Anglo-Saxon context

14. Moving forward
● Expand the sample scope of non-financial reporting regulations in East Asia
● Whether and how these regulations in increasing climate awareness and engagement
in climate finance

15. Thank you!
Felicia H M Liu
Department of Geography
Bush House
30 Aldwych
WC2B 4BG
felicia.liu@kcl.ac.uk