The Rise of ESG in ASEAN: A Comprehensive Analysis of Environmental, Social, and Governance Trends Across Southeast Asia

Here’s a detailed analysis of the development of ESG across ASEAN countries focusing on trends, challenges, and individual country performance.

Introduction to ESG in ASEAN

Environmental, Social, and Governance (ESG) practices are increasingly becoming a crucial focus for businesses and governments worldwide. ESG principles encompass three key dimensions: *Environmental* (how companies mitigate their environmental impact), *Social* (their relationships with employees, suppliers, customers, and the communities where they operate), and *Governance* (leadership, executive pay, audits, internal controls, and shareholder rights). These principles are used to assess the long-term sustainability and ethical impact of companies, providing a framework for both risk management and value creation.

In the context of ASEAN (Association of Southeast Asian Nations), a regional grouping of ten countries—Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam—ESG is gaining prominence. The region is diverse in terms of economic development, political governance, and environmental challenges, making ESG adoption and implementation varied across countries. However, as global investors and stakeholders prioritize sustainability, ASEAN companies and governments are increasingly adopting ESG principles to align with international standards and attract foreign investment.

Global ESG Trends and ASEAN's Position

Globally, ESG has transformed from a niche concept to a mainstream investment and governance approach. The rise of responsible investing and consumer demand for sustainable products has led corporations to integrate ESG into their operations. In the ASEAN region, ESG adoption is growing, although at different speeds across countries. The need to balance rapid economic growth with environmental preservation and social equity has driven governments and businesses to explore ESG frameworks.

ASEAN’s position in the global economy, especially as a manufacturing hub, makes it a critical player in the ESG landscape. The region is home to significant natural resources, major agricultural and industrial sectors, and a growing middle class—all of which make ESG integration complex but essential. ASEAN’s approach to ESG is influenced by its developmental priorities, such as poverty reduction, economic growth, and infrastructural development, which sometimes conflict with environmental and social goals.

Factors Driving ESG Adoption in ASEAN

Several key drivers are pushing the adoption of ESG in ASEAN:

1. Investor Pressure: Global investors are increasingly prioritizing ESG metrics in their investment decisions. Companies that adhere to ESG principles are considered less risky and more sustainable in the long term. As ASEAN seeks foreign investment, companies are adopting ESG frameworks to meet investor demands.

   
   

2. Regulatory Frameworks: Governments in the region are implementing policies that require or encourage ESG practices. For example, stock exchanges in countries like Singapore, Malaysia, and Thailand have mandated sustainability reporting for listed companies.

   
   

3. Public Awareness: Consumers in the region are becoming more conscious of sustainability and social equity. This trend is driving companies to adopt more transparent and responsible practices, particularly in sectors like manufacturing, agriculture, and energy.

   
   

4. Climate Change: ASEAN is one of the regions most vulnerable to climate change, with countries like the Philippines and Vietnam facing increased risks from natural disasters. This vulnerability is forcing governments and businesses to integrate environmental considerations into their decision-making processes.

   
   

5. Corporate Governance Issues: Many ASEAN countries face challenges related to corruption, weak governance, and labor exploitation. Strengthening governance structures through ESG practices is seen as a way to improve corporate reputation and attract foreign capital.

   
   

6. Access to Global Markets and Supply Chains: ASEAN companies are increasingly integrated into global supply chains, where multinational corporations demand ESG compliance from their suppliers. For instance, European and North American buyers often require adherence to strict environmental and social standards, such as carbon footprint reduction or fair labor practices. To remain competitive and secure contracts, ASEAN firms are adopting ESG frameworks to align with these international expectations.

   
   

7. Financial Incentives and Green Financing: Financial institutions in ASEAN are promoting ESG through green bonds, sustainability-linked loans, and other financial instruments. For example, Singapore has emerged as a hub for green finance, with initiatives like the Green Finance Industry Taskforce encouraging investments in sustainable projects. Companies adopting ESG practices can access these funding opportunities, which often come with favorable terms, driving further adoption

   
   

8. Technological Advancements and Innovation: The rise of digital technologies, such as blockchain for supply chain transparency or AI for energy efficiency, is enabling ASEAN companies to implement ESG initiatives more effectively. Startups and established firms alike are leveraging these technologies to monitor emissions, improve resource efficiency, and enhance governance, aligning with ESG goals while gaining a competitive edge.

   
   

9. Regional Collaboration and Commitments: ASEAN member states are increasingly aligning with regional and global sustainability agendas, such as the ASEAN Plan of Action for Energy Cooperation (APAEC) or commitments under the Paris Agreement. These collaborative efforts encourage countries to harmonize ESG standards, share best practices, and develop regional frameworks, pushing businesses to adopt sustainable practices to meet collective goals.

   
   

10. Talent Attraction and Retention: Younger generations in ASEAN, particularly millennials and Gen Z, prioritize working for organizations with strong ethical and environmental values. Companies adopting ESG principles are better positioned to attract and retain top talent, as employees increasingly seek employers that demonstrate social responsibility and a commitment to sustainability.

    
    

These 10 drivers highlight the multifaceted pressures and opportunities accelerating ESG adoption across ASEAN, from economic incentives to societal shifts and regional cooperation.

Challenges to ESG Adoption in ASEAN

Challenges to ESG Adoption in ASEAN: A Data-Driven Analysis with SIIS Integration

The Association of Southeast Asian Nations (ASEAN), comprising 10 diverse economies, is undergoing a transformation towards Environmental, Social, and Governance (ESG) integration. Countries such as Singapore, Malaysia, Thailand, and Indonesia are advancing sustainability legislation, finance taxonomies, and corporate ESG disclosures. However, despite progress, systemic disparities persist.

To deepen this analysis, we integrate the Social Impact Integrated Score (SIIS) — a composite index that synthesizes indicators such as health access, education equity, labor rights, gender inclusion, and poverty reduction. This inclusion adds granularity to the “Social” dimension of ESG, which is often underreported.

Lack of Uniform ESG Standards

ASEAN lacks a region-wide, enforceable ESG disclosure standard, leading to inconsistencies in how companies report and implement ESG practices.

Key Issues:

Only 4 out of 10 ASEAN countries (Singapore, Malaysia, Thailand, Indonesia) have mandatory disclosure rules for public firms.

No unified ASEAN taxonomy exists for ESG reporting, though the ASEAN Taxonomy for Sustainable Finance (Version 2) provides a two-tier approach:

A Foundation Framework (minimum baseline)

A Plus Standard (advanced alignment with global principles)

Statistics:

46% of listed companies in ASEAN-6 published sustainability reports in 2022 (ACMF).

60% of ASEAN SMEs lack any ESG reporting mechanism (ADB, 2023).

SIIS Perspective:

Countries with low SIIS scores (e.g., Myanmar, Cambodia) often lack the institutional and human capital to implement ESG standards.

High SIIS countries (e.g., Singapore, Malaysia) benefit from stronger social infrastructure, enabling more robust ESG disclosures.

ASEAN’s wide development spectrum complicates uniform ESG adoption. This is particularly evident in the S of ESG.

Income Gaps:

Singapore’s per capita GDP: $88,000 (IMF, 2024)

Cambodia & Myanmar: Below $2,000

Statistics:

Singapore ranks 8th globally in the Global Sustainable Competitiveness Index 2023.

SIIS 2024 (scale: 0–100):

Singapore: 91.2

Malaysia: 74.6

Thailand: 70.4

Indonesia: 61.1

Vietnam: 59.7

Philippines: 53.8

Cambodia: 39.2

Myanmar: 28.4

Implications:

Low SIIS scores correlate with fragile social systems, limiting ESG implementation capacity.

High-SIIS countries are more likely to attract ESG-aligned capital and participate in green value chains.

3. Data Availability and Transparency

Reliable ESG data collection and reporting remain fragmented and costly, particularly in countries with low SIIS indicators for public sector capacity and education.

Challenges:

SMEs (97–99% of ASEAN businesses) often lack ESG tracking systems.

National-level data gaps persist in emissions, labor rights, and social outcomes.

Statistics:

PwC 2023 ASEAN ESG Readiness Report:

Only 28% of companies conduct third-party ESG assurance.

62% cite lack of data as the top challenge.

Indonesia: Only 35% of listed firms disclose Scope 1 emissions.

SIIS Relevance:

Low SIIS scores often mean:

Limited digital literacy

Weak administrative capacity

Inadequate ESG training in business education

This creates a feedback loop: weak social systems → poor ESG data → low accountability → minimal ESG capital inflows.

4. Cultural and Governance Differences

The governance and social norms across ASEAN vary immensely, affecting ESG enforcement and public trust.

Political and Legal Context:

Singapore and Malaysia enjoy rule-of-law-based ESG regimes.

Myanmar’s post-2021 governance collapse has erased ESG oversight.

Governance Data:

Transparency International CPI 2023:

Singapore: 83/100

Malaysia: 47/100

Myanmar: 20/100

World Bank Governance Indicators (2023):

Rule of Law:

Singapore: +1.8 (high)

Myanmar: –1.5 (low)

🧭 SIIS Overlay:

Low SIIS and poor governance (e.g. Myanmar, Cambodia) correlate with:

Weak ESG enforcement

Environmental degradation

Labor exploitation

Medium-SIIS countries like Indonesia and the Philippines face challenges in judicial transparency and stakeholder engagement, impacting ESG legitimacy.

Country-by-Country Analysis of ESG Development in ASEAN

1. Indonesia

Overview: Indonesia, the largest economy in Southeast Asia, faces significant environmental challenges due to deforestation, mining, and industrial pollution. However, it has made strides in adopting ESG principles, especially in sectors like palm oil, mining, and energy.

- Environmental: Indonesia has committed to reducing emissions through its Nationally Determined Contributions (NDCs) under the Paris Agreement. However, deforestation, driven by agriculture and palm oil production, continues to be a major issue. The government has implemented moratoriums on forest clearance, but enforcement remains weak.

- Social: Indonesia faces significant labor rights issues, particularly in the palm oil and mining industries. However, there have been improvements in social standards, driven by both government regulation and international pressure.

- Governance: Corruption and governance issues remain significant challenges. However, the adoption of ESG practices is seen as a way to improve corporate governance and attract more foreign investment.

2. Malaysia

Overview: Malaysia has been a regional leader in ESG, particularly in the financial sector. Bursa Malaysia, the country’s stock exchange, has been proactive in encouraging sustainability reporting among listed companies.

- Environmental: Malaysia’s environmental challenges include deforestation and pollution from its palm oil industry. However, the government is increasingly promoting green energy and sustainable development. Malaysia is one of the leading issuers of green bonds in the region.

- Social: Labor rights, particularly in the palm oil and rubber industries, have come under international scrutiny. The government has taken steps to address these issues, but enforcement remains inconsistent.

- Governance: Corporate governance in Malaysia has improved significantly, driven by regulatory reforms and the adoption of international best practices. However, corruption remains a concern, particularly in state-owned enterprises.

3. Singapore

Overview: As a global financial hub, Singapore plays a leading role in promoting ESG in ASEAN. The government has been proactive in adopting green finance initiatives and promoting corporate sustainability.

- Environmental: Singapore has set ambitious environmental targets, including a 2030 Green Plan that focuses on reducing carbon emissions, increasing green spaces, and promoting sustainable living. The city-state has introduced a carbon tax and has been a leader in green building initiatives.

- Social: Singapore has a strong social framework, with a focus on social equity, healthcare, and education. However, migrant worker rights remain an area of concern, particularly in the construction and domestic labor sectors.

- Governance: Singapore is known for its strong governance and low levels of corruption. The government’s proactive stance on ESG has encouraged businesses to adopt more stringent governance practices and transparency.

4. Thailand

Overview: Thailand has made significant progress in promoting ESG through its stock exchange, which has developed a sustainability index and reporting framework for listed companies.

- Environmental: Thailand is heavily reliant on agriculture and tourism, both of which have significant environmental impacts. The government has implemented policies to promote sustainable tourism and reduce pollution, but enforcement remains a challenge.

- Social: Labor rights and inequality are major social issues in Thailand, particularly in the agricultural and manufacturing sectors. However, the government has made efforts to improve social standards through various initiatives.

- Governance: Corporate governance has improved in recent years, driven by regulatory reforms and increased investor scrutiny. However, corruption remains a significant issue, particularly in the public sector.

5. Vietnam

Overview: Vietnam’s rapid industrialization has brought both opportunities and challenges for ESG adoption. The government has implemented several policies to promote environmental sustainability and improve labor rights.

- Environmental: Vietnam is highly vulnerable to climate change, with rising sea levels and extreme weather events posing significant risks. The government has set ambitious targets for renewable energy and reducing emissions, but the country’s reliance on coal remains a challenge.

- Social: Labor rights have been a significant issue in Vietnam, particularly in the manufacturing sector. However, the government has made efforts to improve working conditions and labor standards, driven in part by international trade agreements.

- Governance: Corporate governance in Vietnam is still developing, but there has been progress in recent years due to regulatory reforms and increased foreign investment.

6. Philippines

Overview: The Philippines faces significant environmental and social challenges, driven by its vulnerability to natural disasters and high levels of poverty. However, the government and private sector are increasingly adopting ESG practices.

- Environmental: The Philippines is one of the most climate-vulnerable countries in the world. The government has implemented policies to promote renewable energy and reduce emissions, but challenges remain in enforcing environmental regulations.

- Social: Poverty and inequality are major social issues in the Philippines. The government has implemented various social programs, but progress has been slow due to political instability and corruption.

- Governance: Corruption and weak governance remain significant challenges in the Philippines. However, the adoption of ESG practices is seen as a way to improve corporate governance and attract more foreign investment.

7. Brunei

Overview: Brunei’s economy is heavily reliant on oil and gas, which presents challenges for ESG adoption. However, the government has made efforts to diversify the economy and promote sustainability.

- Environmental: Brunei has implemented policies to promote environmental sustainability, but its reliance on fossil fuels remains a significant challenge. The government is exploring renewable energy options as part of its economic diversification strategy.

- Social: Brunei has a strong social framework, with high levels of healthcare, education, and social welfare. However, labor rights, particularly for migrant workers, remain an area of concern.

- Governance: Corporate governance in Brunei is relatively strong, driven by government regulation. However, the country’s reliance on the oil and gas sector presents challenges for ESG adoption.

8. Cambodia

Overview: Cambodia’s ESG landscape is still in its infancy, driven by its status as a developing economy. However, there are growing efforts to promote sustainability, particularly in the textile and tourism sectors.

- Environmental: Cambodia faces significant environmental challenges, including deforestation and pollution. The government has implemented policies to promote environmental sustainability, but enforcement remains weak.

- Social: Labor rights in Cambodia, particularly in the textile industry, have come under international scrutiny. The government has made efforts to improve working conditions, but progress has been slow.

- Governance: Corruption and weak governance remain significant challenges in Cambodia. However, the adoption of ESG practices is seen as a way to improve corporate governance and attract more foreign investment.

9. Laos

Overview: Laos, a landlocked country with a relatively small economy, has been slow to adopt ESG practices. However, the government is increasingly focusing on sustainable development, particularly in the hydropower sector.

- Environmental: Laos is heavily reliant on hydropower, which presents both opportunities and challenges for environmental sustainability. The government has implemented policies to promote sustainable energy, but environmental degradation remains a concern.

- Social: Social issues in Laos, including poverty and inequality, remain significant challenges. However, the government has implemented various social programs to address these issues.

- Governance: Corporate governance in Laos is still developing, but there has been progress in recent years due to regulatory reforms and increased foreign investment.

10. Myanmar

Overview: Myanmar’s political instability presents significant challenges for ESG adoption. However, there is growing awareness of ESG among local companies, driven by international pressure.

- Environmental: Myanmar faces significant environmental challenges, including deforestation and pollution. The government has implemented policies to promote environmental sustainability, but enforcement remains weak due to political instability.

- Social: Labor rights and human rights are major social issues in Myanmar. The government has made efforts to address these issues, but progress has been slow due to political instability.

- Governance: Corporate governance in Myanmar remains weak, driven by political instability and corruption. However, the adoption of ESG practices is seen as a way to improve corporate governance and attract more foreign investment.

Sectoral Analysis of ESG in ASEAN

1. Energy and Extractives

ASEAN’s energy sector has long depended on fossil fuels—chiefly coal and natural gas—due to their historical availability and cost-effectiveness. However, a paradigm shift is underway:

• Policy and Market Drivers: National governments in countries like Vietnam, Thailand, and the Philippines are increasingly establishing policies that incentivize renewable energy projects. Subsidies, tax breaks, and clear renewable targets are becoming more common, helping to balance the scales between traditional fossil fuels and renewables.

  
  

• Investor Demand: Financial markets and institutional investors are now prioritizing environmental sustainability. Companies in the energy sector face growing pressure to reduce their carbon footprints, invest in cleaner technologies, and transition towards more resilient energy sources.

  
  

• Technological Change: Advances in solar and wind technology, coupled with declining costs, are making renewables not just a “green” option but a financially viable one. Overcoming challenges such as intermittency is driving innovation in energy storage and grid modernization, essential steps for large-scale renewable integration.

  
  

• Risks and Opportunities: The transition introduces new risks, as fossil fuel-dependent economies and investments may face stranded assets. Conversely, early adoption of renewables can enhance energy security and create new economic opportunities in developing clean technology markets.

  
  

This evolution prompts companies to diversify their energy portfolios, balance short-term operational concerns with long-term sustainability goals, and position themselves competitively in an emerging green economy.

2. Agriculture and Forestry

Agriculture remains a backbone of many ASEAN economies, but its environmental footprint is under increasing scrutiny:

• Economic Importance versus Environmental Impact: Nations like Indonesia, Malaysia, and Thailand benefit immensely from agricultural exports. However, the push for higher yields and expanded cultivation areas often comes at the cost of native forests, leading to deforestation that undermines biodiversity and exacerbates climate change.

  
  

• Palm Oil Industry Scrutiny: The palm oil sector illustrates this complexity. While it supports local economies and global supply chains, unsustainable practices—like clearing rainforests—have sparked both environmental degradation and disputes over labor conditions. This has led to international pressure for certification schemes (such as the Roundtable on Sustainable Palm Oil) and improved regulatory frameworks.

  
  

• Sustainable Alternatives and Practices: There’s growing momentum toward more sustainable agriculture, involving integrated land management, agroforestry, and innovative practices that improve productivity on existing agricultural land while preserving natural ecosystems. These initiatives are also backed by research and partnerships between governments, NGOs, and the private sector.

  
  

• Social Considerations: Beyond the environment, issues around labor rights and community displacement are critical. Implementing fair labor practices and ensuring that local communities have a say in land use decisions are becoming central ESG concerns.

  
  

Together, these factors are repositioning agriculture and forestry from traditional production models to systems that strive for a balance between economic growth and environmental stewardship.

3. Manufacturing and Industrial Sector

Manufacturing is a pillar of ASEAN’s economic growth, particularly in countries like Vietnam, Thailand, and Malaysia. However, its rapid industrialization brings significant ESG challenges:

• Environmental Impact: Manufacturing processes can be heavy polluters, generating waste, greenhouse gas emissions, and high energy consumption. In response, companies are increasingly investing in cleaner production techniques, energy efficiency measures, and waste recycling programs to reduce their environmental footprint.

  
  

• Labor Rights and Workforce Issues: As production scales up, ensuring safe working conditions, fair wages, and worker rights becomes paramount. International buyers and investors are paying closer attention to labor practices, prompting manufacturers to adopt stricter internal controls and transparent supply chains.

  
  

• Technological Innovations: The advent of Industry 4.0 offers a double advantage. Automation, IoT monitoring systems, and digital twins help companies optimize production processes to be both more efficient and less wasteful, reducing emissions and environmental risk while enhancing worker safety.

  
  

• Resilience and Reputation: Companies that proactively address these ESG challenges not only mitigate risks such as supply chain disruptions and regulatory penalties but also enhance brand reputation. Consumers and business partners increasingly factor sustainability into their purchasing decisions, thus rewarding companies that lead the change.

This growing focus on sustainability transforms manufacturing into an innovative field where efficiency, environmental care, and worker rights are integrated into the core business strategy.

4. Tourism

Tourism is one of ASEAN’s most visible and economically significant industries, especially in cultural and natural hotspots like Thailand, the Philippines, and Cambodia:

• Environmental Sensitivity: Tourism destinations often hinge on the preservation of natural landscapes and cultural heritage. However, an influx of tourists can strain local resources, including water supplies, local ecosystems, and waste management systems. Sustainable tourism strategies now include measures to protect these delicate environments through regulated visitation and eco-friendly infrastructure.

  
  

• Social and Labor Considerations: The tourism industry also faces ESG challenges on the social front. Workers in hospitality and related sectors sometimes face precarious employment conditions. Promoting fair labor practices, ensuring adequate wages, and providing training and development opportunities are becoming critical measures to sustain both human capital and service quality.

  
  

• Community Engagement: Integrating local communities into tourism development not only ensures cultural preservation but also offers a fair distribution of economic benefits. Community-based tourism initiatives can empower local populations while ensuring that tourism growth is responsible and inclusive.

  
  

• Innovation in Sustainable Experiences: There’s a rising trend toward eco-tourism and experiential travel. These models emphasize minimal environmental disturbance, conservation education, and activities that contribute directly to the local economy. This mindset shift can lead to innovative tours, responsible wildlife interactions, and local culinary experiences that promote sustainability.

  
  

Tourism, therefore, is evolving beyond mere attraction to a more complex interplay of environmental protection, social responsibility, and economic inclusivity.

5. Finance and Banking

In ASEAN, the finance and banking sector is emerging as a powerful catalyst in driving sustainability:

• Green Bonds and Sustainable Finance: Financial hubs like Singapore and Malaysia are spearheading the issuance of green bonds—debt instruments specifically earmarked to fund projects that have positive environmental outcomes. This form of financing not only supports renewable energy and conservation projects but also aligns with global efforts to mitigate climate change.

  
  

• ESG Integration in Lending: Banks are increasingly incorporating ESG criteria within their credit risk assessment processes. By evaluating potential borrowers on their environmental and social performance, lenders can manage risks more effectively while shifting capital toward projects that are sustainable and ethically sound.

  
  

• Innovation in Financial Products: Beyond traditional loans, the market is moving toward innovative financial products. For instance, sustainability-linked loans tie interest rates to the borrower’s performance against ESG benchmarks, motivating companies to improve their sustainability practices to enjoy better financing terms.

  
  

• Regulatory and Investor Pressure: As regulatory frameworks mature and investor expectations grow, financial institutions in ASEAN are under increasing pressure to be transparent about their own ESG practices. This involves disclosing how climate risks are factored into investment decisions, as well as providing evidence of positive social impact.

• Long-Term Value Creation: Ultimately, by channeling funds into sustainable projects and integrating ESG factors into risk management, banks and financial institutions help foster an economy that is resilient to climate change and socially equitable. This not only reduces systemic risk but also unlocks long-term value for investors and society at large.

  
  

Overall, the financial sector in ASEAN is not only facilitating a broader societal push towards sustainability but is also reaping the rewards of being an early mover in embedding ESG into core financial practices.

Conclusion

ESG practices in ASEAN are developing, with Singapore and Malaysia leading due to strong regulations and investor demand. Singapore’s SGX mandates sustainability reporting, and Malaysia aligns ESG with national goals like net-zero by 2050. Less developed countries like Cambodia and Laos lag, prioritizing economic growth over sustainability due to weak frameworks and limited resources. Global investor focus on ESG (83% use sustainability in analysis) pushes ASEAN to adopt robust frameworks to stay competitive. Challenges include inconsistent standards, greenwashing, and data gaps. To advance, ASEAN needs harmonized standards, stronger regulations, and capacity building. Recent initiatives like the ASEAN Sustainable Investment Guidelines (2025) show progress, but balancing growth and sustainability remains key.