This report focuses on corporate transparency on environmental risks, and lays the groundwork for understanding environmental disclosure and reporting issues in emerging markets through an investor lens. It is the second report in a series establishing the link between issues like climate change, air pollution, water supply, and natural resource depletion and traditional financial analysis on corporate value and financial strength for companies in six key Asian economies — India, Indonesia, Malaysia, Philippines, Thailand, and Vietnam.

Key Findings

  • Sustainability reporting in the six focus countries has improved in the past 5 years through the efforts of national governments, training and consulting organizations, national securities regulators, accounting professional associations and others.
  • Company disclosure in emerging Asia is typically focused on community giving and philanthropic activities. In general, such reporting is of more interest to stakeholder groups such as local communities and employees than to investors. We found most of the sustainability information disclosed to be of limited relevance to mainstream investors.
  • Indian companies examined in this study were ahead of the field, with the majority producing sustainability reports that we evaluated as average or above-average and somewhat relevant to investors. In contrast, the Vietnamese companies surveyed had the least progressive disclosure.
  • Companies with above average reporting are responding to external pressures, including pressure from stakeholders and parent companies, as well as reputation and supply chain concerns.
  • Each country, with the exception of Vietnam, has some form of regulations, codes, awards, support organizations, or market initiatives that encourage sustainability reporting. Malaysia is the most advanced in this respect.
  • Investors and equity analysts in emerging Asia often obtain pertinent information on sustainability risks through non-public informal channels. This practice likely gives some investors a competitive advantage. However, it does little to help tip the scale toward mainstreaming corporate sustainability reporting in the region.

Executive Summary

In a world where the physical impacts of environmental degradation are already being felt, and most governments have embraced some form of regulation to mitigate further damage to the environment, environmental concerns are increasingly relevant to companies’ bottom lines. Companies will both impact and are dependent on the environment and current environmental trends will present companies with both risks and opportunities. In its report Emerging Risk, World Resources Institute (WRI) identified the critical trends that countries in emerging Asia face; trends that have a material financial impact on key sectors in the region.

Today, if and how companies manage trends such as climate change or water scarcity is of direct interest to investors. In fact, many investors and financial analysts regard a company’s performance on environmental and social aspects affecting their business as a proxy for good management.

In developed markets, company disclosure on environmental, social, and governance (ESG) performance on their website, in their annual report, or a separate corporate sustainability* report, is routine practice. In emerging markets, however, such reporting still lags behind.

Undisclosed Risk: Corporate Environmental and Social Reporting in Emerging Asia examines the current state of public corporate sustainability reporting in English by the ten largest companies in each of six Asian countries—India, Indonesia, Malaysia, Philippines, Thailand and Vietnam. This report does not cover corporate governance reporting and its drivers, although a national corporate governance code may have a positive influence on company transparency on environmental and social factors.

The companies examined include both multinational and national businesses, and cover sectors ranging from resource-based energy, mining, and oil and gas corporations to service sector banking, telecommunications, and transportation. The companies are ranked according to a four point criteria developed by WRI, which draw on guidelines from the Global Reporting Initiative1 and from the international consultancy SustainAbility’s Global Reporters work.2 To put the results in context, we also examine the regulatory and non-regulatory drivers in place in each country to encourage corporate disclosure on sustainability risks.

This study provides an investor perspective on corporate sustainability reporting in the six focus countries. It is intended for both foreign and local investors in key emerging Asian economies, as well as sector and equity analysts and researchers that cover the region.

Undisclosed Risk is part of a multi-report research project† between WRI and the International Finance Corporation (IFC) that studies the financial materiality of key environmental issues in India, Indonesia, Malaysia, Philippines, Thailand and Vietnam. The project seeks to help equity investors in emerging Asia to mitigate risks and take advantage of opportunities by directing capital toward environmentally sustainable listed companies.