Beyond Green Labels: Towards Fostering Globally-Aligned Sustainability Disclosure in Southeast Asia

As capital increasingly flows toward sustainable investments, Southeast Asia’s financial markets face a defining test of ensuring that true green claims are credible, comparable, and aligned with science.

Across the region, particularly in Indonesia and Philippines, greenwashing risks have grown alongside sustainability-linked bonds, ESG funds, and transition finance products. Financial institutions may market products as “green” or “net zero-aligned” while underlying assets remain carbon-intensive, transition strategies lack measurable milestones, or disclosures omit material climate risks.

Inconsistent reporting frameworks and voluntary standards have allowed sustainability claims to outpace regulatory oversight, reducing investor confidence, fragmenting disclosures, and complicating comparisons of climate-related risks across markets.

Markets worldwide are moving toward harmonised sustainability reporting standards to curb greenwashing and strengthen market integrity.

Two major frameworks have shaped this shift:

●       Task Force on Climate-related Financial Disclosures (TCFD)

●     International Sustainability Standards Board (ISSB), through its IFRS Sustainability Disclosure Standards

Jurisdictions representing over half of global GDP have announced steps to adopt or align with ISSB standards. By embedding consistent requirements on climate-related risks, governance, metrics, and transition planning, these standards aim to ensure that sustainability disclosures are:

●       Comparable across borders

●       Consistent across sectors

●       Reliable for investors

●     Grounded in material financial risk

Tackling greenwashing practices is a step toward securing investor confidence and greater market transparency and aligning country standards with internationally-acknowledged benchmarks to ensure more comparable, consistent and reliable sustainability information.

Regional Progress of Late

Malaysia became the first country in Southeast Asia to fully adopt the ISSB’s standards through the launch of its National Sustainability Reporting Framework (NSRF) in September 2024. This positioned Malaysia as an early regional leader in globally aligned disclosure.

Other jurisdictions are implementing aligned frameworks in phases between 2026 and 2031, including Thailand, Indonesia, Singapore, The Philippines.

The Philippines

Starting 1 January 2026, the Philippines has mandated new sustainability reporting standards aligned with IFRS Sustainability Disclosure Standards for large publicly listed companies and significant non-listed entities.

This marks a major shift from predominantly voluntary ESG reporting toward a more standardised, regulator-backed framework. The move is expected to improve transparency around climate risk exposure, transition planning, and emissions disclosures, particularly for banks and energy-intensive corporations.

Indonesia

In August 2025, Indonesia ratified sustainability disclosure standards based on IFRS S1 and S2, signalling its intention to align with global benchmarks. The implementation, effective from 1 January 2027, is expected to be phased, prioritising listed companies and financial institutions before broader expansion.

As one of the region’s largest capital markets and a major coal producer, Indonesia’s approach to classification standards, transition planning, and financial product labelling will be critical in determining whether green finance flows are directed toward genuine decarbonisation or risk enabling transition-washing.

ClientEarth’s Approach

As part of its broader work across Southeast Asia, ClientEarth is advancing a guardrails framework to prevent transition-washing and strengthen market integrity.

This includes:

●       Preparation of  national or regional Paris-aligned emissions reduction pathways to guide corporate transition strategies.

●       Development of scientifically robust classification standards for carbon-intensive activities and technologies.

●       Building capacity in the market for external verification of transition finance instruments.

●       Implementing targeted financial regulation with mandatory threshold requirements for credible use of protected transition finance labels.

●       Empowerment of financial regulators to penalise transition-washing practices effectively.

●       Implementing systemic reforms to scale up transition finance flows, both labelled and unlabelled.

ClientEarth continues to expand its legal capabilities across Southeast Asia, with the latest additions to our expanding team within the corporate and finance programme. These altogether are part of our overarching goal to prevent greenwashing, protect investor confidence, and ensure capital flows support a credible, just, and climate-aligned transition.