Guest post: How ESG is transforming SE Asia's tech game

Guest post: How ESG is transforming SE Asia's tech game

Photo: Mert Guller / Unsplash.com

Environmental, social, and governance (ESG) reporting is shaping up to be one of the most significant agendas of our time. Major commitments are being made in company boardrooms which have resulted in promising developments in emerging markets like Southeast Asia.

As one of the fastest-growing regional economies, Southeast Asia has seen more than $15 billion in green capital deployed since 2020. The tech industry in particular is collectively placing a renewed emphasis on various aspects of ESG, with most of the large players recommitting to, or updating, their frameworks.

The big three cloud providers—Amazon Web Services, Microsoft Azure, and Google Cloud Platform—that account for almost two-thirds of the world’s cloud computing, have boldly pledged to fully decarbonise their data centres. Further, companies are betting big on purchasing growing shares of renewable energy, investing in carbon removal, and issuing green bonds.

But as these tech companies forge ahead with investments into green technology in a bid to meet ESG commitments, it does not come without its challenges.

You can’t manage what you don’t measure

The biggest hurdle we still face today is a lack of consistency and uniformity in measurement and reporting. While many tech CEOs are aware of the importance of ESG reporting, truth be told, their companies aren’t fully prepared to measure and track the necessary metrics.

As part of our efforts working in this space, we found that most companies generally fall into one of three categories:

  • They’re only just starting out and getting baselines,
  • They’re setting targets and reporting, or
  • They’re starting to take action.

Most companies in Southeast Asia still fall into the first category and are at the beginning of their ESG journey, where sustainability is a recent strategic priority.

Although there is no one mechanism that serves as the ‘generally accepted framework’ for reporting, there are increasingly more tech-driven solutions to help companies start on this journey. Two regional startups worth mentioning are Terrascope and Unravel Carbon, both based in Singapore.

Evolving standards

The global regulatory landscape is also changing rapidly, and positive steps are being taken to tackle issues, such as greenwashing, and standardise ESG rules and reporting. Nowhere is this more evident than in Europe, where countries like Finland, Sweden, and Germany are unquestionably leading the charge on ESG reporting rules.

In one of the biggest measures to date, the EU recently reached a deal on corporate sustainability reporting requirements for large companies from 2024. With it, the EU targets to end greenwashing and lay the groundwork for sustainability reporting standards.

The US Securities and Exchange Commission (SEC), too, has recently announced fresh amendments to rules and reporting norms. For the first time, US companies would have to report on their greenhouse gas emissions and detail how climate change-related risks will affect their businesses.

Closer to home, in Thailand, the local SEC is expected to revise its disclosure requirements for listed companies to include information on human rights practices and carbon emissions.

Using ‘net impact’ as a north star

Tech CEOs and venture capital firms need to establish numerical baselines for how their companies are impacting the environment and society. They need to get into the habit of reporting these baselines publicly and then creating plans for how to improve next year’s metrics.

This is where players can leverage tools like the Helsinki-based Upright Project’s system and methodology. Upright is the world’s first open-access platform for impact data. In the context of ESG and impact reporting, it is increasingly being viewed as the single most authoritative tool for global investors, companies, and governments.

With it, companies can arrive at a north star metric known as their ‘net impact’ ratios. This is a positive or negative percentage figure that shows, in granular detail, precisely how a company affects the world around it (with its four key subcategories being “society,” “knowledge,” “health,” and “environment”)

Where a +100% would theoretically indicate a perfect net impact ratio (essentially non-existent), one interesting benchmark to look at for comparison is the S&P 500, which carries an average of +2%.

Looking forward

For tech companies in Southeast Asia—where impact and ESG have always been more of an afterthought—the stakes are now real, and serious players need to get their houses in order.

ESG is fast becoming standardised, with Europe clearly setting the bar. Reporting on impact and ESG needs to be done in a way that is quantifiable, clear, and up to the same standards being set globally. Capturing opportunities and making the world a better place is of course a reason worth doing it, but this is also about pragmatism and mitigating risk.

Companies and institutions that find themselves behind the curve on proper ESG reporting in Southeast Asia are likely to pay the price going forward. This may come in the form of foreign capital simply not being allowed to make its way into your fund or your company.


About the authors:

Lauren Blasco is Principal, Head of ESG at AC Ventures, a leading Southeast Asian venture capital firm with $500 million in assets under management investing in early-stage startups focused on Indonesia and ASEAN. The firm is a generational partner to founders driving positive societal change and economic impact in the region.

Neels Steyn is Venture Architect Director at BCG Digital Ventures, the venture-building arm of Boston Consulting Group, where he leads teams that are building new industry-defining ventures together with the world’s most influential companies. Neels is also co-founder of the Southeast Asia chapter of Leaders For Climate Action.

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