Corporate Governance And Risk Management – ESG

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Over the past few years, HM has been considering how it can best assist businesses to address environmental, social and governance (“ESG”) issues.  In developing our approach to an ESG advisory practice, HM stands on the shoulders of giants. We have read a number of articles and regulatory papers on ESG in the course of our research and have compiled a list at the end of this article of some of our favorite ESG commentaries and reference materials.

The inflection points for launching our ESG practice were: (1) a November invitation from the International Compliance Association for our colleague, Melindah Bush, to speak on ESG panel with other leading experts, (2) a gracious conversation with an ESG expert (who shall remain nameless but had excellent credentials in the spacing including running an ESG advisory start-up and managing a regional advisory practice for a prominent global consulting firm) who told us everyone was still learning and there were opportunities for HM to make a positive contribution and (3) continued growth in ESG and sustainability reporting requirements for companies with operations across Asia Pacific.


A variety of motivations may drive a firm to engage in strong ESG practices, including beliefs that:

  • strong ESG practices matter to:
    • a company’s investors, customers, directors and/or employees;
    • a company’s regulators; and/or
    • the stock exchange(s) on which the company’s stock is listed;
  • ESG initiatives can unlock competitive value (e.g. improved corporate governance improving employee morale and increasing the productivity of a company);
  • ESG initiatives can enable companies to access certain financial grants/loans and other benefits; and
  • addressing ESG issues are critical to the survival of the planet.

We defer to our clients’ Board and senior management about how they prioritise ESG initiatives in their business, subject to any minimum legal or regulatory requirements.


There are no black and white answers here, although we believe environmental issues are prioritized by many businesses according to studies we have seen.1 Moreover, companies with global operations may try to implement global standards and practices rather than develop a distinct ESG strategy for each individual country. We have the following initial thoughts2 :

  • Governance has always been an important consideration for companies because failures in governance can lead to (1) material business losses and the resulting lawsuits from shareholders against the directors or (2) regulatory penalties. To that extent, a well-run financial institution that has no ESG-specific initiatives likely already addresses the governance issues that are material for a business of its nature, size and complexity.
  • Social standards can vary significantly between countries and industries. Even disclosures of employment statistics by age, race or gender can raise sensitive questions about how a company considers such characteristics in the course of their business and why the company is disclosing the information at all. 
    • A company’s emphasis on and consideration of social metrics may also vary depending on what the company categorizes as a social issue. For example, some consider management diversity, ethical treatment of employees and/or workplace safety incidents to be a social issue, while others consider it a governance subject.   
  • We think environmental issues are the ESG standards that attract the most attention because the conduct measured:
    • is the same as what could be measured for natural persons. Whether a company looks at the amount of carbon it uses in its business or the environmental impact of its investee companies, the same analysis could be done by a person. 
    • impacts the entire planet.
    • receives relatively more media and political attention and is the subject of more regulatory matters.

Efforts to combat climate change have accelerated and intensified since the Paris Agreement, such as opening green markets, launching carbon taxes, issuing green bonds etc. Singapore has elevated its climate ambition, announcing in February 2022, its target to achieve net-zero emissions by or around mid-century3


In December 2020, the Monetary Authority of Singapore (the “MAS”) published guidelines on managing environmental risk aimed to enhance banks’, insurers’ and asset managers’ resilience to and management of environmental risk (the “Guidelines on Environmental Risk Management”).4  The Guidelines on Environmental Risk Management set out the MAS’ expectations relating to (1) governance and strategy, (2) risk management and (3) disclosures. We note that the guidelines for each financial institution category are substantially similar but not completely the same.

The MAS has stated that (1) the Guidelines on Environmental Risk Management focus on environmental risk rather than social risk because the linkage between environmental risk and impact on the financial system is more established and (2) governance issues can be addressed by existing governance requirements.5  The MAS highlighted that environmental risk has the potential to financially impact financial institutions through physical and transition risk channels.

  • Physical risk arises from the impact of weather events and long-term or widespread environmental changes.
  • Transition risk arises from the process of adjustment to an environmentally sustainable economy, including changes in public policies, disruptive technologies developments and shifts in consumer and investor preferences.

In May 2022, the MAS also published information papers on environmental risk management commenting on the progress financial institutions had made in implementing the Guidelines on Environmental Risk Management.6 Many companies here are subject to other ESG regulations through their parent companies and due to their presence in other jurisdictions, so there is some flexibility in reporting to MAS7. This will require companies to be familiar not only with MAS ESG reporting requirements but also the larger context of ESG globally and especially out of the EU which is driving significant ESG reporting standards.


We think the growth and evolution of ESG as an issue for businesses to consider is unparalleled.  Many jurisdictions are promulgating new ESG requirements. In particular, the United States Securities and Exchange Commission is expected to announce its requirements in 20238. Jurisdictions that have limited ESG reporting to larger or listed entities, such as Singapore, have indicated moves to expand compliance requirements to additional entities9.

ESG raises questions about the future of the planet, but also ties into decades-old philosophical questions about whether the social responsibility of a business is to increase its profits.10 Some thought leaders believe there is going to be considerable pushback against ESG initiatives in the coming years because ESG, both the investment strategy and corporate practice, either doesn’t lead to improved performance or sacrifices performance.11   At a minimum, we are certain that Boards of Directors and senior management will be spending considerable time thinking about how they address ESG issues.

There is a lot going on.  There is a lot to learn.  We look forward to being part of the conversation. 


Please feel free to reach out if you would like to explore how HM can assist your company on ESG matters.  HM helps companies:

  • comply with the Guidelines on Environmental Risk Management;
  • develop ESG strategy;
  • conduct ESG audits; and
  • conduct ESG training


Environmental risk management for financial institutions in Singapore – PWC

Five priorities to build trust in ESG – EY

ESG: What boards of Directors should do now? – Norton Rose Fulbright

SGX Core ESG Metrics – SGX

Sustainable Finance in Singapore and Hong Kong – Clifford Chance

Climate, ESG and the Board of Directors: “You cannot direct the wind, but you can adjust your sails” – Speech by Allison Herren Lee, Commissioner at the U.S. Securities and Exchange Commission

For further information, contact:

Chris Holland: Partner | [email protected]

Disclaimer: The material in this post represents general information only and should not be relied upon as legal advice. Holland & Marie Pte. Ltd. is not a law firm and may not act as an advocate or solicitor for purposes of the Singapore Legal Profession Act.

1 For example, see The Economic Realities of ESG, PWC, 28 October 2021.

2 ESG issues are incredibly nuanced and the statements in this article are meant to introduce our thoughts on these topics rather than be definitive or exhaustive statements our views.

3 See MAS Sustainability Report 2021/2022, MAS, 28 July 2022.

4 See Guidelines on Environmental Risk Management for Banks, MAS, 8 December 2020.

5 For example, see Paragraph 2.3 of the Response to Feedback Received on Proposed Guidelines on Environmental Risk Management, December 2020.

6 Guidelines on Environmental Risk Management for Banks, Information Papers on Environmental Risk Management

7 See Paragraph 1.2 of the Guidelines on Environmental Risk Management, December 2020

8 See Climate Change Disclosure, Office of Information and Regulatory Affairs Office of Management and Budget, 2022.

9 See Paragraph 2.11 of Response to Feedback Received on Guidelines on Environmental Risk Management for Asset Managers, 8 December 2022

10 Friedman and His ESG Critics: Myths and Realities, Steven Globerman, August 2022.

11 See Predictions for Business & Society in 2023, Aspen Institute, 21 December 2022.

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