Authors: Param Pandya and Jasmin Fraser
Date: 28 May 2024
The Commonwealth Climate & Law Initiative (CCLI) and the EW Barker Centre for Law and Business (EWBCLB), National University of Singapore, co-organised the ‘Private Roundtable: Global Regulatory Enforcement Approaches to Tackle Greenwashing: Lessons for Asia’ (the Private Roundtable) at the National University of Singapore.
The Private Roundtable was convened to discuss regulatory enforcement of greenwashing stemming from unsubstantiated claims about a company’s asserted transition plans, or a breach of sustainable disclosure standards, and whether either could, in turn, amount to a breach of directors’ duties in different jurisdictions.
The Private Roundtable was attended by several regulators from Asia, academics, practitioners, and international policy professionals. Prof. Hans Tjio, Professor and Director, EWBCLB, Faculty of Law, National University of Singapore, in his opening remarks, probed the need to develop an efficient ESG market which may require a greater push on the legal and economic front. He suggested that a key focus area should be to enable a ‘reasonable shareholder’ – a shareholder who makes some profit for its entrepreneurial risks but does not sacrifice the future for the present in doing so. He highlighted that the topics being examined at this gathering are necessary to protect our planet and to achieve inter-generational justice. The Private Roundtable was moderated by Prof. Cynthia Williams, Executive Director, CCLI, and Roscoe C. O’Byrne Chair in Law, Indiana University, United States of America.
With particular reference to greenwashing stemming from breach of sustainability disclosures, certain key themes emerged from the discussion among a diverse group of delegates. First, there are different contours of the definition of ‘greenwashing’ regarding the sustainability disclosure frameworks in jurisdictions. Most Asian jurisdictions have adopted a ‘local’ solution to a ‘global’ problem – they have put in place sustainability disclosure frameworks that are designed to cater to the capabilities of companies in their jurisdictions. However, they are also exploring mechanisms to enhance the quality of these disclosures, the requirements of which are introduced in a phased manner. Policy professionals from leading international organisations advocated for adopting global sustainability disclosure frameworks as they make these disclosures more comparable for foreign investors. This may also attract financial inflows into Asian markets.
Second, there are considerable challenges to effectively implementing sustainability disclosure frameworks such as: (a) lack of required expertise at the company level and regulatory level; (b) absence of clear guidelines for companies to make disclosures; and (c) inadequate number of third-party assurance providers. Concerns were raised that such issues risk companies engaging in ‘greenhushing’ – not making adequate disclosures regarding their climate-related impacts due to the fear of being held liable in breach of unclear disclosure requirements.
Last, the discussion revolved around the impact of various engagement and enforcement mechanisms. Most regulators expressed the need to constantly monitor and engage with companies struggling with the new disclosure requirements. The delegates noted the practice of using artificial intelligence to monitor sustainability disclosure and the enhanced potential of this technology which could be implemented globally. International policy professionals also stressed the need for cooperation between securities market regulators and other sectoral regulators within a jurisdiction to develop capabilities to detect ‘greenwashing’ and take appropriate action. Importantly, while enforcement relating to greenwashing in most jurisdictions was found lacking, regulators appeared to be more keen on ‘engagement’ with companies such that they build a sustainable market ecosystem that tackles ‘greenwashing’ and promotes industry and entrepreneurship.
The discussion hoped to inform the Asian jurisdictions of the experience of certain jurisdictions in tackling greenwashing through breaches of sustainability disclosure standards, such as Australia and the European Union. However, in his closing remarks, Prof Ernest Lim, Professor and Vice-Dean, Faculty of Law, National University of Singapore, highlighted that given the specificities in which the Asian jurisdictions operate, there were certainly lessons from Asia that could be applied globally.