ESG risk is rising up the agenda of priorities for the boards of companies in Asia, but many are reporting difficulties in integrating ESG into risk practices, and a lack of skills and knowledge.

Hogan Lovells questioned 600 large multi-national companies in regions including Greater China, Singapore, Japan, Indonesia and Vietnam across a multitude of sectors to form the study Navigating Deep Waters.

While 76% of those based in Asia said ESG risk is an increasing priority for their organisation’s board, the biggest concern was around the difficulty in embedding ESG into existing risk practices, which was indicated by 77% of respondents. This was most prevalent in Japan (84%) and Singapore (81%).

As a result, less than half of the Asia companies surveyed (42%) said they have a mature ESG program in place.

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Almost three quarters (74%) also reported a lack of knowledge and skills in the region, again this was most common in Japan, and 72% reported complexity in navigating countries in which they, or third parties, operate in – Singapore-based respondents highlighted this concern (74%) more than other markets in Asia.

Nick Williams, partner in the investigations, white collar and fraud practice for Hogan Lovells in Singapore, said: “In order to become ESG compliant, the legal and compliance teams of organisations in Asia still need a certain amount of education on where to start – this involves how to audit, prioritise and embed ESG practices into their risk and compliance frameworks. While companies across all sectors in the report acknowledge that this is required, they’re still at the beginning of their ESG journeys compared to businesses in Europe and North America.”

While it is encouraging ESG risk is a rising priority, more needs to be done, according to Antonia Croke, partner in the litigation, arbitration and employment practice in Hogan Lovells’ Hong Kong office.

“Organisations in Asia must wake up to the reality of prioritising ESG over the next decade – or face jeopardising their business growth and exposing themselves to financial and reputational damage, as well as litigation risk. We see companies navigate a range of risks, including supply chain, shareholder activism and environmental issues.

“This region is also hugely diverse in terms of its economies, jurisdictions and varied regulatory scrutiny, which pose additional challenges to companies looking to embed ESG into their existing risk practices.”