Why Asia is not (yet) succumbing to sustainability fatigue

Countries across the Asia-Pacific region are tightening sustainability regulation, even as the US goes into reverse and the EU steps on the brake.

As of 2026, voluntary frameworks have been replaced by mandatory sustainability reporting in almost all major Asia-Pacific economies. Most are aligning their national standards with those of the International Sustainability Standards Board (ISSB).

At one level, the regulation is a key step for Asian governments to deliver on their decarbonisation commitments made under the Paris Climate Agreement. By providing transparency on emissions, the regulation is intended to steer investments towards low-carbon activities.

But there are also pressing reasons for keeping up the momentum.

Asia is warming nearly twice as fast as the global average¹ raising concern among governments, regulators and investors about the potential impacts of climate change. In June 2025, the World Meteorological Organization (WMO) said extreme weather linked to warming is “wreaking a heavy toll” on Asian economies, ecosystems and societies.

The need to protect economies from the financial effects of climate risk is one major theme in the reasons given by regulators for tighter regulation. Regulators in Australia, Japan, Singapore, Hong Kong and other jurisdictions have all said climate risk threatens the stability of their markets.

Market pressure

Despite the perception of a weakening commitment to sustainability regulation in the US and EU, the bar is still rising for many companies in these parts of the world. The EU’s Corporate Sustainability Reporting Directive (CSRD) will make sustainability disclosures mandatory for additional EU and non-EU companies by the end of the decade, even if the original standards that accompany the directive have been watered down. And while the US federal administration has reversed course, major states such as California and New York are requiring large companies to report emissions. As a result, many organisations  – from Microsoft and Walmart to Goldman Sachs and JPMorgan Chase – are adopting these standards nationally to simplify their operations.

Given Asia’s central role in global supply chains, countries in the region recognise the importance of aligning with international standards. From India to Singapore, Japan and Australia, regulatory authorities have said such alignment is crucial to ensuring their economies remain competitive. In January 2026, China also unveiled a climate reporting standard aligned with ISSB that may become mandatory starting in 2027.

For Asian businesses, operating seamlessly in global markets requires them to remain attractive to global investors, who want data on potential climate-related impacts that they can compare across companies and economies. Such transparency is necessary to protect investments, the Institutional Investors Group on Climate Change said in December 2025, noting that many companies still “fall short.”²

Slowing implementation

Similar to the EU, many Asia-Pacific countries are using phased approaches to implementing regulation, giving large entities earlier deadlines while smaller companies have grace periods. Regulators in Australia, Thailand and Singapore are placing immediate pressure on banks and insurers to manage climate risk.

However, falling oil exports from the Middle East and rising oil prices are taking a toll. Governments across Asia – which is more dependent on oil from the Middle East than any other region – have slowed implementation of sustainability regulation to protect their economies from the energy crisis.

India, Indonesia, Japan, Singapore and South Korea, for example, have all delayed measures relating to carbon taxes, the mandatory reporting of emissions, or the closure of coal power plants.

For now, the energy crisis has not caused a formal retreat from sustainability goals across Asia, but it has shifted the focus from decarbonisation to energy security and economic resilience. The long-term ambition remains, but the path to get there looks set to be slower and more susceptible to geopolitical shocks.