Guide on Climate Action for Boards in Southeast Asia

Kuala Lumpur, 08 November 2024 – ClientEarth has launched "Guide on Climate Action for Boards in Southeast Asia". The guide, co-published by Climate Governance Malaysia and Earth on Board, aims to provide corporate directors with insights to address the increasing complexity of climate-related legal risks, regulations, and governance requirements within the region.

As Southeast Asia faces increasing vulnerability to both physical climate impacts and transition risks, such as evolving regulations and shifting market preferences and behaviours, it is critical for corporate boards to incorporate climate considerations into their decision-making processes. Home to over 685 million people (around 8.5% of the world’s population), Southeast Asia is projected to account for 6.5% of CO2 emissions by 2040. The region faces threats of (and some areas have already witnessed) rising sea levels, increased heat waves, strengthened typhoons, extreme floods and droughts, and unprecedented weather events.

In addition, Asia could lose 14.9% of its GDP by 2050, significantly affecting livelihoods, with Indonesia, Malaysia, the Philippines, Singapore, and Thailand potentially losing seven times their total economic output without ambitious climate action. Conversely, achieving net-zero emissions by 2050 could boost the Asia-Pacific’s GDP by 6.3% above projections and create up to 36.5 million additional jobs by the 2030s.

In light of this, the need for corporate boards to take decisive climate action has never been more critical. Recent commitments by countries in the Southeast Asian region to achieve net-zero emissions and the growing integration of climate considerations into national policies reflect an urgent call for businesses to adapt swiftly.

This guide provides corporate directors with a comprehensive framework for climate governance. It gives guidance on emerging legal risks, including litigation risk directors and corporations face regarding greenwashing and other climate-related liabilities, whilst outlining key regulatory and market shifts in Southeast Asia’s net zero transition. Companies that do not adequately consider and manage foreseeable climate risks, and those that cause harm through carbon-intensive operations that exacerbate the climate crisis, are increasingly facing legal action. At the same time, to the extent that a corporation is found liable in a climate lawsuit, directors may also face personal liability for failing to act reasonably in steering the corporation to manage foreseeable climate risks.

Drawing from off-the-record stakeholder interviews, the guide offers actionable steps, including: embedding sustainability across board-level committees, establishing dedicated governance structures, assessing climate risks and opportunities, setting science-based climate ambitions, and ensuring alignment throughout the company’s value chain.

With the growing adoption in Southeast Asia of international reporting standards like those from the Task Force on Climate-Related Financial Disclosures (TCFD) and the International Sustainability Standards Board (ISSB), as well as the emergence of foreign regulations such as the EU’s Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CS3D), companies are urged to improve transparency and develop comprehensive decarbonisation transition plans to meet their net zero objectives.

In response to these evolving reporting requirements and standards, corporate boards in Southeast Asia play a pivotal role in navigating corporations through the challenges of climate change. As stewards of corporate governance, they are in a unique position to steer their companies through regulatory changes and transition risks while ensuring that commitments to reach net zero can be effectively implemented and monitored.

Philippe Joubert, Earth on Board, said: “At Earth on Board we defend the idea that 2015, with the adoption of the SDGs and the Paris Agreement, must be seen as a pivotal year in the area of Boards’ duties. The fact that the world recognised climate change as a reality and of human origin and has elaborated the main lines of a necessary evolution of the behaviour of economic agents toward all their stakeholders changes dramatically the way we should consider the duties of a board of directors, adding urgency to their actions and deepening the legal responsibilities of this body toward society. Duties of care and diligence and responsibility toward the way and the content of what is reported externally by the company are now subject to a different scrutiny by society, and it is urgent that boards understand that this will challenge the way they must fulfil these duties. This guide is a tool to help the boards navigate these fundamental matters.”

Datin Seri Sunita Rajakumar, Climate Governance Malaysia (CGM), said: “The guide highlights how climate leadership goes beyond regulatory compliance, it requires boards to set bold climate ambitions, engage meaningfully with stakeholders, and integrate sustainability into core business strategies. As interest in climate-related resolutions and litigations grows in Southeast Asia, corporate boards must step up to drive change, to ensure a positive impact on the communities they serve”

Elizabeth Wu, ClientEarth, said: “In view of the urgency of the planetary crisis, this guide seeks to encourage robust climate leadership by directors when navigating climate challenges in Southeast Asia. By showcasing diverse regional examples, we aim to help directors translate climate ambitions into concrete action. Whether it's establishing effective governance structures, grappling with legal and litigation risks or developing transition plans, the guide provides boards with practical insights adaptable to their unique industry contexts to drive meaningful climate action within their organisation.”

Tan Sri Tommy Thomas, Former Attorney General of Malaysia, said: “From a legal standpoint, corporate directors in Southeast Asia must exercise heightened vigilance in climate risk governance. As the regulatory landscape evolves, new aspects of director liability are emerging, positioning climate risk oversight as an essential element of directors' fiduciary duties—not merely an advisory responsibility”.”