BUSINESSES in South-east Asia are falling behind their global peers in terms of climate-related disclosures, despite having made some progress over the past two years.

Based on findings from EY’s 2023 Global Climate Risk Barometer report released Tuesday (Mar 5), the region was the third weakest-performing in 2023 after India and the Middle East, in terms of both quality and coverage.

The annual study measures companies based on the number of recommended disclosures made (coverage), and the extent and detail of each disclosure (quality).

In its latest iteration, EY observed that certain markets had “scope for further improvement” in terms of 2023 quality scores, despite their overall increase in performance compared with last year.

This was particularly so for the Middle East (23 per cent), South-east Asia (34 per cent) and India (36 per cent).

While South-east Asia’s quality score for 2023 was up from 26 per cent in 2022, this was far from the UK, which came in at the top with its quality scores for both 2023 (66 per cent) and the year before (62 per cent).

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Said EY of markets at the lower end of the quality spectrum: “The key commonality for these markets is the lack of any mandatory climate disclosure requirements. Until this is rectified, these low scores are unlikely to change significantly.”

Out of the 1,500 businesses surveyed across 51 countries globally, 133 companies were in South-east Asia, namely, in Indonesia, Malaysia, and Singapore.

EY noted that 89 per cent of South-east Asian respondents do not reference climate-related matters in their financial statements. Out of those who do, most (64 per cent) do not include the quantitative impacts of climate risk in their disclosures.

In the financial services firm’s view, this implies that climate change is “not being considered the same way as other material impacts, and is reflective of a broader trend for climate strategy to remain separate from corporate reporting”.

It also highlighted that Malaysia (43 per cent) and Singapore (41 per cent) fared better than others in terms of quality of disclosure; Indonesia (22 per cent) was cited as needing “marked improvement”.

Praveen Tekchandani, Singapore climate change and sustainability services leader and partner for assurance at EY, said: “In South-east Asia, while each country is adopting the standards at its own pace, progressive regulators such as those in Singapore and Malaysia have started on the journey, resulting in better scores in the quality of disclosure. Importantly, their experience offers valuable lessons for other countries in the region.”

Globally, business’ climate-related disclosures achieved a 50 per cent quality score in 2023, from 44 per cent in 2022.

EY viewed this as proof that companies are now investing more time and resources in the fundamental quality of what they disclose to stakeholders.

Meanwhile, the firm attributed the overall coverage score increase to 90 per cent in 2023, from 84 per cent the year before, to increased focus on the quality of disclosures and alignment with Climate-Related Financial Disclosures (TCFD) recommendations.

Both global scores for 2023 each represented a 6 per cent year-on-year improvement in terms of coverage and quality of disclosures.

EY noted, however, that the global quality score of just 50 per cent is “concerning”, given how it has been eight years since the launch of TCFD.

“Time is running out for keeping global warming to a below -2 deg Celsius trajectory. As a result, stakeholders are now expecting companies to embed a genuine, rigorous culture of continuous improvement in relation to climate action.”