Asia Funds ESG + Sustainability Survey: What's Next?

In the coming years, ESG funds will very likely face both significant headwinds and tailwinds. Political forces in several major global economies are seeking to shift attention away from sustainable investing practices. Meanwhile, ESG funds continue to see success in many markets and robust reporting requirements are emerging in more and more jurisdictions. On top of this push and pull, ESG funds will have to grapple with new industry dynamics as factors like AI and supply chain due diligence play a larger role within corporates and investors alike.

Major market trends are likely to include:

1. Geopolitics, Economic Headwinds, and ESG Impact. Geopolitical developments, shifting domestic priorities, and economic headwinds will influence ESG regulatory focus in global markets. Growing tensions among major powers, coupled with global trade uncertainty and “nearshoring” will undoubtedly reinforce the tensions between economic growth and environmental commitments, particularly for developing economies like many in Asia and Latin America. That said, these global changes will also reinforce the need for supply chain reconfiguration, if not diversification, with both companies and countries looking to position themselves to tap new opportunities including from an ESG perspective. For example, countries across ASEAN    are deploying mechanisms to promote and incentivize supply chain decarbonization, in line with ASEAN’s march toward carbon neutrality. We expect these changes to impact funds’ strategies with respect to geographic and sector diversification, capital reallocation, and risk management in this evolving global landscape.
2. Growth in Thematic ESG Funds. ESG funds in Asia will be increasingly thematic, focusing on areas such as renewable energy, sustainable infrastructure, electric mobility, and biodiversity. With many Asian governments setting net-zero targets—China by 2060 and Japan and South Korea by 2050—capital is flowing into industries that support decarbonization and the green transition. Looking ahead, the scope of thematic ESG funds is expected to broaden beyond climate-linked sectors to include themes such as water security, waste management, social inclusion, and healthcare access, reflecting both regional vulnerabilities and development priorities.
3. AI Promise and Peril. AI has changed, and will continue to change, the way we live, work, and invest. AI presents a double-edged sword from an ESG perspective. We expect increased reliance on AI to advance the progress of companies’ ESG goals by, for example, enhancing real-time data collection and the accuracy of sustainability disclosures. At the same time, AI reliance will also require greater oversight and rigor from governance frameworks, and will very likely increase risks related to cybersecurity and data protection, particularly as digital infrastructure continues to expand. With regions like the EU taking the lead on AI governance (with its EU AI Act and Digital Operational Resilience Act), we can expect countries in Asia and elsewhere to follow suit.
4. Increasing Significance of ESG Taxonomies. In recent years, various major markets in the region, including China, Hong Kong, India, Indonesia, Singapore, and the ASEAN Member States, have developed or refined ESG taxonomies with an eye toward clarifying and building consensus around what corporate sustainability means in practice. In the coming years, ESG taxonomies in Asia will continue to move toward greater alignment, inclusivity, and practicality as the region balances ambitious sustainability goals with its reliance on carbon-intensive industries. While current ESG taxonomies are environmental in focus, they will likely broaden in scope to include social considerations, like modern slavery and other supply chain risks. This trend reflects mounting investor demand for standardized sustainability metrics and growing wariness regarding the potential for greenwashing and other ESG misstatements.
5. Continued Convergence of Reporting Requirements. Across Asia, regulators are steadily increasing ESG reporting requirements. Jurisdictions such as Singapore, Hong Kong, and Japan have introduced mandatory disclosures on climate-related risks, sustainability practices, and corporate governance, with other major markets, like South Korea, potentially soon to follow in their footsteps. These country-level reporting requirements largely align with global standards like the Task Force on Climate-related Financial Disclosures (TCFD  ), the International Sustainability Standards Board (ISSB), and the Global Reporting Initiative (GRI), while also considering regional priorities like carbon transition and supply chain accountability.

Read more in the Asia Funds ESG + Sustainability Survey 2025 Report.