Director’s Masterclass Series: Session 6-6: Guide for Corporate Directors in Southeast Asia on Climate Action

Jenifer Thien, Council Member of Climate Governance Malaysia, warmly welcomed attendees to the final session of our Director’s Masterclass series, which took place at the Institute of Corporate Directors Malaysia (ICDM) on the 8th of November, 2024. Bringing together industry leaders and directors, this session served as an introduction to the newly released Guide for Corporate Directors in Southeast Asia on Climate Action.

In her opening remarks, Michele Kythe Lim, President and CEO of ICDM, emphasised the importance of board directors, as leaders of the boardroom, in navigating their companies through the intensifying climate crisis. To support this mission, ClientEarth, in partnership with CGM and Earth on Board, developed the Guide for Corporate Directors in Southeast Asia on Climate Action to equip corporate boards with essential knowledge and actionable strategies for addressing climate change and Environmental, Social, and Governance (ESG) matters. This guide offers directors a robust foundation, covering critical areas such as legal responsibilities, transition strategies, shareholder engagement, and practical frameworks for embedding climate considerations into boardroom decisions. Michele imparted a powerful message: companies must act now to integrate climate action into their core operations to build resilience, profitability, and long-term success or risk severe consequences for both businesses and communities.

Before providing an overview of the guide, Kyoko Okuyama, Legal and Policy Researcher for ClientEarth, prefaced by highlighting Southeast Asia’s significant role in the global climate landscape. Home to 685 million people and the aggregate fifth largest economy worldwide, Southeast Asia faces serious climate risks, including rising sea levels, extreme heatwaves, and intensifying monsoons. With global temperatures rising due to greenhouse gas (GHG) emissions, these risks are especially critical for Southeast Asia, given its heavy reliance on fossil fuels. Transitioning to a net-zero emissions future is therefore essential not only for climate resilience but also for regional prosperity. Projections show that achieving net-zero by 2050 could elevate Asia-Pacific’s GDP by as much as 6.3% above expected levels, while creating an estimated 36.5 million additional jobs by the 2030s.

Kyoko elaborated on the central topics covered in the guide, starting with the recent surge of climate litigation against corporations. ESG disputes now rank as one of the top litigation risks for organisations. Two significant ongoing cases illustrate this trend: Asmania et al. v Holcim (2023, Switzerland) and Japanese Youth v. JERA & others (2024, Japan). These cases not only reflect the transboundary nature of climate litigation, but also highlight the growing duty of directors to consider climate-related risks as part of their fiduciary responsibilities. This sentiment is echoed in legal opinions across Southeast Asia, emphasising that climate accountability is both a local and global imperative.

She then covered the topic of increasing regulatory support for corporate climate engagement, especially in Asia, which is reflected in climate engagement involving investors and policies supporting responsible stewardship in the Malaysian Code for Institutional Investors and the Singapore Stewardship Principles, respectively. Japan is one of the key jurisdictions where shareholder climate resolutions, such as demands for increased transparency and decarbonisation plans, are growing. Shareholder proposals to J-Power in 2022 and 2023 are examples of this trend.

The final section of the guide, “Integrating Climate into the Boardroom,” was presented by Simon Wong, Independent Advisor and co-leader of the Sustainable Finance Teaching Team at the University of Cambridge Institute for Sustainability Leadership. As companies and their leaders increasingly embark on climate action journeys, this section discusses the climate action leadership needed for more ambitious efforts across the Asia-Pacific region. Simon emphasised the necessity of formally assigning boards the responsibility of overseeing climate action—a trend gaining traction globally, as demonstrated by the board mandates of Ayala and Unilever. Recognizing the unique dynamics of the Asia-Pacific region, where family-owned businesses and state shareholders predominate, the guide highlights the critical need for securing de facto mandates from controlling owners to enable effective board governance.

While standalone sustainability board-level committees are less common in the Asia-Pacific, Simon stressed their importance in allowing boards to dedicate the time and effort required to address increasingly complex and evolving sustainability issues. Boards are also encouraged to enhance their competence by acquiring deep sustainability knowledge so as to be able to navigate the trade-offs inherent in the climate transition journey. By moving beyond viewing sustainability and climate change as merely compliance matters, —facilitated by such tools as the Task Force on Climate-Related Financial Disclosures (TCFD) framework—Asia-Pacific companies can adopt more structured approaches to sustainability while uncovering attractive and innovative business opportunities. With an increasing number of Asian firms committing to net-zero targets, Simon introduced the Transition Plan Taskforce (TPT) disclosure framework to help companies deliver on these commitments, citing AIA as an instructive example of a net-zero transition plan.

Moreover, boards must regularly evaluate the robustness of their transition plans to account for advancements in technology, shifts in policy environments, and company’s transition experiences. The guide also stresses the importance of fostering alignment within and beyond the organisation. Boards are encouraged to utilise various tools—including climate-related KPIs, climate finance, and internal carbon pricing—to remain on track with their climate transition goals.

The masterclass then moved on to a panel discussion moderated by Elizabeth Wu, International Economic Lawyer for ClientEarth. She asked Tan Sri Tommy Thomas, former Attorney General of Malaysia for his personal thoughts on the pending Asmania et al. v Holcim case, and the larger implications for companies and conglomerates conducting activities within Southeast Asia. Filed in Swiss courts, this case represents a landmark moment where Indonesian plaintiffs have brought claims against a Swiss-based conglomerate over the adverse impacts of climate change, specifically increased flooding in their region. Tan Sri Tommy noted the difficulty of generalising the impact of this case on the whole Southeast Asia region due to its size and diversity, and thus chose to focus on Malaysia. He observed that Malaysia has seen limited climate litigation, partly due to the absence of a dedicated climate change bill. However, the introduction of RUUPIN, the climate change bill proposed by the Ministry of Natural Resources, Environment, and Climate Change (NRES), may mark the beginning of a shift in Malaysia’s legal landscape. Nonetheless, he expressed concerns about the slow uptake of climate litigation in Malaysia, citing the lack of legal action against the transboundary haze originating from the burning of forests in Sumatra by companies as a missed opportunity for litigation despite clear legal grounds.

Elizabeth Wu then directed a question to Philippe Joubert, Founder and CEO of Earth on Board, regarding how companies can effectively integrate climate action into their systems and processes. Highlighting the prevalent issue of businesses taking nature for granted in their operations, Philippe emphasised the need for boards to enhance governance and redefine the entrenched mindset viewing the environment as a free and unlimited resource. To address this, he strongly advocated for the adoption of shadow pricing to account for environmental costs. Responding to Elizabeth’s query about corporate greenwashing, Philippe commented on the phenomenon where corporations develop unrealistic transition plans solely to meet climate goals. The consequences of misleading environmental claims could lead to a rise in climate litigation cases, with the FossielVrij NL v. KLM court case as a clear example where boards may face legal repercussions for failing to deliver on their sustainability promises.

In response to Elizabeth’s inquiry about the role of institutional investors in scrutinising climate-related activities, Rejina Rahim, Advisor for the Institutional Investors Council (IIC), provided insights into the growing pressure on companies in Southeast Asia to align with climate goals. She noted the dual forces of potential economic losses from climate change in ASEAN and tightening regulatory requirements, such as those from Bursa Malaysia and the European Union, compelling institutional investors to demand compliance. Highlighting the example of Permodalan Nasional Berhad, she explained how the organisation has pressured its investee companies to set net-zero targets for 2030, threatening divestment for non-compliance. Building on this, Rejina elaborated that the considerable power distance that exists in Malaysia often necessitates pressure from both regulators and investors to drive meaningful corporate action.

Following Elizabeth’s query regarding Southeast Asian corporates' responses to escalating climate litigation cases against the government, Tan Sri Tommy referenced the Do-Hyun Kim et al. v. South Korea case alongside Malaysia’s and India’s constitutional guarantees of the Right to Liberty, emphasising their relevance in holding governments accountable for failing to ensure a clean and healthy environment. While these cases demonstrate the potential for governmental liability, he cautioned that corporations face significantly lower thresholds for litigation. He advocated for studying international climate litigation frameworks, enabling corporations to better anticipate and navigate the evolving legal landscapes. Building on this, Philippe highlighted the necessity of holding governments primarily accountable for climate action, before corporate boards can be effectively influenced to adopt meaningful behavioural changes. Philippe and Tan Sri Tommy shared aligned perspectives, advocating for the Paris Agreement to be made legally binding, with Tan Sri Tommy expressing hope that Malaysia’s forthcoming climate change bill could lay the groundwork for such progress.

Datin Seri Sunita Rajakumar, Founder and Chairperson of CGM concluded the masterclass with a powerful reminder of the urgent need for climate action and the transformative role of corporate governance in reshaping economies toward sustainability. With Southeast Asia positioned as a major contributor to rising energy demand, the region bears a significant responsibility to act decisively. Incorporating climate risks, including litigation, into business strategies is no longer optional—it is essential. By embracing meaningful disclosure standards, avoiding greenwashing, and fostering engagement across value chains, industries, and civil society, businesses can seize the opportunities within this transition economy. This collective effort will not only ensure compliance but also drive meaningful change, as there is no true resilience without resilient ecosystems.

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