Effective governance can help state-owned enterprises (SOEs) play a major role in the low-carbon transition and sustainable development. Asian jurisdictions have implemented significant legal and institutional reforms in recent years to strengthen the governance of SOEs and incorporate sustainability considerations into state ownership policies and practices. This report takes stock of the main issues with incorporating sustainability policies within the state ownership function in selected Asian jurisdictions (the People’s Republic of China, India, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, Thailand and Viet Nam), building on the OECD Guidelines on Corporate Governance of State-Owned Enterprises. It also highlights considerations for policymakers to support further improvements in their SOE sectors.
State Ownership and Sustainability in Asia
Abstract
Executive summary
With SOEs representing 26% of Asia’s total market capitalisation as of end 2024 — far above levels observed in other regions — their influence over the region’s economic and sustainability trajectory is substantial. Given their scale, strategic importance, sectoral prevalence, and public mandates, SOEs in Asia are uniquely positioned to advance national and international sustainability commitments and drive change. The incorporation of sustainability considerations into SOE ownership and governance frameworks can both mitigate risks and create opportunities for state-owners and their portfolios.
Drawing on the OECD Guidelines on the Corporate Governance of State-Owned Enterprises, this report takes stock of national approaches to integrating sustainability considerations into SOE governance and operations in ten Asian jurisdictions. It covers: the role of the state owner; the roles and responsibilities of SOE boards; sustainability reporting and disclosure; and responsible business conduct and stakeholder engagement. Key findings and ongoing challenges include:
Role of the state-owner. While all reviewed countries have made national sustainability commitments which are progressively cascading to SOEs, implementation remains uneven and concentrated among large or listed enterprises. Strengthening enforcement, incentives and SOE engagement will be critical to turn commitments into measurable outcomes. National sustainability commitments (e.g. emissions reduction targets or energy capabilities) are mainly focused on climate, with reference to international agreements. However, the explicit translation of national commitments into SOE mandates is limited, and linkages to performance outcomes are still evolving. Sustainability requirements (e.g. operational, strategic, disclosure) for SOEs are typically established through laws and regulations, governance codes or sectoral guidance but the level of coverage, formalisation and coherence varies, with a focus on large or listed SOEs. Without credible incentives and consistent application across portfolios, sustainability commitments risk remaining aspirational rather than operational.
Roles and responsibilities of SOE boards. The formalisation of sustainability-related board responsibilities in national governance frameworks is mixed – spanning explicit requirements for listed SOEs, expectations in corporate governance codes and implicit reliance on existing risk management or due diligence practices. Particularly in large or listed SOEs, the sharpened focus on the role of boards has resulted in changes to leadership composition (either by way of designated sustainability committees at board or executive level) and performance evaluation, but embedding sustainability expertise in board appointments remains at an early stage. There is only limited evidence linking sustainability to executive remuneration in most reviewed countries and targeted capacity building initiatives are uncommon.
Sustainability reporting and disclosure. Sustainability reporting frameworks are shifting to align with international standards but only certain SOEs are expected to comply. Nearly all countries have SOEs that report under the Global Reporting Initiative (GRI) Standards and/or the Sustainability Accounting Standards Board (SASB) standards and a majority are developing national equivalents to International Financial Reporting Standards (IFRS) S1 and S2. Despite recent initiatives to align sustainability reporting with evolving internationally recognised disclosure frameworks, there are clear differences in reporting obligations between reviewed countries. Moreover, national frameworks are phased or distinguished by enterprise type (listed vs. non-listed), size or sector. Notably, sustainability disclosure requirements are not expected to apply to non-listed and/or small SOEs in the short- to medium-term. Independent third-party verification processes to provide assurances on sustainability reporting are less advanced than disclosure mandates. While tailored disclosure requirements recognise differences in reporting capacities, they may also lead to fragmented and uneven transparency and disclosure practices of SOEs.
Responsible business conduct and stakeholder engagement. In addition to disclosure and reporting, other responsible business conduct (RBC) principles and standards are increasingly being translated into national frameworks, but limited resourcing and weak enforcement limit the uptake and impact on SOE strategy and operations. All reviewed countries have reflected commitments to international RBC standards in their national legal frameworks, policies and action plans. Human rights and environmental due diligence expectations are also increasingly reflected in enterprise risk management systems. However, the absence of co‑ordination mechanisms, resources and enforcement in most reviewed countries means that practical implementation remains uneven.
Considering these findings, the following measures could support policymakers in enabling SOEs and their owners to lead by example on sustainability across the reviewed jurisdictions:
State sustainability-related expectations should be clearly set out in ownership policies. Clear mandates help SOEs to effectively incorporate sustainability-related risks and opportunities in corporate objectives, targets, disclosure and monitoring measures. Without clear long-term strategies reflected in ownership policies and enterprise rationales, conflicting expectations could arise from operational and strategic uncertainties.
SOE boards should actively incorporate sustainability into their oversight and strategic functions. Adopting a long-term perspective will allow SOE boards to embed sustainability-related considerations into business strategies supporting long-term value creation, incentive and performance monitoring frameworks for executives, and risk management and control systems. Comprehensive incorporation of sustainability considerations across board responsibilities, succession planning and remuneration frameworks, along with “top down” and “bottom up” communication of material information to state owners and stakeholders will play a key role.
Sustainability reporting and disclosure obligations should be expected of all SOEs with requirements phased in and tailored based on size, sector or stage of development. Implementation of interoperable sustainability reporting frameworks will enhance long-term comparability of information, and the incremental or segmented phasing of obligations can recognise disparities in enterprise capacities in the short to medium term. Phased external assurance obligations can improve credibility and accountability – starting with high-priority sectors where reasonable assurance could be phased in as a priority over limited assurance while systems and capabilities mature. While disclosure practices remain inconsistent across portfolios, state owners should disclose assumptions, boundaries and data limitations used in aggregation.
Due diligence responsibilities should be clearly identified in SOEs to enhance RBC outcomes. Coherent and well-enforced RBC policies should extend beyond large or high-risk SOEs to be systematically implemented across SOE portfolios, with due diligence responsibilities and operational plans identified at the company level, supported by clear lines of accountability, monitoring and access to remedy.
SOEs should view sustainability as broader than climate. National and corporate approaches have, in some cases, prioritised climate-related risks and opportunities. While important, it is also in the long-term interests of enterprises to consider other aspects (e.g. integrity and anti-corruption, human rights and human capital, environment and biodiversity, modern slavery).
