This chapter discusses the SOE landscape and the multifaceted role of the state in setting and communicating concrete and ambitious sustainability-related expectations in the reviewed countries. It covers practices related to the monitoring and assessment of performance and reporting on alignment with these sustainability-related expectations. It also examines other mechanisms for incorporating sustainability considerations into the SOE sector, including incentives and engagement with sustainable finance initiatives, green public procurement and contracting standards, and SOE participation in partnerships and collaborative initiatives.
State Ownership and Sustainability in Asia
A Review of National Practices
Abstract
The OECD Guidelines on Corporate Governance of State-Owned Enterprises indicate that as owners, states play a central role in shaping how SOEs contribute to national sustainability objectives through the expectations, incentives, and accountability mechanisms embedded in ownership policies and practices. This role extends across a broad range of sustainability priorities, including climate and environmental goals, as well as wider economic and social considerations. In the reviewed jurisdictions, the issue is particularly salient in the context of the green transition, given the strong presence of SOEs in emissions-intensive sectors. As of 2023, nearly two-thirds of SOEs among the world’s 500 largest companies by revenue were concentrated in greenhouse gas-intensive sectors, notably mining, utilities, energy, and construction (OECD, 2025[1]).
In this context, policymakers are increasingly positioning SOEs as important actors in advancing the green transition (IEA, 2024[2]). At the same time, the heightened public accountability associated with state ownership reinforces the case for SOEs to lead by example, in line with the SOE Guidelines.
This chapter discusses the SOE landscape and the multifaceted role of the state in the reviewed countries in setting and communicating concrete and ambitious sustainability-related expectations as well as monitoring and assessing performance and reporting on alignment with these sustainability-related expectations. It also examines other mechanisms for incorporating sustainability considerations into the SOE sector, including engagement with sustainable finance initiatives and incentives, green public procurement and contracting standards, and SOE participation in partnerships and collaborative initiatives.
The contexts in which SOEs operate in the ten reviewed countries exhibit both differences and similarities. In the majority of reviewed countries, despite various legal reforms to strengthen SOE governance arrangements central government entities tend to play a direct role in shaping SOE strategic decision making and governance. The enterprises owned by the responding jurisdictions are typically incorporated as joint-stock companies, public or statutory corporations (with a legal form specific to SOEs).
In all the reviewed countries, many SOEs are major economic players, serving both commercial and non-commercial objectives. They operate across a variety of economically significant and strategic sectors, including energy, finance, transport, infrastructure, telecommunications, utilities, and natural resources. Their weight in national economies varies considerably, from countries where state ownership is concentrated in a small number of commercially oriented listed firms to countries – accounting for 26% of Asia’s total market capitalisation as of end 2024 - where SOEs are dominant across strategic sectors and public service delivery (OECD, 2024[3]).
Across the sample, SOEs also exhibit differing degrees of market orientation and interaction with capital markets. India, Indonesia, Japan, the Philippines, Thailand and Viet Nam, have pursued varying forms of privatisation, partial listing, restructuring, or ownership dilution to improve efficiency and market discipline. For sustainability, the significance of SOEs is especially important because many operate in emissions-intensive and infrastructure-heavy sectors, while also being used by governments to deliver public policy goals, strengthen economic resilience, and support long-term development (OECD, 2025[1]).
China’s SOEs play an important economic role both domestically and in the global marketplace, accounting for approximately 17% of the world’s 500 largest companies by revenue as of 2023. Domestically, the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) reports that central SOEs play a stabilising macroeconomic role, including in energy security, fiscal contributions, and industrial upgrading. China’s SOEs have also become increasingly integrated into global markets through overseas partnerships, cross-border investment, and mixed-ownership reform, reflecting a model in which SOEs combine strategic policy functions with growing commercial and international reach (OECD, 2024[3]; OECD, 2024[4]).
While SOEs remain key players in India’s economy, in recent years their overall economic importance has declined partly because of privatisation, restructuring, and weaker performance. As of April 2024, there were 402 centrally-owned SOEs, of which 63 were listed. These enterprises primarily operate in agriculture, mining, manufacturing and services. SOEs with social welfare functions are expected to prioritise public policy objectives (PPOs) and support the government in achieving broader developmental and community-oriented goals (OECD, 2024[3]; OECD, 2024[4]).
In Indonesia, there has been a sizeable reduction in the number of SOEs through privatisation, mergers, and business closures, as part of a broader restructuring plan aimed at improving efficiency and competitiveness. Between 2018 and 2022, the total number of SOEs decreased from 118 to 77. Nevertheless, SOEs remain important sources of government revenue and played a key role in implementing the National Economic Recovery Plan after the COVID-19 pandemic. Although the sector was negatively affected at the onset of the pandemic, financial performance subsequently improved, with strong growth in consolidated net profit and returns on assets and equity in recent years (OECD, 2024[3]; OECD, 2026[5]).
Japan’s SOE sector is less significant than in several other reviewed countries, reflecting a long history of corporatisation and privatisation. State ownership is concentrated in a limited number of strategically important SOEs often operating formerly as natural monopolies. The government has progressively reduced holdings through share sales while retaining influence in selected firms. Japan Post Holdings is illustrative: as of 2026, the Minister of Finance remained its largest shareholder with 37.83% of shares. This reflects a model in which state ownership is more selective and closely linked to capital market mechanisms than in many other Asian jurisdictions (Japan Post Holdings, 2025[6]; Ministry of Finance of Japan, 2025[7]; Ministry of Finance of Japan, 2025[8]).
In Korea, SOEs operate across a range of sectors, including finance, energy, infrastructure, and health, and play an important role in delivering public services and supporting industrial policy objectives. They employed 157 executives and nearly 99 000 people in 2025. Korea’s SOE sector combines commercially active public corporations with entities that retain strong public service and policy mandates (OECD, 2024[3]).
In Malaysia, SOEs are commonly structured as government-linked companies (GLCs) and government-linked investment companies (GLICs), and they have a significant footprint in the domestic economy. Official governance guidance describes GLICs and GLCs as longstanding instruments of nation-building, infrastructure delivery, and economic development. In 2024, 57.5% of the sovereign wealth fund’s (Khazanah Nasional Behard) investment portfolio remained in Malaysia, including 10 listed GLCs, while the Ministry of Finance’s GEAR-uP initiative mobilised a commitment by leading GLICs to invest RM 120 billion in domestic direct investment over five years. This reflects a model in which commercially run state-linked firms are expected to deliver strategic development, remuneration, and social objectives (Ministry of Finance of Malaysia, 2022[9]; Khazanah Times, 2024[10]; Ministry of Finance of Malaysia, 2024[11]; Ministry of Finance of Malaysia, 2024[12]).
In the Philippines, SOEs play a significant role in key sectors such as hydrocarbons, manufacturing, finance, telecommunications, energy, transportation, utilities, and real estate. Under the GOCC Governance Act of 2011, they conduct both commercial and non-commercial activities and contribute to national development by providing essential public services and infrastructure. SOEs may also be tasked with promoting social stability through employment creation. Between 2011 and 2024, the number of SOEs declined from 158 to 118 due to privatisation, mergers, and closure of loss-making entities (OECD, 2025[13]).
Singapore’s SOE landscape is distinctive in that it is centered on Temasek and its portfolio companies. Temasek is wholly owned by the Ministry of Finance, but its governance is organised in a way that does not direct or influence Temasek’s individual investment decisions. As of 31 March 2025, Temasek’s net portfolio value stood at SGD 434 billion. Singapore therefore combines state ownership with a highly commercial, globally integrated, and professionally managed investment portfolio. At the same time, state-owned assets remain economically significant, as investment returns from reserves contribute about 20% of annual government spending through the Net Investment Returns Contribution framework (Ministry of Finance of Singapore, 2026[14]; Ministry of Finance of Singapore, 2025[15]; Ministry of Finance of Singapore, 2026[16]; Temasek, 2025[17]).
In Thailand, SOEs play a large role in the economy and are concentrated in major sectors such as energy, finance, public utilities, and transport. According to data provided by Thailand’s State Enterprise Policy Office (SEPO), 52 wholly owned and majority-owned SOEs employed 307 579 people by the end of 2023, with total assets of USD 448.2 billion and total revenue equivalent to 32.7% of Gross Domestic Product (GDP). Thailand has strengthened the institutional framework for SOE oversight through the State Enterprise Policy Committee (SEPC) and SEPO, indicating an effort to professionalise ownership while maintaining a large SOE footprint in strategic sectors (OECD, 2025[18]).
SOEs also play an important role in Viet Nam’s economy. There are 2 109 central SOEs in Viet Nam and they account for around 30% of GDP. This makes Viet Nam’s SOE sector one of the most economically significant in the region, notwithstanding ongoing equitisation and restructuring efforts intended to improve performance and competitiveness (OECD, 2024[3]; OECD, 2022[19]).
1.1.1. State ownership models
The SOE Guidelines recommend centralising the ownership function in a single ownership entity. Where this is not possible, the SOE Guidelines recommend adopting a coordinated ownership model, where a coordinating body advises other shareholding ministries on technical and operational issues related to SOEs. The OECD has identified five ownership models for SOEs: the centralised model, the coordinating agency model, the dispersed model, the dual ownership model, and the twin-track model (see Table 1.1) (OECD, 2024[3]). The reviewed countries have adopted a variety of SOE ownership models.
Source: OECD, (2024[3]), Ownership and Governance of State-Owned Enterprises, https://doi.org/10.1787/395c9956-en.
As set out in Figure 1.1Figure 1.1, India, Indonesia, the Philippines and Viet Nam have coordinated ownership models where a department holds non-trivial powers over SOEs formally held by other ministries or institutions. Korea and Singapore adopt centralised models, with the Ministry of Finance and Economy (MOFE) responsible for SOE ownership and policy coordination in Korea, and Temasek responsible as a holding company in Singapore. Japan and Malaysia have dispersed ownership where several line ministries or other public institutions exercise ownerships. Thailand’s dual ownership is exercised with a degree of central government coordination where SEPO, an agency under the Ministry of Finance, along with individual line ministries, jointly exercise ownership over central SOEs. China uses a twin-track ownership model, with ownership responsibilities exercised by SASAC for the non-financial sector SOE portfolio and the Ministry of Finance for financial sector SOEs.
The state ownership model can play an important role in shaping sustainability practices. Countries with centralised or coordinated ownership functions may be better placed to establish clear guidelines and comprehensive sustainability policies that are applied consistently across the SOE portfolio.
Source: OECD questionnaire, State Ownership and Sustainability in Asia.
The SOE Guidelines recommend that the state, as owner, encourages and promotes sustainable and responsible business practices by SOEs and support long-term value creation by integrating sustainability into enterprise-level corporate governance frameworks. This includes setting expectations for SOEs’ observance of sustainable and responsible business conduct principles and standards (see Chapters 3 and 4). This section reviews the progress made by governments in translating key national sustainability commitments into concrete, measurable targets and performance objectives for SOEs, and in putting in place related monitoring mechanisms, while also identifying ongoing challenges.
1.2.1. Key national sustainability commitments with a focus on the low carbon transition
All reviewed countries are parties to binding and voluntary international commitments related to sustainability, including for example the United Nations Framework Convention on Climate Change (UNFCCC), the Paris Agreement, and the United Nations (UN) 2030 Agenda for Sustainable Development. These commitments are increasingly being integrated at a national level, through the development or revision of laws, regulations, policies and corporate strategies, and in some cases, through entirely new initiatives. These tend to focus on the low carbon transition, such as reducing greenhouse gas (GHG) emissions, achieving climate neutrality, and increasing the use of renewable energy in national energy mixes (see Table 1.2).
However, there are varying levels of prioritisation of these considerations within national frameworks across the reviewed jurisdictions. This could be a consequence of the pace of regulatory change and evolving global standards, shifting national objectives, and limited resources for enforcement.
Source: OECD questionnaire, State Ownership and Sustainability in Asia and desktop research on key sustainability policies.
As part of these legal and regulatory frameworks, the reviewed countries have established national targets to reduce GHG emissions with timebound objectives to reach net zero emissions or carbon neutrality. Renewable energy sources and diverse energy mixes are also being pursued to enhance decarbonisation efforts (see Table 1.3). These legal and regulatory frameworks, and their associated targets, will directly impact SOEs given their prevalence in strategic and energy-intensive sectors. Clear and well-defined expectations set through state ownership policy can support the alignment of SOE strategies with these long-term national priorities.
Note: [1] Unconditional contribution: the country’s effort to reduce emissions made possible by resources including: state budget, loan capital, investment of domestic and foreign enterprises, contribution and investment of the people. Conditional contribution: the country’s effort to reduce emissions made possible by resources received from international financing in adequate and appropriate manner through grants, concessional portions of loans, financial resources, technology and capacity building under bilateral and multilateral international co-operation mechanisms, especially under the UNFCCC and the Paris Agreement.
[2] As of 2025, Indonesia has achieved a renewable energy mix of 15.75%.
Source: OECD questionnaire, State Ownership and Sustainability in Asia; OECD, (2023[20]), Sustainability Policies and Practices for Corporate Governance in Asia, https://doi.org/10.1787/c937a2d9-en.
1.2.2. Setting concrete and ambitious expectations and targets for SOEs
Sustainability integration into SOE’s ownership policies
The SOE Guidelines recommend that where the state has set sustainability goals, they should be integral to the state’s ownership policy and practices (OECD, 2024[21]). The translation of both international and national sustainability commitments into objectives, priorities and operational expectations for SOEs should be consistent with broader governmental commitments to climate change mitigation and sustainable development.
As set out in Table 1.4, all reviewed countries are taking steps to integrate high-level sustainability considerations into SOE policy frameworks, with state owners setting expectations through laws, regulations, or policies with varying levels of formalisation. Several countries, such as Indonesia, Korea and Thailand, have translated aspects of the expected role of SOEs in delivering national sustainability objectives directly into overarching ownership policy frameworks or relevant policy guidance.
Indonesia has integrated sustainability objectives into its recently amended SOE Law (Law No. 16/2025), the main document underpinning the state ownership framework. The law, together with several ministerial regulations, requires SOEs to embed sustainability in their corporate strategies and reporting. It also establishes mandates on social welfare programmes and stakeholder engagement (OECD, 2026[5]).
Korea introduced Environmental, Social and Governance (ESG) Guidelines for Public Institutions in February 2026 to facilitate their leading role in promoting the adoption of sustainability management practices. The Guidelines include indicators and sub-indicators across the environmental, social and governance pillars reflecting the roles and responsibilities of public institutions (Ministry of Finance and Economy of Korea, 2026[22]). Together with the Act on the Management of Public Institutions (AMPI)’s reporting and evaluation architecture and the Carbon Neutrality and Green Growth Framework Act’s explicit duties for public institutions, these frameworks collectively encourage Korean SOEs to integrate sustainability considerations into their strategies, operational decision making, and sustainability-related disclosures. However, it is worth noting that the AMPI does not explicitly articulate the state’s role as owner in advancing sustainability across the SOE sector. Rather, it establishes a general ownership and performance-management framework — covering management goals, evaluation, disclosure, and supervision — within which sustainability considerations can be incorporated through broader government policy, sectoral legislation, and more recent ESG Guidelines.
Through Thailand’s corporate governance guidelines, as set out in the Notification of State Enterprise Policy Committee: Good Corporate Governance for State Enterprises B.E. 2568 (2025) and the State Enterprise Development Plan (2023-2027), SOE boards are assigned responsibilities to establish policies and plans that prioritise sustainable operations and social and environmental responsibility, and ensure sustainability reporting aligned with nationally or internationally recognised frameworks (OECD, 2025[18]). The State Enterprise Development Plan (2023-2027) positions SOEs as key instruments for delivering national priorities related to the low-carbon transition and circular economy development in line with Thailand’s National Strategy and National Economic and Social Development Plan. However, the 2019 Development of Supervision and Management of State-Owned Enterprise Act, a key document that clarifies the ownership framework, has not incorporated ambitious sustainability goals for SOEs yet.
China and India have incorporated specific sustainability and climate-related expectations in standalone SOE policy documents to provide targeted expectations for the role of their portfolios in certain aspects of the climate transition:
In China, SASAC’s Measures for the Supervision and Administration of Energy Conservation and Eco-Environmental Protection of Central State-owned Enterprises (2022) guide central SOEs in supporting broader economic and social development goals. They require compliance with national and provincial energy-saving and environmental laws, establish performance oversight measures, and mandate internal committees (referred to as “leading bodies”), reporting systems, and contingency plans for environmental emergencies.
In India, the Department of Public Enterprises (DPE) revised its mandatory Guidelines on Corporate Social Responsibility (CSR) and Sustainability for Central Public Sector Enterprises (CPSEs) in 2025. The revised guidelines require CPSEs to comply with the CSR provisions of the Companies Act 2013. Specifically, each CPSE must adopt a board-approved policy that sets out the broad sustainability initiatives it intends to pursue. The guidelines further require CPSEs to reduce GHG emissions, promote sustainable supply chains and take into account the environmental impacts of business operations. Nonetheless, important practical challenges persist, including uneven implementation across CPSEs, difficulties in impact measurement, methodological variation and related concerns about the credibility of reported outcomes.
As detailed below, the majority of jurisdictions examined have put in place general laws, regulations and policies relevant to sustainability that are applicable to SOEs, and India, Japan, Korea, Malaysia, Thailand and Viet Nam have incorporated specific climate-related expectations through individual mandates for SOEs. While this level of specificity can help establish a practical framework for the implementation of certain priorities, the incorporation of overarching, high-level sustainability mandates into a state ownership policy (or an equivalent document) is also important for understanding the strategic drivers behind broader sustainability-related improvements at an enterprise, portfolio, and national level.
Sustainability integration into corporate governance codes
Moreover, sustainability considerations have been increasingly incorporated into corporate governance codes in the reviewed jurisdictions (see Table 1.5). While the specific approaches and depth of expectations differ and often take the form of recommendations for listed companies, these frameworks increasingly recognise sustainability as central to corporate performance and non-listed SOEs are encouraged to adopt their principles as a matter of good governance. These codes also emphasise the board’s role in integrating sustainability into strategy, risk management, and disclosure practices, as is further discussed in Chapter 2.
Japan has increasingly integrated national sustainability objectives into the governance of its state-owned enterprises. It has embedded sustainability principles through broader corporate governance frameworks and national strategies. Notably, Japan’s Corporate Governance Code – revised in 2021 – now requires all publicly listed companies (including partially state-owned firms) to actively address sustainability issues (“environmental, social and governance factors”) as part of their long-term value creation strategy. The Code mandates that listed companies develop and disclose their sustainability initiatives.
This reform aligns SOEs with Japan’s international commitments such as the Sustainable Development Goals (SDGs) and its 2050 net zero GHG emissions goal. In addition, Japan is moving towards mandatory sustainability disclosure in financial reporting: in 2025 the Sustainability Standards Board of Japan (SSBJ) finalised domestic sustainability disclosure standards aligned with the International Sustainability Standards Board (ISSB) IFRS S1 and S2. A phased roadmap will require large TSE-listed companies to report on climate and other sustainability metrics from 2026–2027 onwards. Through these measures, national climate and social objectives are being integrated into SOE oversight and incentives (Sato and Endo, 2025[24]; Koshimoto et al., 2025[25]).
Note: India does not have a standalone corporate governance code and is accordingly not included in this table.
Source: Based on national corporate governance codes.
1.2.3. Monitoring, assessing and reporting SOE performance
The SOE Guidelines call on the state to monitor the implementation of high-level sustainability expectations by integrating them into existing reporting systems and using these systems to assess SOE performance and compliance with applicable legal and regulatory requirements. Across the ten Asian countries reviewed, governments are making increasing use of sustainability-related expectations and targets in frameworks for monitoring SOE performance, particularly in relation to climate and environmental objectives. When sustainability priorities are translated into clear enterprise-level expectations, they can provide a basis for regular monitoring, performance assessment, and follow-up by the state as owner.
Well-designed targets and reporting arrangements are particularly important in this context. While a high-level commitment, such as carbon neutrality or net zero, can provide strategic direction, it does not in itself ensure implementation. To be operational, sustainability expectations need to be embedded in ownership frameworks, corporate plans, investment and budget decisions, and performance monitoring systems. Defined targets can help state owners and SOEs guide strategic choices, evaluate progress, support dialogue between ownership entities, boards and management, and strengthen the credibility and comparability of sustainability reporting. Across the countries examined, three broad patterns emerge in how sustainability-related expectations are translated into monitoring arrangements for SOEs:
Formalised and relatively stringent approaches, where climate or environmental expectations are embedded in public sector or SOE governance systems and linked to established monitoring arrangements (Japan and Korea). Korea, for example, operates a public-sector GHG target management system applying to public institutions.
Progressive but still evolving approaches, where governments or state owners have issued sustainability or net zero guidance and are increasingly asking SOEs to integrate these into strategy and disclosure, but system-wide translation into standardised SOE monitoring remains uneven (China, Indonesia, Malaysia and Singapore). China’s SASAC requires central SOEs to support carbon-peaking and carbon-neutrality goals, including emissions and energy-intensity reductions, while Indonesia’s SOE framework increasingly requires integration and monitoring of sustainability key performance indicators (KPIs), though the framework is still evolving. In Singapore, Temasek has explicit portfolio-level climate targets and systematically assesses major portfolio companies against transition-readiness dimensions, but this is better described as strong owner stewardship than a fully standardised public SOE monitoring.
More generic performance-management approaches, where sustainability is recognised in policy or corporate governance guidance but is not yet systematically integrated into SOE target-setting and monitoring across the portfolio (India, the Philippines, Thailand and Viet Nam). For example, in India CPSEs are subject to DPE guidelines on CSR and sustainability and must adopt CSR and sustainability policies approved by their boards, but the framework does not yet include issue-specific targets, such as on climate. In the Philippines, the Governance Commission for GOCCs (GCG) has a central monitoring role but it provides general governance and performance oversight rather than a dedicated SOE sustainability monitoring framework.
Overall, national practice suggests growing recognition of the need to monitor SOEs against sustainability-related expectations, but also uneven integration of such expectations into existing reporting systems.
Compliance monitoring of high-level expectations
A first dimension of implementation relates to whether the state has mechanisms to monitor SOE compliance with high-level sustainability expectations and related legal or regulatory requirements (OECD, 2025[1]). Across the reviewed countries, this is increasingly done through a mix of performance agreements, corporate planning requirements, periodic reporting, audits, due diligence systems and review by ownership entities or supervisory bodies.
In countries with more centralised or co-ordinated ownership arrangements, monitoring responsibilities are more often concentrated in a single institution, which can support consistency across the SOE portfolio and coordinated monitoring. In more decentralised or dual-ownership settings, ensuring coherence across ministries and consistency of expectations remains more challenging, making common monitoring tools and methodologies especially important. National practice indicates varying levels of maturity in compliance monitoring:
In Indonesia, supervisory review of sustainability performance is becoming more robust, supported by sustainability reports, audit processes and external assurance. Oversight by the SOE regulatory agency of Indonesia, Badan Pengeola Badan Usaha Milik (BP BUMN), and other public authorities also strengthens the basis for holding SOEs accountable where sustainability expectations are not met.
In Korea, sustainability-related expectations are increasingly embedded in the formal oversight framework for SOEs. The annual evaluation process managed by the MOFE includes environmental dimensions and requires SOEs to report against specified indicators. This provides the ownership function with a structured basis for assessing whether SOEs are aligning with government expectations.
In the Philippines, certain sustainability-related KPIs have been incorporated into the performance evaluation system for GOCCs, indicating a move towards more systematic monitoring of compliance with state expectations.
In Thailand, SEPO monitors SOEs through established assessment tools and reviews long-term and annual action plans. The framework encompasses sustainable development, risk management and governance elements, with summary scores of annual assessments published on the SEPO’s website.
In Viet Nam, the link between sustainability expectations and formal compliance monitoring remains less systematic, although legal and regulatory reforms are under way and some SOEs are increasingly expected to reflect environmental efficiency and cleaner technologies in their operational planning.
Taken together, these examples suggest that many countries are beginning to integrate sustainability into compliance monitoring systems. In particular, while reporting channels and review processes are emerging, they are not always sufficiently systematic, comparable across the SOE portfolio, or clearly linked to legal and regulatory compliance.
Sustainability performance evaluation
A second dimension of implementation concerns whether sustainability-related outcomes are incorporated into formal SOE performance evaluation systems (OECD, 2025[1]). Here too, practice varies significantly across the reviewed countries. Some countries have started to integrate sustainability indicators into performance assessments in ways that create direct incentives for SOE executives. Others remain at an earlier stage, where sustainability is recognised in broad terms but not yet consistently assessed as part of overall SOE performance. It is notable that in countries with decentralised state ownership function, performance evaluation frameworks can also include sustainability elements, though not always in a way that allows for consistent benchmarking across the full SOE portfolio.
Source: OECD questionnaire, State Ownership and Sustainability in Asia and desktop research.
In Indonesia, sustainability performance is increasingly considered in supervisory and funding decisions. Annual sustainability performance reports, along with external audits and third-party assurance under frameworks such as GRI, ISSB and Task Force on Climate-related Financial Disclosure (TCFD), are used as part of the assessment process. Underperformance may affect access to state funding, green finance and, in some cases, executive incentives and board tenure. This demonstrates movement towards performance-based accountability, although the framework is still evolving.
In Korea, the MOFE’s annual performance evaluation assigns weight to environmental performance, including metrics such as energy intensity, greenhouse gas emissions reduction, and green investment. These submissions are reviewed by expert evaluation teams, and the results affect the SOE’s overall score as well as executive remuneration and tenure. This creates a direct incentive for management to prioritise sustainability-related objectives.
The Philippines has also taken steps to incorporate selected sustainability key KPIs into the performance evaluation framework for GOCCs, although the degree of coverage and institutionalisation appears limited (See Box 1.1).
In Thailand, the State Enterprise Assessment Model (SE-AM) includes criteria related to sustainable development initiatives, risk management practices and good governance. This indicates that sustainability considerations are entering the evaluation framework, even if climate-specific indicators are not yet fully embedded or separately reported.
In Viet Nam, sustainability indicators are not yet systematically tied to performance evaluations across the SOE sector. However, reforms under way suggest an intention to improve the state’s capacity to assess SOE performance against sustainability-related objectives over time.
Detailed national examples of sustainability-related performance monitoring conducted by state owners in reviewed countries, with a focus on climate related aspects, are set out in Table 1.6.
Overall, sustainability performance evaluation is gaining traction, but is not yet consistently embedded across all countries. Only a limited number of countries appear to have clearly defined, measurable and recurring sustainability metrics integrated into formal SOE evaluation systems. In many cases, sustainability remains an emerging component of performance assessment rather than a core and systematically applied element.
In June 2024, the Philippines revised its Performance Evaluation System to integrate disaster risk reduction and management (DRRM) and gender equity, disability and social inclusion (GEDSI).
The reforms directly referred to the UN SDGs and strived for alignment and consistency with national government directives. This system provides a framework for setting the organisational targets of a state-owned enterprise (GOCC), where the achievement of those targets serves as a basis for:
determining performance based bonuses and incentives
determining reappointment of directors
ascertaining whether a GOCC should be reorganised, merged, streamlined, abolished or privatised
determining whether a special audit of the enterprise is necessary.
GOCCs are required to identify strategic measures that can be aligned with DRRM and GEDSI, and to identify related annual targets that are clearly defined, realistic and growth oriented. Strategic measures may involve themes including supply chain stability, infrastructure resilience, training and awareness, and equitable access to services.
Source: GCG, (2024[26]), GCG Memorandum Circular No.01/2024 - Enhanced Performance Evaluation System for the GOCC Sector, https://gcg.gov.ph/memorandum-circulars.
Reporting on sustainability
Reporting plays a distinct role within the ownership cycle by consolidating information generated through monitoring and evaluation into formats that support oversight, accountability, and transparency. In this context, it is useful to distinguish between (i) reporting by SOEs to the ownership entity through established accountability channels, and (ii) aggregated reporting by the state as owner on the performance of the SOE portfolio. This subsection focuses on the former, as an input into effective ownership functions. The aggregate reporting practices of state owners are set out in Section 3.2.
Across the reviewed countries, sustainability-related information is increasingly incorporated into existing SOE reporting channels, including periodic submissions to ownership entities, corporate plans, and annual reporting processes. In some systems, these reporting flows are closely linked to monitoring indicators and feed directly into evaluation frameworks, enabling the ownership function to assess performance in a structured and comparable manner.
For example, in Korea, sustainability-related data reported by SOEs is integrated into the annual performance evaluation cycle, while in Thailand reporting on corporate plans and annual actions supports SEPO’s evaluation processes. In the Philippines, the gradual inclusion of sustainability KPIs in reporting frameworks for GOCCs points in a similar direction, although coverage remains uneven.
However, in many cases, reporting systems remain only partially aligned with monitoring and evaluation practices. Information may be descriptive or not systematically used to inform ownership decisions. In Viet Nam, for instance, sustainability-related reporting is still evolving and not yet fully embedded in performance reporting across the SOE sector.
An important gap therefore remains in the extent to which reporting systems enable the state to obtain a regular, comparable and decision-useful view across the SOE portfolio. While sustainability-related expectations are often articulated at the policy level, they are less consistently embedded in ownership monitoring systems, performance evaluation methodologies, and portfolio-wide reporting arrangements. Strengthening the coherence between these elements will be essential for enabling governments to monitor implementation effectively, assess performance against high-level expectations, and support SOEs in contributing credibly to national sustainability objectives.
The SOE Guidelines underscore that SOEs may serve as important vehicles for advancing sustainability, including through the provision of low-carbon alternatives, sustainability-related research and development, and the promotion of resilience and long-term value creation. They further recognise the role that state-owned banks and other public financial institutions can play by mainstreaming sustainability considerations in lending and financing practices.
In this context, state owners are responsible for ensuring that SOEs are equipped to respond to emerging developments, and that appropriate incentives and frameworks are in place to support decision making that advances sustainability and resilience. Accordingly, this section addresses other mechanisms related to sustainability, specifically engagement with incentives, sustainable finance initiatives, green public procurement and contracting standards, and SOE participation in partnerships and collaborative initiatives. These mechanisms support the implementation of sustainability expectations under the SOE Guidelines by helping to embed them in operational practice.
1.3.1. Engagement with sustainable finance initiatives and incentives
SOEs represent nearly one-fifth of the MSCI Emerging Markets Index (MSCI EM Index), and they are prevalent in energy, industry, utilities and financial sectors (OECD, 2025[27]). The significant presence of SOEs in emerging economies and strategic sectors for the energy transition explains the increasing expectation that enterprises fund and/or operationalise investments in renewable energy, electrification, and adaptation. In line with the financial mobilisation goals of the Paris Agreement, several reviewed countries have introduced sustainable financing instruments, such as green bonds, and other means to incentivise renewable energy – such as a Feed-in Tariff (FiT) – to incentivise low-emission projects and climate-resilient infrastructure.
SOEs can participate in sustainable finance through two distinct roles: as direct issuers and as recipients. Although SOEs can issue green financial instruments, in practice SOEs seeking to issue green instruments — such as green bonds — must satisfy two fundamental requirements: both the SOE and the underlying green asset (e.g. a project or subsidiary) must be (i) financially bankable and (ii) demonstrably “green”, in line with applicable domestic regulations or internationally recognised standards and processes for green bond issuance (ADB, 2023[28]).
Indonesia and Singapore are implementing frameworks to encourage the financing of green activities. Indonesia’s Financial Service Authority, Otoritas Jasa Keuangan (OJK) regulation No. 51/POJK.03/2017 requires state-owned banks to finance green projects and restrict lending to activities with high environmental risks. Indonesia has also developed alternative green instruments and has pioneered sovereign and Sharia-compliant green sukuk1 to finance renewable energy, energy efficiency, and climate adaptation projects. For example, the Bank Syariah Indonesia has issued a Sustainability-Based Mudharabah Sukuk (Sustainability Sukuk). Singapore has implemented a general framework under the Enterprise Financing Scheme which offers funding to enterprises, including SOEs, for green or sustainable initiatives to help them build capacity, build a track record and seize growth opportunities in the green economy. Singapore has also launched the Green Finance Action Plan and updated its climate finance strategy through the Finance for Net Zero Action Plan. Building on the original plan, this updated framework broadens the focus beyond green finance to include transition finance, while maintaining the overarching objective of supporting Asia’s transition towards net zero.
Other examples involving SOEs across the region include the issuance of green bonds by the Export–Import Bank of Korea (KEXIM) and the Korea Development Bank (KDB) to finance climate-related projects implemented by SOEs, including hydrogen infrastructure and offshore wind development. In Thailand, specialised financial institutions and SOEs such as the Bank for Agriculture and Agricultural Cooperatives, Export-Import Bank of Thailand, and the Small Medium Enterprise Development Bank provide green loans and green bonds to the market in compliance with the State Enterprise Development Plan (2023-2027). In India several CPSEs have adopted an equivalent role by raising green or climate finance through green bond issuance, but this is not yet a significant national practice.
Notwithstanding the above examples, the potential of sustainable finance — and green bonds in particular — remains largely untapped by SOEs, especially in emerging Asian economies, and widespread SOE engagement with sustainable finance structures has been relatively limited (OECD, 2025[1]). Despite national endorsements and participation in the relevant markets, the main challenges faced by SOEs seeking to issue green financial instruments can be grouped into three areas:
Enabling environment: whether the SOE is legally and institutionally authorised to access capital markets and issue green financial instruments.
Governance and institutional capacity: whether the SOE has adequate governance structures, risk management systems, transparency and reporting capabilities, a credible green strategy, and sufficient managerial capacity to issue and manage green financial instruments.
Green finance issuance requirements: whether the SOE and the underlying projects are financially bankable and meet recognised green eligibility criteria.
FiTs are a type of market based economic instrument that supports the scaling up of renewable energy capacity by typically offering long-term contracts for energy producers with a fixed price for electricity generated (OECD, 2018[29]). The aim of a FiT is to make renewable energy projects financially attractive and thereby reduce investment risk. FiTs have been introduced in all countries surveyed except Singapore. Countries such as China, Japan, Malaysia, the Philippines and Thailand maintain classic FiT systems, which provide a fixed and stable price for renewable energy fed into the electricity grid over a period of 20–25 years. For example, in Malaysia, SOEs Sabah Electricity and Tenaga Nasional Berhad purchase energy produced from renewable sources at government-defined tariffs through the Sustainable Energy Development Authority, making investment in renewables more economically viable in the long-term. India and Indonesia have adopted systems based on competitive auctions, in which renewable energy producers submit bids to sell electricity at the lowest possible price. FiT systems have now been replaced in Korea with a mandatory renewable energy quota mechanism, known as the Renewable Portfolio Standard. In this model, electricity companies, including SOEs, must ensure that an increasing percentage of their production comes from renewable sources.
1.3.2. Green public procurement and contracting standards
Governments are uniquely positioned to directly influence sustainability-related outcomes through procurement contracts. Sustainable procurement policies for public sector purchases have been adopted by several countries globally and environmental and sustainability considerations have been integrated into public procurement practices in all reviewed countries. These practices are set out in existing or new legislative frameworks, including expectations for product and service lists, technical specifications, and monitoring systems.
SOEs can act as both suppliers and procurers for public procurement contracts. Across the surveyed countries, SOEs are often subject to public procurement laws and frameworks (see Table 1.7) with a mix of environmental protection laws, general public procurement legislation or dedicated Green Public Procurement (GPP) laws or green purchasing acts integrating environmental considerations into procurement processes. Legal and regulatory frameworks outlining SOE participation should ensure that bidding processes are generally fair, open and transparent, in line with the OECD Recommendation on Public Procurement (OECD, 2015[30]). When SOEs carry out a governmental mandate, they are expected to apply procurement procedures consistent with recognised public-sector best practices, including in cases where they operate statutory monopolies, which should be subject to the same procurement rules as the general government sector (OECD, 2024[21]).
The SOE Guidelines recommend that when acting as procurers in competitive markets, SOEs should be encouraged to rely on open and competitive tendering, while retaining sufficient flexibility to select procurement methods appropriate to their commercial activities. Such discretion is consistent with the principle of competitive neutrality and important to avoid placing SOEs at a competitive disadvantage vis-à-vis private firms. The SOE Guidelines also highlight the importance of ownership entities of being transparent about the rules and framework under which SOEs engage in procurement. At the same time, competitive neutrality must be preserved so that firms compete on equal terms, regardless of ownership, nationality or legal form (OECD, 2024[31]).
A minority of surveyed countries (China, India, Japan and Korea) have an overarching law governing GPP, with others (Indonesia, Malaysia, the Philippines, Singapore, Thailand and Viet Nam) promoting GPP through generic sustainability or climate laws, strategic roadmaps, national plans, targeted eco-labels and certifications.
Source: OECD questionnaire, State Ownership and Sustainability in Asia; SWITCH-Asia (2024[32]), Asian Experiences in Sustainable/Green Public Procurement, https://www.switch-asia.eu/site/assets/files/4034/gpp_regional_experiences_final.pdf; Government of Singapore (2026[33]), Green Government, https://www.greenplan.gov.sg/key-focus-areas/green-government/.
1.3.3. SOE participation in partnerships and collaborative initiatives
As part of its role, the state should expect SOEs to adopt appropriate investment, infrastructure and technologies to support the transition to a sustainable and resilient economy. Within a sustainability strategy, the state may, inter alia, encourage public-private partnerships (PPPs), joint ventures or other types of public-private cooperative projects.
SOEs join partnerships – such as joint ventures and PPPs– for two key reasons:
Sharing of the financial and operational risks of projects. Particularly in emerging economies, SOEs can have limited technical capacity, access to advanced technologies, or financial flexibility to implement large-scale infrastructure alone. Through partnerships, they can distribute the risks with private actors and ease resourcing constraints with shared and complementary expertise. However, given the state’s involvement, questions may arise regarding the actual transfer of risk if there is no clear accountability and separation of functions (Fleta-Asín and Munoz, 2024[34]; Mazher, 2025[35]).
Distribution and diversification of fiscal budgets and access to private and multilateral funding. Pooled fiscal allocations and expenditure budgets can enhance the scale and scope of the partnership outcomes. Given the proximity of the state, SOEs should be transparent about any implicit or explicit fiscal support from the government including: operational subsidies, equity injections, government loans, loans from state-owned banks, or deferred tax liabilities (Dappe et al., 2022[36]).
Source: OECD questionnaire, State Ownership and Sustainability in Asia and desktop research.
The Philippines
The first regulatory framework on PPPs in the Philippines was introduced in 1990 by Republic Act No. 6957, which established the legal basis for co-operation between the public and private sectors in the design, construction, financing, operation and maintenance of public infrastructure. This legislation was subsequently amended by Republic Act No. 7718 (1994), which expanded the permissible contractual arrangements and made private involvement more flexible.
The current regulatory framework is governed by the Public–Private Partnership Code of the Philippines (Republic Act No. 11966), which was adopted in December 2023 and accompanied by the issuance of its implementing regulation in 2024. The new Code replaces and consolidates existing legislation to pursue three main objectives: eliminate the interpretative ambiguities of the previous framework; respond to the operational critical issues that have hindered the implementation of PPPs in recent decades; and promote a more competitive, transparent and investment-oriented environment.
The Code provides the legal basis for PPPs in a wide range of sectors — including transport, energy, health, education, water and environmental management — and applies to both national and local projects. SOEs can participate in PPPs both as contracting entities Government Contracting Agencies (GCAs) and as private partners in projects promoted by other GCAs, which helps to broaden the range of entities that can be involved.
Thailand
SOEs in Thailand mostly engage in PPP projects in compliance with the Public-Private Partnership Act B.E. 2562 (2019). According to the Act, the adoption of green or environmental practices alone does not determine PPP eligibility.
Each project is considered in terms of the authority and responsibilities of the respective project-owning agency. If the activities fall outside the agency’s statutory functions, they would not be implemented as PPP projects under the Act. The integration of environmental considerations in PPP projects is therefore by consideration of the project-owning agency.
SEPO is currently undertaking a study on the implementation of environmentally conscious PPP projects, including the development of support measures to promote such initiatives.
Source: OECD questionnaire, State Ownership and Sustainability in Asia; ADB (2025[37]), Public-Private Partnership Monitor: Philippines, https://www.adb.org/publications/public-private-partnership-monitor-philippines-2025.
When appropriately managed and disclosed, SOE contributions to PPPs can drive development, enhance market confidence and encourage private sector engagement. SOE expertise and capacity in domestic infrastructure development is often necessary due to their strategic nature and market failure. While SOE involvement can instill investor confidence in the sustainability of strategic projects and position SOEs as valuable partners, it is also important to ensure their involvement doesn’t jeopardise a level playing field or crowd out private investment.
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← 1. Sharia-compliant green sukuk is a financial instrument that funds environmentally beneficial projects while adhering to Islamic law. Unlike a conventional bond, which pays interest, a sukuk gives investors a share of a project's ownership and a profit generated by its sustainable activities, such as a solar farm or a waste management system.