CGS International Pushes ESG Integration as SE Asia Grapples with Sustainability Gaps

As regulatory frameworks tighten and climate risks mount, CGS International is stepping up efforts to embed sustainability into financial decision-making across Southeast Asia. In an exclusive conversation with CarbonWire, Kevin Lee, Group Head of Sustainability, outlined the firm’s strategy to move ESG from a compliance checkbox to a driver of long-term value creation.

Lee noted that ASEAN-listed companies face a growing push for sustainability reporting, with Singapore taking the lead through adoption of the IFRS S1 and S2 standards. Unlike earlier frameworks such as GRI, these are designed with investors in mind, aligning disclosures with the needs of the financial community. “The finance sector here has a unique role to play in advancing the sustainability agenda,” Lee said, pointing to the region’s exposure to climate change and biodiversity loss.

CGS International’s ESG Incorporation Framework is designed to guide its diverse business lines towards embedding sustainability criteria into products and services. This includes capital allocation towards renewable energy and biodiversity enhancements, and tracking ‘ESG revenues’ to meet the expectations of rating agencies and investors.

Lee sees this as critical to addressing one of the region’s largest gaps: ESG-related assets under management remain at just 3–5% in ASEAN, compared with far higher levels in Europe and the US. “The frameworks are there, but action is still lacking. We need far more investor education to build momentum,” he stressed.

Carbon Markets and Scope 3 Challenges

While mandatory reporting requirements are expanding, Lee believes incentives — such as preferential lending rates for strong ESG performers — will be essential to drive change. Measuring Scope 3 emissions remains a major obstacle, particularly for companies unfamiliar with upstream and downstream data collection. CGS International’s advisory services aim to bridge this knowledge gap, helping clients improve ESG performance and secure better access to capital.

On carbon markets, Lee emphasised that companies should first reduce emissions internally before turning to offsets. While Singapore’s carbon tax system allows up to 5% of emissions to be offset using Article 6.2 credits, the lack of operationalised government-to-government implementation agreements has stalled progress. “MOUs are signed, but implementation is slow — particularly with less developed counterparties,” he observed.

Transition Finance and Regional Cooperation

Lee highlighted the growing role of transition finance, particularly in coal-dependent economies. CGS International launched the ASEAN Institute of Carbon Neutrality (AICN) to drive thought leadership in the ESG space.

Last year, a joint research paper was published on the early retirement of coal-fired power plants in Indonesia in collaboration with the Sustainable and Green Finance Institute of the National University of Singapore. This year, the research has advanced to touch on the role of ‘transition credits’ in a blended finance model to facilitate coal-dependent economies like Indonesia phase out coal by replacing it with renewable energies like solar.

Interest in such research goes beyond this region. With China’s push to internationalise, Chinese enterprises are interested to understand how they could expand their business operations in ASEAN and this includes the sustainability issues that comes with operating in the region. AICN sees its role in providing such insights,

In predominantly Muslim markets like Malaysia, Lee sees strong alignment between Sharia-compliant investing and ESG principles, particularly in socially responsible exclusions and values-based environmental initiatives. CGS International has introduced ESG margin financing to nudge investors towards higher-rated stocks on the Bursa FTSE4Good Index.

Building Internal Capability

In 2023, CGS International won 17 sustainability-related awards, spanning ESG research, CSR, and diversity, equity, and inclusion (DEI). The firm’s ASEAN Investment Challenge educates tertiary students on ESG investing, while annual DEI surveys inform workplace culture initiatives, from cultural festival celebrations to language learning programmes.

Internally, the company is rolling out ESG education packs across its markets, training senior management on climate risk, and leveraging LinkedIn Learning for self-directed sustainability modules. “We want our teams and clients to see ESG not just as an obligation, but as a long-term strategic advantage,” Lee concluded.