Accounting for Sustainability in Asia: Stock Market Regulation and Reporting in Hong Kong and Singapore

abstract

Sustainability reporting nudges firms into behaving more sustainably by forcing them to account publicly for their wider social and environmental performance. This libertarian paternalist approach to governance through disclosure rather than command-and-control regulation is well established in Anglo-Saxon jurisdictions but comparatively untested in the emerging markets of Asia, where different state traditions and forms of business organization raise questions about its transferability and effectiveness. This article contributes to research on corporate social responsibility, neoliberal environmental governance, and Asian varieties of capitalism by providing the first comparative analysis of the origins, design, and initial impact of new sustainability reporting requirements on the stock markets of Hong Kong and Singapore. In mandating sustainability reporting, both exchanges were similarly concerned with following international norms and competitors but differed in the style and granularity of their company disclosure requirements. These policy design choices reflected different developmental state traditions and the different audiences that market regulators in Hong Kong and Singapore sought to influence through these public accounts. Notwithstanding substantial differences between Hong Kong’s rules-based and Singapore’s principles-based approach to reporting, the response in both markets was remarkably similar. In both cases, sustainability reporting was largely ignored by local market players who dismissed it as a foreign practice of interest to only a small number of Western institutional investors and providing little incentive to go beyond tick box compliance. These findings raise questions about the effectiveness of disclosure requirements at nudging Asian businesses toward sustainability.

Key words:

• corporate sustainability reporting
• Asian capitalism
• developmental state
• environmental regulation
• nudge

JEL codes:

• D22
• G14
• G38
• M48

Acknowledgments

We acknowledge the support with fieldwork and data collection in Singapore provided by the Department of Geography at the National University of Singapore and thank the following for their constructive comments on various iterations of this article: Frances Bowen, Noel Castree, Brett Christophers, and Henry Rothstein, as well as the editor of Economic Geography and three anonymous reviewers.

Notes

¹ The Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China is the constitutional document of the Hong Kong Special Administrative Region. http://www.basiclaw.gov.hk/en/basiclawtext/.