By Stella Zhang
Introduction
Over the past decade, Environmental, Social, and Governance (“ESG”) disclosure has shifted from a largely voluntary practice into an increasingly structured piece of financial regulation.[1] What used to be seen as corporate social responsibility has gradually become part of formal disclosure rules, requiring companies to explain how sustainability risks and governance affect their long-term value.[2] However, the global development of ESG regulation has not followed a single, unified trajectory.
This article examines how major jurisdictions are responding to evolving ESG requirements and how their approaches diverge. In the West, the European Union has embraced an expansive model grounded in stakeholder accountability and double materiality, while the United States has maintained a narrower, investor-focused approach based in traditional securities law.[3] On the other hand, countries in Asia are starting to build ESG disclosure frameworks that draw on global standards while still reflecting their own economic and policy needs.[4] Japan, Singapore, and China, in particular, demonstrate how ESG regulation can be adapted to different institutional contexts, ranging from corporate governance reform to financial innovation and state-led industrial policy.[5] Together, these examples highlight a broader shift in how ESG regulation is developing across regions.
What Is ESG?
ESG refers to a framework for evaluating companies based on how they handle environmental, social, and governance issues as part of their overall business strategy.[6] Originally, ESG grew out of socially responsible investing, where investors primarily used it to screen out companies associated with negative environmental or social practices.[7] Over time, however, ESG has evolved into a more integrated approach in which environmental, social, and governance factors are treated as core drivers of long-term value and risk management, rather than simple criteria.[8] In its current form, ESG encompasses environmental impact, stakeholder and human capital practices, and the governance structures that oversee them.[9] These factors are increasingly incorporated into investment analysis and corporate decision-making, reflecting a broader shift toward evaluating firms not only on financial performance but also on their capacity to manage sustainability-related risks.[10]
In response to the evolving understanding of ESG, efforts are made to standardize how such information is disclosed across jurisdictions.[11] The IFRS Foundation is an independent, non-profit organization that develops and oversees global accounting standards aimed at promoting transparency, accountability, and efficiency in financial markets.[12] Within this framework, the International Sustainability Standards Board (“ISSB”), established under the IFRS Foundation, seeks to create a globally consistent baseline for sustainability-related financial disclosures.[13] In June 2023, the ISSB issued its first two standards, IFRS S1 and IFRS S2, requiring companies to disclose material sustainability and climate-related risks in a manner comparable to traditional financial reporting.[14] These standards organize disclosure around governance, strategy, risk management, and metrics, indicating an effort to integrate ESG considerations into the core of financial regulation.[15]
I. The European Union
The European Union’s approach to ESG disclosure reflects a shift toward a comprehensive and mandatory regulatory framework embedded within its financial system. This shift is implemented through the Corporate Sustainability Reporting Directive (“CSRD”), which requires comprehensive sustainability reporting by a broad set of companies.[16] This directive expands traditional disclosure obligations by requiring firms to disclose not only sustainability-related financial risks but also the environmental and social impacts of their activities such as emissions, workforce practices, and governance structures.[17] This approach reflects a shift away from purely investor-focused disclosure toward a broader model of corporate accountability grounded in transparency and comparability.[18]
At the center of the CSRD is the principle of double materiality, which requires companies to disclose information that is material from either a financial or an impact perspective.[19] Unlike earlier ESG regimes that gave firms significant discretion in what and how to report, the CSRD limits selective or purely voluntary disclosure by mandating a structured double materiality assessment, requiring firms to disclose information that is material from either an impact perspective or a financial perspective, or both.[20] This dual perspective is operationalized through the European Sustainability Reporting Standards (“ESRS”), which function as the implementing framework of the CSRD.[21] The ESRS requires businesses to identify and report material risks, impacts, and opportunities across environmental, social, and governance categories using a structured framework.[22] Together, the CSRD and ESRS transform ESG disclosure into a standardized, mandatory component of corporate reporting.
The broad scope of the CSRD strengthens its regulatory reach by closing jurisdictional gaps that previously allowed companies to avoid disclosure obligations. The directive applies to a wide range of companies, including non-EU firms with substantial operations in the European market, thereby extending its application beyond EU-incorporated entities.[23] As a result, multinational corporations may be required to comply with EU sustainability reporting obligations regardless of their place of incorporation.
At the same time, the EU’s ESG regime is undergoing a period of adjustment. Recent regulatory developments reflect growing concern over the complexity and compliance burden associated with the CSRD.[24] Proposed changes include raising applicability thresholds, reducing ESRS data points, and aligning EU reporting standards more closely with international frameworks such as the ISSB to reduce duplication.[25] Although these reforms reflect increasing attention to compliance burdens, they do not fundamentally alter the structure of the regime, which continues to rely on double materiality as the organizing principle.
II. The United States
In contrast to the European Union, the United States’ approach to ESG disclosure reflects a narrower and less centralized framework grounded in financial materiality. Under the Securities Exchange Act of 1934, disclosure obligations are governed by the materiality standard, requiring companies to report information that a reasonable investor would consider important.[26] This standard limits ESG disclosure to financially relevant risks, rather than treating sustainability as an independent regulatory category.[27]
However, recent regulatory efforts have tested the boundaries of this framework. In 2024, the Securities and Exchange Commission adopted a climate disclosure rule intended to standardize reporting of climate-related risks, governance practices, and certain emissions data.[28] The rule was framed as an extension of existing materiality principles, aimed at providing investors with more consistent and comparable information about the financial effects of climate-related risks.[29] Almost immediately, the rule faced legal challenges from states and industry groups, leading the SEC to issue a voluntary stay of the rule.[30] In March 2025, the Commission formally voted to end its defense of the rule in ongoing litigation, halting its progress and casting doubt on whether a federal ESG disclosure regime will emerge in the near future.[31]
In the absence of stable federal leadership, ESG disclosure in the United States is increasingly shifting to the state level, where jurisdictions have adopted divergent approaches to regulation. On the one hand, California’s climate disclosure laws, requiring emissions reporting and climate risk disclosure beginning in 2026 and beyond, represent one of the most significant regulatory developments in this space.[32] Other jurisdictions, including New York, have begun adopting similar frameworks, signaling a growing trend toward state level regulation.[33] On the other hand, some states have moved in the opposite direction, enacting laws that restrict the use of ESG considerations in investment and governance decisions.[34] For example, Texas restricts public investment in financial institutions that “boycott” fossil fuel companies and imposes limits on the use of ESG factors in areas such as insurance and proxy advisory services.[35] Similarly, Florida requires public investment decisions to be based solely on financial factors and restricts the use of ESG criteria by financial institutions in providing services.[36]
These competing developments have produced a fragmented and often contradictory regulatory landscape. While federal rules remain uncertain, state-level initiatives are expanding in divergent directions. As a result, the United States no longer offers a coherent model for ESG regulation, but presents a system where the future of sustainability disclosure will likely be determined through a combination of litigation and state experimentation.[37]
III. Singapore
Singapore has developed an ESG framework that combines disclosure requirements with financial innovation, positioning itself as a green finance hub.[38] The Singapore Exchange (“SGX”) requires listed companies to publish annual sustainability reports, establishing a baseline level of ESG transparency across the market.[39] In addition, Singapore has introduced mandatory climate-related disclosures aligned with internationally recognized frameworks such as the Task Force on Climate-related Financial Disclosures (“TCFD”) and the ISSB.[40] These measures reflect the country’s broader strategy of aligning domestic regulation with global standards in order to maintain its competitiveness as an international financial center.[41]
One distinctive feature of Singapore’s approach is its use of sustainability-linked financial instruments, particularly Sustainability-Linked Loans (SLLs), as shown by its early launch of a support scheme that highlights their central role in its sustainable finance framework.[42] Unlike traditional green financing, which restricts the use of proceeds to specific environmentally friendly projects, SLLs tie the financial terms of a loan to the borrower’s achievement of predefined Sustainability Performance Targets (“SPTs”).[43] These targets are typically tailored to the borrower’s business and may include metrics such as reductions in greenhouse gas emissions, improvements in energy efficiency, or broader ESG-related benchmarks.[44] This structure creates a direct link between ESG performance and financial outcomes. Companies that meet their targets benefit from lower borrowing costs, while those that fail face higher rates when borrowing.[45] In this way, ESG is embedded within the mechanics of financial markets rather than operating solely as a disclosure requirement.[46]
Singapore takes a different approach to ESG regulation by going beyond disclosure and factoring sustainability into financial decisions. By combining reporting requirements with sustainability-linked financial instruments, Singapore moves ESG away from a purely informational framework and toward one that shapes corporate incentives in a more direct way. Instead of relying solely on disclosure to influence investors, the current system seeks to link ESG performance to the cost of capital and ensure that ESG performance carries tangible economic consequences.
IV. Japan
Japan’s approach to ESG disclosure reflects a different regulatory emphasis, focusing more on integrating sustainability into its existing corporate governance structures. In recent years, regulators have sought to align domestic disclosure practices with international standards through initiatives such as the Sustainability Standards Board of Japan (“SSBJ”), with the goal of improving the consistency and comparability of disclosures for global investors.[47] Unlike the EU’s comprehensive regulatory model, Japan incorporates ESG considerations into its existing governance framework, using disclosure requirements to improve transparency and inform how companies oversee and manage sustainability-related risks.[48]
This governance-oriented approach is reflected in the Tokyo Stock Exchange’s Corporate Governance Code, which emphasizes transparency and encourages companies to address sustainability issues as part of their oversight responsibilities.[49] In practice, this means that boards are expected to address sustainability-related risks and opportunities as core management issues, assess their impact on business performance, and disclose this information in order to support long-term corporate value.[50] Japan’s disclosure approach prioritizes integrating these considerations into corporate oversight, strategy, and risk management rather than treating them as a separate reporting obligation.
This approach has been reinforced through recent changes to Japan’s disclosure rules. In 2023, the Financial Services Agency required all listed companies to include a dedicated sustainability section in their annual securities reports, structured around the TCFD pillars.[51] By organizing disclosure around governance, strategy, and risk management, the rule effectively requires firms to formalize how boards oversee sustainability risks and opportunities and how these are reflected in their business operations.[52] While this introduces a more formal disclosure framework, it still remains flexible given that it does not mandate a single standard or require third-party assurance.[53] Ongoing work by the SSBJ is expected to further standardize disclosure in line with ISSB, with rules likely to apply to all listed companies, including foreign firms listed on the Tokyo Stock Exchange.[54]
Ultimately, Japan’s model demonstrates how ESG disclosure can be integrated into corporate governance reforms rather than imposed as a separate regulatory regime. By aligning domestic reforms with international standards, Japan has developed a hybrid model that balances global comparability with institutional continuity.
V. China
China’s approach to ESG disclosure reflects a shift toward a more structured and centralized framework, developed through a phased, nationwide rollout. In 2024, the Ministry of Finance introduced a draft Sustainability Disclosure Standards, outlining a system that will be implemented in stages, beginning with basic standards and expanding to more detailed and industry-specific requirements over time.[55] Rather than applying a single set of rules across all companies at once, the framework is expected to introduce disclosure obligations gradually, with listed and larger companies subject to earlier requirements.[56] This phased approach signals an effort to build a unified national system while allowing time for different market participants to adjust.
At the same time, China’s disclosure regime is developing alongside international standards. The emerging framework draws on global models, particularly the ISSB, with the goal of making disclosures more comparable across jurisdictions.[57] Recent guidance also emphasizes structuring sustainability disclosure around governance, strategy, risk management, and metrics, while incorporating financial materiality considerations.[58] This alignment reflects an effort to balance domestic regulatory priorities with the need for international comparability.
China has also begun to formalize ESG disclosure requirements at the market level. In 2024, major stock exchanges introduced sustainability reporting guidelines requiring companies of the SSE 180 Index, STAR 50 Index, SZSE 100 Index, and ChiNext Index, and companies listed domestically and overseas to disclose their ESG data in 2026.[59] Other non-listed companies are also encouraged to publish their ESG report on a voluntary basis.[60]
Overall, China’s framework reflects a more government-led and phased approach to ESG disclosure. This model emphasizes consistency and scalability by demonstrating how ESG disclosure can develop through centralized rulemaking and gradual implementation.
Conclusion
ESG disclosure is no longer developing along a single global path, but through distinct regulatory models shaped by different priorities. The EU continues to expand a comprehensive regime, the United States remains fragmented, and Asian countries are developing more adaptive frameworks that combine international alignment with local structures. Together, these approaches suggest that ESG regulation will remain plural, with ISSB serving more as a reference point than a unifying standard.
For legal professionals, this divergence means navigating multiple regimes at once. ESG now affects not only disclosure, but also financing, governance, and cross-border transactions. As a result, ESG compliance is less a standalone obligation and more an ongoing part of corporate strategy and risk management.
[1] David A. Cifrino, The Rise of International ESG Disclosure Standards, Harvard Law School Forum on Corporate Governance (June 29, 2023), https://corpgov.law.harvard.edu/2023/06/29/the-rise-of-international-esg-disclosure-standards/.
[2] Id.
[3] Emma Bichet, et al., Comparing the SEC Climate Rules to California, EU and ISSB Disclosure Frameworks, Harvard Law School Forum on Corporate Governance (Apr. 15, 2024), https://corpgov.law.harvard.edu/2024/04/15/comparing-the-sec-climate-rules-to-california-eu-and-issb-disclosure-frameworks/.
[4] OECD, Board Responsibility and Sustainability‑Related Disclosure in Asia (Nov. 27, 2025), https://www.oecd.org/en/publications/board-responsibility-and-sustainability-related-disclosure-in-asia_8d2672e7-en/full-report/component-4.html.
[5] Id.
[6] Mark S. Bergman, et al., Introduction to ESG, Harvard Law School Forum on Corporate Governance (Aug. 1, 2020), https://corpgov.law.harvard.edu/2020/08/01/introduction-to-esg/.
[7] Id.
[8] Id.
[9] Id.
[10] Id.
[11] IFRS Foundation, ISSB Issues Inaugural Global Sustainability Disclosure Standards (June 26, 2023), https://www.ifrs.org/news-and-events/news/2023/06/issb-issues-ifrs-s1-ifrs-s2/.
[12] IFRS Foundation, Who We Are, https://www.ifrs.org/about-us/who-we-are/ (last visited Apr. 15, 2026).
[13] ISSB Issues Inaugural Global Sustainability Disclosure Standards, supra note 11.
[14] Id.
[15] Deloitte, Global Sustainability Disclosure Standards Converge: ISSB Finalizes IFRS S1 and IFRS S2 (June 30, 2023), https://dart.deloitte.com/USDART/home/publications/deloitte/heads-up/2023/global-sustainability-disclosure-standard-coverage-issb-finalizes-ifrs-s1-s2.
[16] CSRD Readiness, Navigate Changing CSRD Requirements, https://www.csrdreadiness.com/ (last visited Apr. 21, 2026).
[17] Microsoft, The Corporate Sustainability Reporting Directive (CSRD), https://www.microsoft.com/en-us/sustainability/learning-center/corporate-sustainability-reporting-directive (last visited Apr. 21, 2026).
[18] Matthias Täger, ‘Double Materiality’: What is it and Why Does it Matter?, Grantham Research Institute on Climate Change and the Environment (Apr. 21, 2021), https://www.lse.ac.uk/granthaminstitute/news/double-materiality-what-is-it-and-why-does-it-matter/.
[19] Navigate Changing CSRD Requirements, supra note 16.
[20] Deloitte, Unpacking the Double Materiality Assessment Under the E.U. Corporate Sustainability Reporting Directive (June 27, 2024), https://dart.deloitte.com/USDART/home/publications/deloitte/heads-up/2024/csrd-esrs-double-materiality-assessment.
[21] Anthesis, What is the Difference Between CSRD and ESRS?, https://www.anthesisgroup.com/insights/csrd-vs-esrs/ (last visited Apr. 21, 2026).
[22] Id.
[23] Id.
[24] Crowell, Significant Changes Are in the Works for EU Environmental, Social, and Governance (ESG) Laws (July 31, 2025), https://www.crowell.com/en/insights/client-alerts/a-host-of-significant-changes-are-in-the-works-for-eu-environmental-social-and-governance-esg-laws.
[25] Id.
[26] Bernard S. Sharfman, Materiality, the ‘Reasonable Investor,’ and the SEC’s New Climate-Related Disclosures Rule, The University of Chicago Business Law Review, https://businesslawreview.uchicago.edu/online-archive/materiality-reasonable-investor-and-secs-new-climate-related-disclosures-rule?utm_source=chatgpt.com#heading-2 (last visited Apr. 21, 2026).
[27] Id.
[28] U.S. Securities and Exchange Commission, SEC Adopts Rules to Enhance and Standardize Climate-Related Disclosures for Investors (Mar. 6, 2024), https://www.sec.gov/newsroom/press-releases/2024-31.
[29] Id.
[30] Sidley, SEC Ends Defense of Climate-Related Disclosure Rules (Apr. 1, 2025), https://www.sidley.com/en/insights/newsupdates/2025/04/sec-ends-defense-of-climate-related-disclosure-rules.
[31] U.S. Securities and Exchange Commission, SEC Votes to End Defense of Climate Disclosure Rules (Mar. 27, 2025), https://www.sec.gov/newsroom/press-releases/2025-58.
[32] Senate Bill 253, 2023–2024 Regular Session (California 2023), https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=202320240SB253.
[33] Brad A. Molotsky, New York Senate Passes Climate Disclosure Law – 2nd in the US, Duane Morris Blogs (Feb. 21, 2026), https://blogs.duanemorris.com/esg/2026/02/21/new-york-passes-climate-disclosure-law-2nd-in-the-us/.
[34] Davis Polk, Survey of state law restrictions on ESG (May 29, 2025), https://www.davispolk.com/insights/client-update/survey-state-law-restrictions-esg.
[35] Id.
[36] Id.
[37] Matteo Tonello, Regulatory Shifts in ESG: What Comes Next for Companies?, Harvard Law School Forum on Corporate Governance (Apr. 12, 2025), https://corpgov.law.harvard.edu/2025/04/12/regulatory-shifts-in-esg-what-comes-next-for-companies/.
[38] Singapore Management University, ESG Reporting in Singapore: Standards & Regulations (July 11, 2025), https://academy.smu.edu.sg/insights/esg-reporting.
[39] SGX Group, Sustainability Reporting, https://www.sgx.com/sustainable-finance/sustainability-reporting (last visited Apr. 21, 2026).
[40] ESG Reporting in Singapore: Standards & Regulations, supra note 38.
[41] Id.
[42] Monetary Authority of Singapore, MAS Launches World’s First Grant Scheme to Support Green and Sustainability-Linked Loans (Nov. 24, 2020), https://www.mas.gov.sg/news/media-releases/2020/mas-launches-worlds-first-grant-scheme-to-support-green-and-sustainability-linked-loans.
[43] Id.
[44] Norton Rose Fulbright, Sustainability-linked Loans: Practical Observations and Thoughts (July, 2022), https://www.nortonrosefulbright.com/en/knowledge/publications/4f0b5962/sustainability-linked-loans-practical-observations-and-thoughts.
[45] Ecoskills Academy, Sustainability-Linked Loans (SLL): Explained (July 2, 2025), https://ecoskills.academy/sustainability-loans-sll-explained/; International Finance Corporation, Making Sustainability-Linked Bonds More Impactful (Feb. 15, 2023), https://www.ifc.org/en/insights-reports/2023/making-sustainability-linked-bonds-more-impactful.
[46] Making Sustainability-Linked Bonds More Impactful, supra note 45.
[47] Tim Baines, et al., Japan Mulls ISSB-based Sustainability Disclosure, Mandatory After 2027, Mayer Brown (June 24, 2024), https://www.mayerbrown.com/en/insights/publications/2024/06/japan-mulls-issb-based-sustainability-disclosure-mandatory-after-2027.
[48] Winston & Strawn, Key Points Concerning the Revision to Japan’s Corporate Governance Code (Dec. 10, 2021), https://www.winston.com/en/insights-news/key-points-concerning-the-revision-to-japans-corporate-governance-code.
[49] Id.
[50] Japan Exchange Group, Support for Listed Companies, https://www.jpx.co.jp/english/corporate/sustainability/esg-investment/support/01.html (last updated Aug. 19, 2021).
[51] Yi Zhang, Japan Issues its Sustainability Disclosure Standards Which Incorporates Key Elements of the ISSB Standards, Linklaters (Mar. 11, 2025), https://sustainablefutures.linklaters.com/post/102k3dp/japan-issues-its-sustainability-disclosure-standards-which-incorporates-key-eleme.
[52] Id.
[53] EY Strategy and Consulting Co., Ltd., et al., What’s Next for Japanese Sustainability Disclosure Standards (Oct. 13, 2023), https://www.ey.com/en_jp/insights/sustainability/whats-next-for-japanese-sustainability-disclosure-standards.
[54] Id.
[55] Clifford Chance, China Issues Guidelines on Corporate Sustainability Reporting (July 2024),
[56] Id.
[57] Farid Baddache, Chinese Sustainability Disclosure Standards vs. CSRD and ISSB, Ksapa (Nov. 8, 2024), https://ksapa.org/chinese-sustainability-disclosure-standards-vs-csrd-and-issb.
[58] China Issues Guidelines on Corporate Sustainability Reporting, supra note 55.
[59] UNEP Finance Initiative, China Embarks on a Journey of ESG Disclosure: 2024 Progress and Focus for 2025 (Jan. 7, 2025), https://www.unepfi.org/industries/banking/china-embarks-on-a-journey-of-esg-disclosure/.
[60] Id.
