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[Foreword: Overview of the Global Climate Regulation Landscape] 

 While the global goal of pursuing climate sustainability is aligned, the regulatory paths taken by Asia and the West (Europe and the U.S.) have significantly diverged. Notably, both the European Union and the U.S. Securities and Exchange Commission (SEC) have recently shown a slowdown in sustainability and climate regulation. (The slowdown in Europe does not mean its regulatory power is weakened, but rather that while its content remains comprehensive, the effective timelines and scope for certain parts have been adjusted). In contrast, several Asian jurisdictions have accelerated their implementation. In terms of adopting new global standards, this has complicated the overall global progress and phases of sustainability and climate regulation, requiring global enterprises to adjust and respond based on regional specifics. This special report provides a comparison of Eastern and Western regulation by participating experts to help professionals understand this ever-changing international environment. 

The analysis focuses on several key differences: Asia has actively begun to implement "climate disclosure" standards, while the West has gradually raised doubts regarding "industry differentiation," leading to a policy slowdown. Experts believe there is a fundamental difference in philosophy regarding sustainability issues between Western regulators' "risk management and restrictive" approach and the East's "nurturing" approach to transition finance. How the concentrated ownership structure of South Korean companies (representative of Asian family-owned business characteristics) affects owners' strategies and their subsequent impact on sustainability issues. Financial risks are forcing Boards of Directors to face new types of governance strategies. 

 [Climate Disclosure Framework: Two Distinct Timelines] 

 Standardized climate disclosure is the cornerstone of modern sustainable finance, aimed at providing investors with consistent, comparable, and reliable information. Although the International Sustainability Standards Board (ISSB) provides a global baseline, the pace of implementation varies greatly by region, creating a complex compliance environment for multinational corporations and forcing global investors to interpret fragmented information. 

 [Asia Actively Implementing Climate Disclosure Policies] 

 Contrary to general impressions, the EU has announced delays in implementing certain CSRD/ESRS regulations, and the U.S. SEC's climate disclosure rules are suspended due to judicial challenges (see Notes 2 and 5). Meanwhile, Asia is actively moving forward with the implementation of climate disclosure policies. Key cases include: Singapore: Starting from FY2025, listed companies must perform climate disclosure based on ISSB standards; large non-listed enterprises will follow starting in 2027 (see Note 1). Malaysia: Launched the NSRF in 2024, with ISSB as the core framework, and phased mandatory disclosure beginning from FY2025. Hong Kong: HKEX revised ESG reporting regulations; if companies prepare reports according to ISSB, they are deemed to meet the new climate requirements, with phased implementation starting from 2025 (see Note 1). Australia: Legislation requires large enterprises to mandate disclosures aligned closely with IFRS S1/S2 standards starting January 1, 2025.

 [Case Study: South Korea’s Prudent Route] 

 As this year's ACGA Summit was held in Seoul, much attention was given to South Korean business owners and investment institutions. South Korean participants noted that despite years of discussion, the formal adoption of IFRS S1 and S2 launched by ISSB remains in an observation stage, partly due to the slowdown in Western regulation. South Korea is expected to adopt "Single Materiality," remaining consistent with the ISSB core. This is related to its export-oriented economic structure—regulation prioritizes providing "financial information" for investor decision-making. Therefore, it focuses on "how sustainability issues affect corporate financial performance" (e.g., share price, cash flow, costs, risk reserves, capital expenditure, supply chain disruptions, etc.—the Financial Impact). This is a standard financial perspective favoring single materiality on sustainability issues. Note on the EU's "Double Materiality": In contrast to the EU's "Double Materiality" perspective, which besides the aforementioned Financial Impact (Financial Materiality), also emphasizes Impact Materiality. This refers to "whether the sustainability impact caused by the company is material" (e.g., whether the company damages the environment, creates social impact, or causes human rights shocks), which is the reverse impact of "the company on the environment/society." Under this view, EU countries must evaluate and disclose both. To prepare for such new regulations favoring single materiality, most South Korean companies have continued to build internal ESG financial impact disclosure systems, preparing climate risk disclosures on a financial level based on TCFD. 

 [Transition Finance and Regulatory Enforcement: A Divergence of Two Philosophies] 

 Disclosure systems are only part of regulation; a deeper difference lies in regulatory philosophy. Participating experts believe this represents the different directions of European and Asian regulatory philosophies: Should we force high-emission enterprises to change through "financial risk control and restrictive" methods? Or should we "nurture" and support their low-carbon transition? This philosophical choice profoundly affects capital flows, corporate strategies, and the speed of decarbonization. However, these two policies are not absolutely contradictory; they merely emphasize different viewpoints and have complementary effects. 

 [Europe: Centered on Risk Control and Restrictive Regulation] 

 The European approach belongs to "financial risk control and restrictive" regulation, primarily exerting regulatory pressure based on a company's current emission status. The goal is to reduce the climate risk borne by the financial system (especially European insurance companies, reinsurance companies, and financial enterprises holding corporate collateral) and prevent the financial system from being exposed to gradual or sudden climate shocks. Examples include: Additional Capital Requirements: European insurance and pension regulators require insurance companies to set aside more capital for fossil fuel assets due to their high transition risk. In plain terms, this requires putting more financial resources into a "pool that can absorb losses" to enhance the company's ability to "withstand bad events." Climate Factor Adjustment: The European Central Bank (ECB) applies a "climate factor" to corporate collateral, reducing the value of high-emission assets when used as collateral to avoid the financial system's exposure to sudden transition shocks. The core assumption of the European model is: "All assets face consistent transition risk." In other words, this approach emphasizes "reducing risk first, then discussing support for transition." However, such broad assumptions often fail to reflect the true transition speed or strategic differences of different industries and companies (see Notes 2 and 3 regarding regulatory slowdowns for industry-specific differences). 

 [Asia: A Supportive, Nurturing, and Forward-looking Strategy] 

 Asian regulators mostly adopt a guided strategy that "avoids one-size-fits-all divestment." Overall, Asia takes a more "voluntary," "supportive," and "forward-looking" approach. Key Cases: Singapore (MAS): Calls on financial institutions not to hastily divest from high-carbon sectors but rather to assist in their transition. China (PBOC): Promoting "transition finance" pilot programs to study whether transition loans can enjoy the same financial support and regulatory incentives as green loans. ASEAN (ACMF): Released the regional "MARS Climate Adaptation Guidance" paired with the world's first regional "ASEAN Taxonomy" for transition to help companies clarify their transition paths. Asian policy focuses on: "Helping enterprises move toward phased sustainability transitions based on different industries," rather than simple restrictions or focusing solely on their current risk status and urgently requiring increased capital resilience. In other words, while Europe focuses on reducing the existing climate risk of the financial system, Asia leans toward assisting companies in gradual transition and resilience building. These differences are not accidental but are deeply rooted in their respective corporate structures and market cultures. 

 [The Decisive Influence of South Korea’s Concentrated Ownership Structure: Supply Chain and Pressure from Western Customers]

 In South Korea, highly concentrated shareholding is common, where controlling shareholders or founding families often hold 40–50% of shares, while institutional investors often hold only 3–5%. Therefore, in export-oriented countries like South Korea, sustainability requirements from U.S. and EU customers are the strongest pressure, directly affecting export viability. One Korean executive even noted: "Pressure from customers and the supply chain is often stronger than from investors" (see Note 4). However, experts stated that even though the government has not officially mandated it, most large enterprises have voluntarily adopted TCFD and ISSB frameworks to build financial sustainability information systems to meet disclosure requirements for export markets, especially the EU and the U.S. 

 [Emerging Issues: Physical Climate Risk, Climate Adaptation, and Board Responsibility] 

 The world is beginning to realize that focusing solely on carbon reduction is no longer enough; companies must face real and worsening physical climate risks, including extreme weather, heatwaves, heavy rain, and rising sea levels, which can directly cause: Operational disruptions Asset damage Insurance gaps Increased cost of capital 

 [Material Financial Risks that are Underestimated and Under-disclosed] 

Multiple studies reveal the massive risks faced by enterprises: More than half of global companies are exposed to significant physical climate risks. Only about 30% of companies disclose the implementation of related adaptation plans. The proportion of enterprises incorporating physical risks into Enterprise Risk Management (ERM) remains low. Extreme weather may also cause significant "chronic revenue erosion," but insurance coverage for chronic risks like high temperatures and heavy rain is extremely limited, creating an "assurance gap" that may affect asset valuation and financing costs. (Note: Some South Korean experts expressed that under multiple social issues and pressures, such as a plummeting birth rate, it is difficult for the South Korean government to prioritize climate issues. However, other experts argued that the increase in living costs like food caused by extreme weather may implicitly be a root cause of the declining birth rate). 

 [The Board of Directors Will Face Brand New Competencies and Pressures] 

Challenges for the Board include: Fiduciary Duty: Although the "Business Judgment Rule" exists, new regulations such as the French Vigilance Act already require directors to take responsibility for environmental, social, and human rights due diligence. Unbuilt Technical Judgment: Most directors lack cross-disciplinary capabilities such as climate science, reinsurance markets, and physical risk modeling. Legal Liability: For climate strategy issues, existing regulations were previously difficult to link to the "maximization of corporate interest" and the aforementioned legal responsibilities. However, as regulators build out frameworks, legal liabilities are likely to arise. Consequently, experts state that future Boards will need stronger foresight and strategic resilience, rather than merely handling sustainability from a compliance perspective. 

 [Conclusion: Navigating a Fragmented Regulatory World] 

 Finally, sustainability experts pointed out that while the world pursues common climate goals, the paths of the East and the West are rapidly diverging. In this fragmented regulatory environment with obvious regional differences, multinational corporations must redesign their strategies to respond to different definitions of climate risk, capital allocation, and corporate responsibility across regions. Additionally, it was mentioned that although the EU still maintains the world's strictest and most comprehensive disclosure requirements, it has indeed slowed its implementation pace recently. This is due to corporate feedback regarding high costs, the need for revised industry-specific standards, and competitiveness considerations. Meanwhile, the U.S. SEC’s climate disclosures face high uncertainty. Whether this will impact the sustainability strategies of Asian nations remains to be observed. Notes: 

 Note 1: [Singapore and Hong Kong introduce mandatory ISSB disclosures] https://pse.is/8cnpk2 

 Note 2: [EU lawmakers back delay to sector-specific ESG corporate disclosures to 2026] https://pse.is/8cnpll 

 Note 3: [EU delays CSRD reporting for non-EU companies] https://pse.is/8cnpmf Note 4: [ISSB Implementation Across Asia — September 2024] https://pse.is/8cnpn9 Note 5: [SEC Pauses Climate Disclosure Rules Amidst Legal Challenges] https://pse.is/8cnpv2