The future of ESG — EMEA & APAC regulations
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Ali Curi: [00:00:00] Hi everyone and welcome to Markets ConversatION, I'm Ali Curi.

On today's episode, we'll take a closer look at the rise of ESG across EMEA and APAC. From Europe's sweeping disclosure rules, to the rapid adoption of sustainability standards in Asia, and with the Middle East and Africa charting their own path, ESG has become a global conversation. Joining me is Steven Strange, a regular on the podcast who will shed some light on where this movement is heading and what it means for asset managers worldwide. Let's get started.

Steven Strange. Welcome back to the podcast.

Steven Strange: Hi. Good to be here.

Ali Curi: Steven, for our new listeners, tell us a little bit about your background and your role at ION.

Steven Strange: Sure. So I head product for the asset management side of ION Markets. So I focus on the asset management, wealth management community, focusing on portfolio management, trading, investment compliance across all global asset managers. I've been doing this over 15 years in this [00:01:00] industry. So at this point, know it quite well.

Ali Curi: Let's begin with Europe. Regulations like the Corporate Sustainability Reporting Directive, the CSRD and the Corporate Sustainability Due Diligence directive, the C-S-D-D-D and the EU taxonomy have set standards for ESG globally. How do you see these rules shaping not only European markets, and then share with us how they could influence the way other regions think about sustainability?

Steven Strange: Yeah, it's a great question. As you say, these EU sustainability rules, they really are transforming European markets by making sustainability reporting mandatory. Supply chain due diligence, enforceable with CSDDD, capital flows more clearly directed towards screen activities. Having a taxonomy so everybody knows exactly what the definitions are is, is certainly helpful when you're dealing with such complexities.

But their real impact goes beyond Europe, because they apply to non-EU companies and global supply chains. They're setting the global benchmark. Investors [00:02:00] worldwide are starting to align with EU standards. So what began as a European regulation is quickly becoming a template for how sustainability is defined and practiced globally.

And you see this a lot just by the very nature of asset managers. You know, they tend to be global in terms of their investment or presence. 

Ali Curi: And let's stick with Europe for a moment. The omnibus package has sparked some debate. Some call this pragmatism. Others see this as a retreat. Why was it introduced and how does it affect the CSRD and the CSDDD rules, especially in the context of Europe trying to maintain leadership in ESG?

Steven Strange: Yeah, so this is a really interesting one. So as we just mentioned in the previous question that there's a push for regulation really trying to have a clear taxonomy, transparency, et cetera. But the proposed changes here some would say the aim is to simplify a previously complex and arguably incoherent legislation.

So the changes differ. The proposed changes, I should say, differ [00:03:00] significantly from the original rules. And will reduce the number of affected companies. Postponed reporting timelines, cut required data points by up to nearly 70% in some cases. So for asset managers, the revised reporting obligations will be much simpler, which is great for smaller firms, they are overwhelmed, they're often overwhelmed with reporting requirements and implementing these new regulations.

But the debate and, really the discussion around this is, although the new reports and requirements are much easier to follow, there'll be fewer data points they have to source and collect. But will this data set even be effective, then? What am I reporting on? So those that are alarmed and it's not everyone, but there are certainly people who are alarmed with this proposal, feel that a reduction in regulation will impact sustainability and the green goals that the regulations set out to achieve.

So there are asset managers and owners who've asked the European Commission to preserve, in their words, the integrity and the ambition of the framework and don't water it down. 

Ali Curi: Now that's Europe, but if we broaden [00:04:00] in the lens to EMEA. We see a different picture emerging. In the Middle East and Africa ESG is gaining some traction. What trends stand out to you in this part of the world? Where is the traction happening and how are they different from Europe? 

Steven Strange: Yeah, so there is differences. So if you take the Middle East first, ESG traction is strongest around energy transition. Especially renewables, hydrogen, green finance.

And that's really driven by sovereign wealth funds. If you consider the governments there who are looking to diversify beyond oil. Africa's a little different. The momentum is more around climate resilience, social impact, sustainable infrastructure, often supported by development, finance, and international investors.

I guess when you compare to Europe where Europe's regulation leads the way, as we had just discussed, in the Middle East and Africa, it's capital flows. National strategies is external investment requirements that are pulling ESG forward. So the priorities are different. Europe compliance driven, while much [00:05:00] of the Middle East and Africa are growth and development driven.

So it gives a lot of opportunities there for investors. 

Ali Curi: And what do asset managers need to know about the trends happening here? 

Steven Strange: I think asset managers should know that ESG in the Middle East is, as I said, driven by energy transition and government led green initiatives. Africa, more about the climates and social impact.

Although Europe's regulation, very regulation heavy, as we just said. And more Africa and Middle East is more strategic in development. It's really, how do you align your investments with those local drivers and measure the impact on your return? So I think it, comparing regions, it does open the door for a lot of opportunity.

But there's clear differences as I highlighted there that they must be aware of. 

Ali Curi: Now, let's look at Asia Pacific in places like Japan, Singapore, Australia, and China. We see both government-driven policies and market-led initiatives. How are these different playbooks actually playing out on the ground?

What does overall ESG adoption look [00:06:00] like when it's driven by policy versus when it emerges from market demand? 

Steven Strange: Yeah, this is interesting, and we could have a whole separate podcast just on, on APAC and the differences, there throughout the region. But yeah, es adoption varies by the driver really.

So in Japan and Singapore, for example, it is very policy driven. Policy drives compliance. Companies act to meet regulations. Take Australia and China as an example. It's the market forces like investors and customers pushing to go beyond the minimum. So go beyond the minimum limits that have been set out in the legislation.

So on the ground, policy ensures a baseline and I think that gives everybody, a goal of what to achieve. But the market driven is where kinda a lot of the innovation and voluntary impact comes as companies are seeking to stand out, attract capital, attract investment. So there's a little difference there.

It's are you just trying to reach the goal and make sure that you are compliant or you're going beyond? And as [00:07:00] said, that's where the innovation comes. But as I said, there's a lot of variation throughout that region and it's certainly evolving. 

Ali Curi: Now, with Europe's regulation on one hand and APAC's mixed initiatives on the other, specifically, what challenges do global asset managers face in keeping strategies consistent across these different jurisdictions? 

Steven Strange: So it's just that, as you said, global asset managers, may be based in the US, in Europe and APAC, wherever it may be, but where you're investing can mean that you must have to comply to these different regulations.

So it's a bit of a balancing act. Europe's regulations like SFDR and CSRD. They set strict detailed standards. It's pretty transparent. While APAC's ESG frameworks, they're a little uneven, they're evolving. There's lots of variation as I mentioned. So the challenge is maintaining consistent ESG strategies.

So if I'm a global asset manager, I still have to comply. I have to report across these jurisdictions, but I don't wanna overburden teams with different requirements and different data sets [00:08:00] and bring in different resources, et cetera. And I don't wanna compromise on credibility. So I think firms really need to reconcile these differing definitions across the regions, across the globe, the different data requirements, the threshold.

And then ensure investments remain comparable and compliant across these markets. So yeah it's taking a step back and seeing how can we apply a way forward that allows us to be efficient and more importantly compliant, without it being a huge stretch on our resources. 

ION Ad: This episode is brought to you by ION.

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Ali Curi: Let's talk about technology for a minute, and its role in all this. Across all these different regions, firms face the challenge of collecting, standardizing, and reporting ESG data. Share with us how technology is helping asset managers meet these various requirements. 

Steven Strange: So I think technology is certainly key when it comes to ESG reporting across regions or, even a specific region.

We're blessed, as I've said in many podcasts before with rapidly evolving technology. And if you are able to leverage that, whether that's using cloud platforms, whether it's using AI data aggregation tools to collect, standardize, analyze these ESG data sets, I think you then become to be in a much more, kind of a efficient position to be able to handle this. As we've talked about before, there's a huge number of data sources. I think there's 600 plus data providers trying to provide data sets for this type of testing and reporting. You have to one, figure out which ones are available for [00:10:00] you or which ones are applicable to you.

You then need to put them into a system, you able to access them, report on them. So that can be very overwhelming to manage. But if you're using the latest technology and certainly leveraging AI to, to make sense of that data and using this data storage that cloud platforms offer, I think you start to be in a good position to be able to handle this and be able to pivot as regulations change.

But yeah, it's key to leverage the latest technology that's out there, access to info, run investment compliance checks, generate the applicable reporting based on that investment region. And something to keep in mind is that, legacy infrastructure will slow you down. It'll slow down the adoption of the regulations and can impact those investment opportunities.

So it's something to be aware of when you're reviewing, where you stand from a technology platform. 

Ali Curi: Let's go back to the SFDR. You mentioned the sustainable finance disclosure regulation. EU asset managers face strict thresholds, while APAC investors may see looser, but [00:11:00] rapidly evolving frameworks. How do you think the split will fragment ESG investing?

Do you think it will or push markets towards a greater alignment? 

Steven Strange: I see it more as a push toward alignment rather than fragmentation. Yes, so Europe's SFDR sets strict thresholds while APAC frameworks, as you said, little looser still evolving, but a differentiation. But global investors and asset managers, they operate across all of these regions, as we just said.

So they want comparable, credible ESG data to, to make these, these investment decisions. So I think it's more, the net effect is convergence, really. Firms will adopt the highest common standard to satisfy multiple markets. Which hopefully would harmonize ESG expectations worldwide, even if those local rules differ. And I think it's back to that kind of earlier point of going how do I do the balancing act? If I can make sure I meet all the standards, how do I do it in a way that is efficient for me, but also allows us to, to comply to these regulations. So yeah, I'm [00:12:00] more thinking alignment.

Ali Curi: Stephen, when you look across EMEA and APAC, what's the one big takeaway you'd want listeners to leave with about the future of ESG in these regions? 

Steven Strange: So I think the key takeaway is ESG, sustainable investing, whichever you want to label it, is becoming essential everywhere, but the local drivers differ.

In EMEA, as we've seen regulation leads the way APAC capital follows opportunity. Across both regions, ESG is shaping investment decisions, corporate strategy, and firms that are acting early or, trying to get ahead will have that competitive edge. And that's what I think we'll see.

Ali Curi: Great. Well now one bonus question, a bit of a sidebar. What do you enjoy most about your business? 

Steven Strange: Yeah, this is an interesting one. So I would say, being a technology partner within the asset management space, it provides a great opportunity to assist firms with their challenges or strategic opportunities that they're trying to accomplish.

You take sometimes [00:13:00] complex, very complex ideas, and you turn them into product solutions that serve that community, let them achieve their goals. It certainly is challenging. It can sometimes be really tough. But seeing product solutions come to life is very satisfying. And seeing them being used in, in real life production and solving these issues is certainly really enjoyable.

Ali Curi: Steven Strange. Thank you for your insights. Always a pleasure. Let's do it again soon.

Steven Strange: Thank you, Ali. This is great. Thanks for having me.

Ali Curi: And that's our episode for today. You can follow ION Markets on X and on LinkedIn. Thank you for joining us.