After pressuring South Korean oil giant SK E&S to retract claims it would produce carbon-free gas, former fossil fuel advocate and now climate campaigner Jihyeon Ha is calling for action against greenwashing in the Asia-Pacific region.

In January, South Korea became the first nation in East Asia to draft a law to fine companies for false or exaggerated “green” claims.

This followed a ground-breaking lawsuit in 2021 by legal group Solutions for Our Climate – where Ha is head of legal operations – which accused SK E&S of greenwashing after the oil company said it would produce CO2-free liquefied natural gas.

In March 2022, South Korea’s environment ministry warned SK E&S that it had to base its claims on facts, and the company eventually changed the wording on its website to say the Barossa gas project off Australia’s north coast was “low carbon”.

Massive gas projects will have serious, irreversible consequences for the climate, contrary to their “CO2-free” claims, 35-year-old Ha said in an interview.

Green fossil fuels are a myth and a contradiction, added Ha, who himself was formerly a legal adviser to S-Oil, a large refinery.

South Korea’s draft greenwashing law – which includes fines of up to US$2,300 – is expected to be passed in the first half of 2023 an environment ministry spokesman said.

Ha said that while the fines are small, the bill signalled a major shift in approach by the government, with regulations that have previously only dealt with greenwashing by providing “administrative guidance” to oil refiners and steel giants.

In the same way that regulation of tobacco advertising stopped misleading consumers, the same type of regulation with the right sanctions will prevent greenwashing, he told the Reuters news agency.

To achieve net zero by 2050, business practices cannot remain the same as today, she added.

Globally, greenwashing is in the spotlight, with UN experts warning about the spread of greenwashing at last year’s climate summit COP27. Now new standards for environmental, social and governance (ESG) conditions are currently being considered by an international body.

In the Asia-Pacific region research shows growing ESG investment and public interest in environmentally friendly products. We see that an Australian regulator has launched its first greenwashing case against a pension fund and Hong Kong and Singapore continue their battle to become the region’s green financial centres with stricter ESG rules in force.

– Efforts to combat greenwashing do not only take place in the USA and Europe. Some Asian countries can actually move faster in this area than the US, says Kathlyn Collins, vice president and head of ESG at the investment firm Matthews Asia.

According to the World Resources Institute (WRI) think tank, more than 90 countries, representing an estimated 80 percent of global emissions, have committed to reaching net zero emissions.

Despite growing global momentum to curb greenwashing, financial analysts and “green analysts” say the fact that there are multiple ESG and sustainability standards means it’s difficult to define the problem, let alone find consensus on it.

The EU and the US have drawn up their own rules for publishing information, and in February the Group of 20 International Sustainability Standards Board announced it would support two sets of rules – one on climate and one on sustainability – to form a “global baseline” from and including 2024.

Governments will ultimately decide whether to make the standards mandatory, but ESG analysts said this could force companies to put climate at the heart of their business a sign that greenwashing will not go unnoticed.

– Companies state that their product is sustainable, fully recyclable and climate-friendly. The label they put on it needs to be carefully controlled, says Inna Amesheva, director of ESG regulatory research at sustainability data firm ESG Book.

This also applies to banks and asset managers, she added.

– If I market a climate fund or a climate ETF (Exchange Traded fund), I must be able to justify this, she continued.

In a separate case, the Australian Competition and Consumer Commission said in March that an online review of 247 companies over possible greenwashing found more than half had made “worrying allegations” about their environmental information.

In a statement, the regulator said companies were obliged to back up any green or sustainable claims with evidence, including reliable scientific reports, transparent supply chain information and recognized third-party certification.

Asia’s global market share for ESG funds doubled to 4 percent between 2020 and 2022, analysts at Barclays said in January.

ESG experts say that several governments in the Asia-Pacific region – the world’s fastest growing region and largest consumer of fossil fuels – from Hong Kong to India are introducing or working on regulations for sustainability, transparency and greenwashing.

In the Asia-Pacific region, 57 percent of investors are concerned about political pressure or lawsuits if they do not act on climate change and other ESG issues. This is compared to 63 percent in Europe and 40 percent in North America, according to a report by fund manager Robeco last month .

“The financial centres of Hong Kong and Singapore have made some ESG disclosures mandatory for companies listed on their stock exchanges, which has initiated more proactive measures,” says Pat-Nie Woo, partner and head of the Hong Kong ESG practice at KPMG China.

It started with a pure compliance mindset. Now, many companies are scrambling to get better ESG ratings as the market takes notice, he said.

Nine Asian countries have also developed sustainable finance taxonomies, as well as a regional taxonomy for Southeast Asia, which provides guidance on what is green and sustainable, according to the ESG Book.

Amesheva said the region has also started regulating the agencies that provide ESG ratings, referring to the situation in the past as “the Wild West”, with different methodologies being used – often resulting in the same firm receiving different ESG scores.

ESG analysts note that regionally penalties for greenwashing remain rare. Such enforcement will increase as more disclosure and regulatory requirements are introduced, according to a recent report from global law firm Clifford Chance.

There has been a lot of activity in Australia as the supervisory authorities are keen to take action when companies do not present their green credentials correctly, Naomi Griffin, partner at Clifford Chance, said in an interview.

Asia is still at the beginning of this cycle, but interest is on the way, she added.

Several other ESG experts, including Woo of KPMG China and Anne Copeland, managing director of sustainability firm Copeland & Partners, agreed that the Asia-Pacific region will soon increase its efforts against greenwashing.

It is only a matter of time before the consequences of not being truthful with sustainability-related claims will have reputational, business and legal consequences, said Copeland.

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