Benjamin Soh is founder and managing director of ESGpedia, a one-stop digital platform of ESG data and solutions for corporates, SMEs and financial institutions across the Asia Pacific region to help them attain ESG goals.
AS 2025 winds down and boards sketch their budgets and KPIs for 2026, one question keeps coming up in Manila: Does ESG performance really help the bottom line, or is it just another compliance bill?
It is an urgent question, because investor confidence is brittle. In January, business press reports detailed how governance lapses and weak oversight have weighed on the Philippine Stock Exchange, a narrative reinforced again this month by prominent executives lamenting that foreign funds have “tuned out” the market.
Confidence, once lost, is expensive to buy back. The cheapest and fastest way to rebuild it is radical transparency—complete, decision-grade ESG reporting that lets investors price risk accurately.
Good news
Here’s the good news: The policy stars are finally aligning to make credible ESG data non-negotiable and value-creating.
First, the regulator is moving. The Securities and Exchange Commission has proposed mandatory sustainability reports aligned with international standards.
Under the draft, large listed and non-listed entities will have to file ESG disclosures annually, with IFRS S1/S2 (the ISSB climate and sustainability standards) required from financial year 2026, starting with Tier 1 entities—large publicly listed companies (PLCs). Tier 2 PLCs will be due for mandatory reporting from financial year 2027, followed by Tier 3 companies which include smaller PLCs and large non-listed companies, from financial year 2028.
This clarity is exactly what global capital wants. Companies that prepare in 2025 will be first to benefit in 2026.
Second, customers are moving, especially those abroad and within the region. While Europe’s Carbon Border Adjustment Mechanism (CBAM) moves from a reporting-only pilot to a levy on embedded emissions on Jan 1, 2026, the impact is not limited to the European Union (EU).
In South-East Asia, countries like Singapore and Malaysia are also advancing higher expectations for low-carbon suppliers.
From 2026, companies in these markets will face direct carbon tax costs, which will push them to seek suppliers who can demonstrate low-carbon footprints, so as to manage their carbon tax exposure.
Filipino suppliers will need to provide comprehensive carbon footprint data (Scope 1, 2, and relevant Scope 3), ESG disclosures, sustainability practices and certifications or face the risk of incurring higher costs from levies and even the loss of business competitiveness.
And third, the governance tide is rising. The EU’s new due-diligence directive does not just ask big companies to mind their own shop; it also obliges them to identify and address environmental and human-rights impacts across global supply chains starting later this decade.
Filipino suppliers unable to evidence sound labor practices or trace emissions risk being dropped. Not out of activism, but because customers face legal liability.
Real performance
So, does ESG help profits? The empirical answer is: Yes, when it measures real performance, not glossy promises. Stronger ESG performance is associated with better financial outcomes, though the link is weaker when firms disclose without improving operations.
In other words, investors reward substance over spin. For Philippine corporations, the path from cost centre to value driver runs through three practical levers: lower cost of capital through credible disclosure, protecting (and growing) revenues by staying in the supply chain and improving margins through operational insight.
Global investors have been clear: They price uncertainty. If they cannot see your climate exposure, safety record or board accountability, they assume the worst and demand a higher return. Complete, comparable reporting in line with the kind envisaged by IFRS S1/S2 narrows that uncertainty.
In a market trying to shake off headlines about weak governance, companies that publish audit-ready ESG data can differentiate immediately with lenders and long-only funds. That’s not theory, it’s how risk is priced.
Asia’s reporting and due-diligence regimes are increasingly pushing transparency down the value chain. Filipino exporters, from construction materials to electronics and agrifood, will increasingly be asked for product and site-level emissions data, proof of responsible sourcing and remediation plans.
With carbon taxes and regulations expanding across the region, such as Singapore’s Carbon Pricing Act (2024), Malaysia’s upcoming Bill on carbon tax (2026) and Indonesia’s IDX Carbon Market, low-carbon requirements are becoming a regional norm. Those who cannot provide the necessary data will face higher costs under these regional carbon tax policies, or worse, risk losing contracts.
Suppliers who can provide credible emissions data will become preferred vendors. Firms that treat ESG as a measurement discipline often discover inefficiencies, from energy waste to logistics bottlenecks, improving their competitiveness in Asia’s increasingly green-focused supply chains.
The academic literature’s most consistent signal is that performance-based ESG (as opposed to disclosure-only) correlates with stronger returns because it captures these improvements. In 2026 budgeting terms, every avoided kilowatt-hour and optimised route drops straight to EBIT (Earnings Before Interest and Taxes).
Execution challenge
The Philippines faces a particular execution challenge, as well as opportunity, in its supply base. Micro, small and medium enterprises (MSMEs) make up more than 99% of registered enterprises and a majority of employment.
Without them, listed companies cannot credibly report Scope 3 emissions or social metrics. If you are a chief financial officer of a conglomerate, that means your 2026 plan should include enabling your suppliers to measure and share core data (energy, fuel, materials, hours, incidents) in standardised formats.
Many banks in the region already sponsor digital tools for small and medium enterprises (SMEs) to do exactly this, because it lowers portfolio risk and unlocks sustainability-linked financing.
This is also where partnering with reputable international organisations and assurance providers matters.
In the current climate, investors distrust proprietary black boxes. They trust globally recognised standards, independent verification and interoperable data that can be traced back to sources and sampled by auditors. Filipino firms that align their reporting to global standards, map to EU expectations where relevant, and engage external assurance will look less like outliers and more like investable peers in Asean.
And that comparison set is the one foreign capital actually benchmarks. Some skeptics will say, “We tried ESG. Markets didn’t care.”
What markets do not reward is checkbox reporting, sustainability PDFs no one reads, or governance talk that is not matched by board composition and controls.
What they do reward, especially in a market fighting to win back attention, is decision-useful transparency.
When a blue chip sets clear decarbonisation targets, discloses progress with primary data, ties management pay to safety and anti-corruption and gets external assurance, analysts can update models with less hair-cutting.
Smart moves for 2026
Multiply that across the index and you begin to repair the market’s valuation gap. The calendar leaves little room for hesitation. Between now and March, boards will finalise 2026 capital expenditure and incentives.
The smart moves are straightforward.
> Lock in the framework: Commit to IFRS S1/S2 alignment for FY2026, run a dry-run in 2025 so there are no surprises.
> Map exposure to Asia and Europe: If any revenue line touches Asia-bound or EU-bound iron, steel, cement, aluminum, fertilisers, electricity or downstream products, stand up regional carbon tax and CBAM data collection now. Budget for emissions certificates in 2026.
> Activate your suppliers: Provide MSMEs with simple reporting rails and basic training and make ESG data a contractual deliverable rather than a favor.
> Secure independent assurance: Treat sustainability data like financials with the goal to be audit-ready. Investors notice and so do regulators.
Will this cost money? Yes. But the cost of opacity is already visible in trading screens and in the headlines about a market investors no longer rate.
Transparency is cheaper than a higher risk premium. And once you can measure, you can manage and improve.
In 2026, the Philippines has a chance to tell a different story:
A market that learnt from a rough patch, where corporates invest in governance, disclose honestly, decarbonise pragmatically and treat their suppliers as partners in transparency. That is how the Philippines brings foreign capital back — and keeps it.
