Several new corporate governance measures are slated to be introduced in the Singaporean capital markets in coming years, with investors increasingly concerned about their assets’ climate change disclosures and board diversity policies.
Singapore Exchange (SGX) launched a consultation paper on climate change and diversity disclosures last August. In it, Singapore Exchange Regulation (SGX RegCo) set out a roadmap for climate-related disclosures to be mandatory in issuers’ sustainability reports, as a result of heightened investor demand for this information. The disclosures will be based on the TCFD reporting requirements. The consultation process is also exploring assurance of sustainability reports and one-time sustainability training for all directors.
At the same time, SGX RegCo is proposing to introduce enhanced board diversity rules that would require issuers to have a board diversity policy and provide disclosures on related targets, plans and timelines in annual reports.
These changes are being introduced ahead of expected mandatory climate change disclosure rules being developed by the new International Sustainability Standards Board (ISSB), which was created in November last year by the IFRS Foundation in association with the International Accounting Standards Board.
ISSB’s objective is to deliver a comprehensive, global baseline of sustainability-related disclosure standards, providing investors and other capital-market participants with information about companies’ sustainability-related risks and opportunities to help them make informed decisions.
Harold Woo, president of IRPAS, notes the consultation process has involved SGX putting forth a list of 27 proposed ESG metrics. ‘While not mandatory, these metrics may be used by issuers in conjunction with their sustainability reporting,’ he says. ‘The exchange has also proposed a data portal where investors can access ESG data in a structured format as reported by issuers in accordance with aligned metrics and disclosure requirements.’
Commenting on proposals around the assurance of sustainability reports, Woo says the consultation process is exploring how listed Singaporean businesses can demonstrate whether reported data is accurate and complete. ‘Issuers may also choose to have their sustainability reports assured through external auditors or an independent assurance services provider,’ he adds.
Woo points out that financial markets need high-quality and transparent sustainability disclosures, in particular on climate change, so that market participants can price and manage climate risks more effectively.
Fung-Leng Chen, vice president of investor relations at Singaporean real estate investment trust Frasers Centrepoint Asset Management, says corporates know there is no turning back when it comes to enhanced sustainability reporting: ‘You either need to comply to stay in business, or you may have to face the harsh reality of being marginalized as the competition moves forward.’
All issuers must report climate information on a comply-or-explain basis in their sustainability reports from the financial year starting in 2022. Climate reporting will be mandatory for issuers in the financial, agriculture, food and forest products and energy industries from the 2023 financial year, and for the materials and buildings and transportation industries from the 2024 financial year.
Sustainability in practice
Jaclyn Yeo is head of sustainability reporting at DBS, which already has a well-developed sustainability reporting practice. ‘The primary objective of our sustainability report is to convey our sustainability efforts, whether it’s a job well done or in tracking against our targets,’ she explains. ‘It shows where we stand and how much more work needs to be done to get to where we want to be.’
Yeo says the report’s target audiences include investors, regulators and the public. The climate-related information reported is guided by the TCFD framework, against which DBS has been reporting since 2018. She uses the climate change risks to which the business is exposed as an example of how the firm approaches reporting.
This is an extract of a feature from the Spring 2022 issue of IR Magazine. Click here to read the full article.
