Evolving business through ESG and climate reporting

Regulatory Update

The landscape of sustainability regulations in Singapore has evolved significantly over the past decade, especially for companies listed on the Singapore Exchange (SGX). The following is an overview of the regulatory developments and expectations around sustainability reporting in Singapore as of 2024.

The SGX Regulation (SGX RegCo) introduced sustainability reporting for listed issuers on a voluntary basis in 2011, marking a shift towards increased corporate transparency on ESG issues. By 2016, the guidelines were made mandatory on a ‘comply or explain’ basis, requiring issuers to include the following six components in their reports:

1. Material ESG factors – to identify ESG factors that impact the company’s performance.
2. Climate-related disclosures – to detail risks and opportunities posed by climate change.
3. Policies, practices and performance – to outline specific actions taken and outcomes.
4. Targets – to set and track progress toward sustainability goals.
5. Sustainability reporting framework – to align disclosures with recognised frameworks.
6. Board statement and associated governance structure for sustainability practices – to demonstrate accountability for sustainability practices.

2024 Improvements to SGX RegCo Sustainability Reporting Requirements

In response to widespread support from several rounds of public and market consultation, SGX RegCo has progressively strengthened its sustainability reporting framework, including significant updates announced in September 2024.

These changes will provide listed issuers clarity through a more comprehensive framework for disclosing sustainability-related financial information, including climate-related risks and opportunities. This enhancement builds upon the mandatory sustainability reporting regime announced by SGX RegCo in 2016. In 2021, they also introduced a roadmap to help issuers provide climate-related disclosures.

Moving forward, this is what to expect in the next five years:

• Mandatory climate-related disclosures (FY2025) – All listed issuers will be required to incorporate IFRS ISSB standards for climate-related disclosures.
• Full integration of six core components (FY2026) – Sustainability reports must include all six primary components (listed above), reinforcing comprehensive ESG reporting across listed companies.
• Scope 3 emissions disclosures for large issuers (FY2026) – Large issuers will be expected to disclose their Scope 3 emissions. SGX RegCo plans to provide sufficient notice ahead of this requirement to facilitate compliance.
• Simultaneous publication of sustainability and annual reports (FY2026) – Issuers must publish their sustainability report alongside the annual report. If the sustainability report is externally assured, companies must publish within five months after the end of the financial year (EOFY). Issuers have four months post-EOFY to publish the SR if not externally assured.
• Alignment to International Sustainability Standards Board (ISSB) standards – Commencing from financial year 2025, issuers must start incorporating the climate-related requirements in the ISSB standards. Other primary components of a sustainability report are to be disclosed on a ‘comply or explain’ basis.

ACRA and SGX RegCo conducted public consultations following the International Sustainability Standards Board’s (ISSB) release of the first two International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards. As a result, Singapore will implement phased mandatory Climate-related Disclosures (CRD), including Scope 1 and Scope 2 Greenhouse Gas (GHG) emissions. This requirement will apply to:

• Publicly listed companies (PLCs) starting from FY2025 and large non-listed companies (NLCs) from FY2027.
• Mandatory external limited assurance on Scope 1 and Scope 2 GHG emissions from FY2027 for PLCs and FY2029 for large NLCs.

FAQ1: What are the primary components of SR?
The six primary components of an SR are:

1. Material ESG factors;
2. CRDs;
3. Policies, practices, and performance;
4. Targets;
5. Sustainability reporting framework; and
6. Board statement and associated governance structure for sustainability practices.

FAQ2: Is IFRS S1 implemented as well?
Companies should refer to CRD-relevant sections in IFRS, such as the conceptual foundations and general requirements. A separate public consultation on the implementation of IFRS S1 beyond climate-related matters will be conducted.

FAQ3: What are the required scope and standards for external assurance?
The scope of external assurance for the SR may include various aspects, such as materiality assessments, data collection processes, and compliance with the SR framework or listing rules. Companies are encouraged to gradually expand the coverage of external assurance in subsequent years.

External assurance should be performed in accordance with either:

1. A Singapore standard equivalent to ISSA 5000, such as ISAE 3000, ISAE 3410, SSAE 3000, or SSAE 3410 (Singapore equivalent), as ISSA 5000 is currently under development; or
2. SS ISO 14064-3.

FAQ4: What is the threshold for larger PLCs?
The threshold has not yet been announced. However, it is expected to be determined based on a specific level of market capitalisation.

FAQ5: What are large NLCs?
Large NLCs are companies with an annual revenue of at least S$1 billion and total assets of at least S$500 million for two financial years immediately preceding the current financial year.

FAQ6: What are the exemptions from mandatory CRD for large NLCs?
A company is exempt from reporting if the parent company reports CRD using ISSB-aligned standards (e.g., ESRS) and the company is within the scope of reporting. It is exempt from reporting until FY2029 if the parent company reports CRD using other frameworks (e.g., TCFD, GRI) and the company is within the scope of reporting. NLCs exempted from reporting will also be exempted from the assurance requirement.

Conclusion

Between 2019 and 2023, disclosures of climate risk by Singaporean public companies have significantly increased. Similarly to sustainability reporting, the SGX introduced mandatory climate-related reporting requirements on a ‘comply or explain’ basis starting in 2022.

This regulatory push has driven companies to enhance their transparency and accountability regarding climate risks. Additionally, there has been a growing recognition among businesses of the importance of sustainability for long-term value creation and investor trust. The adoption of international frameworks like the Taskforce on Climate-Related Financial Disclosures (TCFD) has also provided a structured approach for companies to report on climate risks and opportunities.

This is driven by the increasing demand from investors for robust climate-related information, pressuring companies to improve their disclosures. These combined efforts have led to a substantial rise in climate risk disclosures among Singaporean public companies during this period.

How can Astria help?

We can help you move forward in your climate reporting journey. With Astria’s expertise in this area, we are confident of advising companies to comply with the latest regulations and keep abreast with the ever changing landscape. Climate reporting is no longer an option but a requirement and to stay ahead of competition.

Speak to us today!