SGX's new sustainability reporting rules will help 'open up markets'

Singapore continues to increase momentum in sustainability reporting by mandating listed companies to report on environment, society and governance factors on a 'comply or explain' basis.

Singapore’s local bourse, the Singapore Exchange (SGX), on Monday officially launched its guidelines on sustainability reporting which mandates that all listed companies report on a ‘comply or explain’ basis from financial year 2017.

The country has been taking formative steps towards sustainability reporting for listed companies in recent years, reflecting the growth of such reporting practices across the globe.

The move follows SGX’s public consultation conducted earlier in January on its sustainability reporting guidelines.

Last month, it also launched its first ever sustainability indices, which identify listed companies that meet sustainability reporting requirements and are considered sustainability leaders with established and leading environment, society and governance (ESG) factors.

The regulator revised its guidelines after taking into consideration comments from the public and industry, gathered during its consultation exercise, said Yeo Lian Sim, SGX special advisor at a media briefing call.

Under the new guidelines, companies will need to publish a sustainability report once a year. For the first report, companies will have up to 12 months to publish it from the end of their financial year 2017. 

From the second year onwards, the report is expected to be published no later than five months after the end of the financial year.

Junice Yeo, director for Southeast Asia of global corporate responsibility consultancy Corporate Citizenship, applauded the SGX’s move.

“Sustainability is a matter of economic survival for businesses, and reporting is the first step,” she said.

Yeo added that this approach means “the onus is on the company to review its own business value chain, in order to identify the environmental and social factors where the business impacts, or is impacted by”.

The sustainability report will be based on the eight principles that include materiality and balanced reporting on risks and opportunities, said the SGX.

Companies will need to describe their sustainability practices according to five primary components:

  • material ESG factors,
  • policies, practices and performance,
  • targets,
  • sustainability reporting framework, and
  • the board statement.

If a primary component is not included, the company will need to provide an explanation. This approach is expected to provide companies with the information and clarity needed for their sustainability reporting.

Transparency in reporting will increase the visibility of companies to investors, given the increasing interest on sustainability reporting from investors.

Yeo Lian Sim, special advisor, SGX 

The ESG factors will be determined based on the materiality principle, that is, what is relevant and important to the company. Sustainability initiatives will be described in the board statement instead of its compliance statement, which was the previous practice. 

Companies also have the flexibility to select a sustainability reporting framework that is most suitable for their business. Some popular frameworks used by listed companies currently include the Global Reporting Initiative sustainability reporting standards and International Integrated Reporting Council that set out general reporting indicators and guidelines for sustainability. 

The SGX will help all companies to understand the new requirements and build reporting capability by conducting briefings for companies’ chief executive officers and by running workshops and trainings from this year.

SGX’s Yeo told the media that more transparency in reporting will increase the visibility of companies to investors, given the increasing interest on sustainability reporting from investors.

“Transparency in reporting and communications speaks of the quality of management,” she added. 

Furthermore, SGX and Global Compact Network Singapore (GCNS) - the local chapter of the United Nations Global Compact aimed at promoting corporate responsibility - are collaborating to organise training workshops by sustainability reporting consultants. Other initiatives in the pipeline include an online portal of information and tools for companies on sustainability reporting.

Although smaller companies may have reservations about this new rule and the financial and physical resources required, SGX’s Yeo said that it will help these companies “in opening up to the global markets”.

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