As Singapore-listed firms embark on mandatory International Sustainability Standards Board (ISSB)-aligned climate reporting this year, Scope 3 emissions – or indirect value chain emissions – remain a “critical weak link”, according to a new study by the Singapore Exchange Regulation (SGX RegCo) and National University of Singapore (NUS) Business School.
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The report, which reviewed 529 sustainability reports from SGX-listed companies last year, found that while overall disclosure of greenhouse gas emissions has improved, only 29 per cent of listed issuers reported their Scope 3 emissions. Meanwhile, 87 per cent disclosed their Scope 2 or indirect emissions from the purchase and use of electricity, and 80 per cent disclosed their Scope 1 emissions, which are a firm’s direct emissions.
Last September, SGX RegCo dropped its 2026 timeline for disclosing Scope 3 emissions, which typically account for over 70 per cent of a firm’s carbon footprint, after a public consultation found that issuers may not be ready for it. The original timeline was in line with the ISSB’s in-built one-year grace period for firms to disclose their Scope 3 emissions.
“One key finding of the study is that Scope 3 is a big challenge,” said Professor Lawrence Loh, director of the Centre for Governance and Sustainability at NUS Business School on a media briefing call on Monday. “Many of the companies are still struggling with the various categories of Scope 3 and going forward, we have to very carefully watch this because this year is a critical year where reporting under the ISSB has started for listed companies.”
SGX RegCo’s head of listing policy and product admission Michael Tang told the media that the regulator has been engaging with companies to understand the constraints in Scope 3 reporting since it made the announcement for ISSB adoption last year. It is also working with the Institute of Singapore Chartered Accountants to support accountants and companies in understanding ISSB and its financial impacts.
While he did not share further details on when these announcements can be expected, Tang reiterated that the plan is to prioritise larger issuers for the first batch of Scope 3 disclosures it expects from FY2026.
‘Shift in curve’ in TCFD alignment
Using alignment with the Taskforce for Climate-related Financial Disclosures (TCFD) as a proxy for readiness to adopt the ISSB’s standards, the study found that “modest progress” has been made by Singapore-listed companies in climate disclosures in 2024, compared to the year before.
Nearly all Singapore-listed issuers – even smaller ones (96 per cent) – now disclose at least one of TCFD’s 11 recommendations, with the average number of TCFD disclosures per issuer doubling to eight in 2024.
This marks a “shift in curve”, from companies having no disclosures to seeing more companies fully disclosing against TCFD recommendations, noted Tang. In 2023, only 67 per cent of issuers with a small market capitalisation of less than S$300 million (US$225 million) had embarked on basic climate reporting.
However, the study noted that full alignment with the TCFD remains limited, with just 28 per cent of issuers aligning with all 11 disclosures and by extension, deemed ISSB-ready. For the rest of the companies, Tang said that there are plans to engage with them to find out how to best support their transition to ISSB-aligned reporting.
Only 9 per cent of issuers reported all 11 recommendations in their sustainability reports in 2023.
Loh said that while there has been a jump in the number of issuers working towards TCFD alignment, or embarking on “rudimentary climate reporting”, the challenge would be “deepening” their reporting, from providing just one or a few of TCFD’s recommended disclosures.
97 per cent of Singapore-listed issuers have provided at least one TCFD disclosure, which outperforms the global average figure of 82 per cent of companies. Image: SGX RegCo, NUS Business School
In particular, the weakest disclosures were in the areas of climate scenario analysis, integration of risk management processes and climate targets.
While more issuers have started carrying out climate scenario analysis in 2024, only 31 per cent have defined the time horizons for scenarios used in the analysis. The report stated that ISSB’s standards require more detailed information, including time horizons, reasons for the chosen climate scenarios and the scope of operations to which the scenarios apply.
Integration of climate risks into broader risk management frameworks are also still lacking, with only 48 per cent of issuers doing so, implying that many still view climate risks as separate from their overall risk management strategy.
In the meantime, 77 per cent of issuers have described the impact of climate issues on their business, strategy and financial planning in 2024, reflecting “a growing trend of companies embedding climate-related factors into their decision-making processes,” according to the report.
“My personal view is that the finance integration is the biggest challenge, but somehow many of the companies were able to link [their climate-related disclosures] to, for example, their income statement in terms of revenue and expenditure, or their balance sheets in terms of assets and liabilities,” said Loh.
The ISSB framework is developed from the same four pillars – governance, strategy, risk management, as well as metrics and targets – as TCFD. For the governance pillar, where 95 per cent of issuers now at least provide some form of climate-related disclosure, Loh also said details are still lacking, with only 42 per cent of issuers describing how their board would monitor progress in addressing climate issues.
“The weak point is the ‘how’. It’s actually not good enough for companies to say, ‘Our board monitors and oversees progress’. They cannot just repeat the disclosure statement, they have to actually tell us how in specific terms… Some of the specificity and the details are always missing,” he said.
When asked about moves to roll back climate disclosure rules in the United States and the European Union in the past month, Tang said that the regulator will continue to closely monitor proposals and decisions in other markets.
“But from our perspective for the Singapore-listed companies at least, our main objective is getting them to recognise what are the potential climate risks or opportunities that might impact the business, and how to best enable them to deal with these risks,” said Tang. “The key is to get companies prepared.”
Meanwhile, Loh said that he does not see a trend of “softening” regulations in many countries, despite the US’ plans to freeze its climate reporting rules passed last year and the EU’s omnibus proposal to reduce the scope of companies subjected to mandatory sustainability reporting, which will be delayed by two years for some under the revised framework.
“In fact, many countries have signalled that they are going to reaffirm and even strengthen their continued commitments, notwithstanding what’s going on, so it is probably not a time for us to go backwards,” said Loh. “If anything, we should double down on sustainability and climate change, so that our transition will not be disorderly.”
