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Singapore exchange proposes mandatory climate-related disclosures

The city-state's exchange regulator is the first in Asia to mandate listed firms to enhance climate disclosures, diversity in line with G20 taskforce recommendations.

Singapore Exchange Regulation (SGX RegCo), Singapore’s stock exchange regulator, will require mandatory climate-related disclosures for listed companies as part of a roadmap to meet investor demand for greater commitments to tackle climate change. 

From 2022, all companies will need to disclose information in-line with recommendations from the Group of 20’s Task Force on Climate-related Financial Disclosures (TCFD), according to the proposal published on Thursday.

In addition to the TCFD framework, the regulator outlined seven environment-related metrics for reporting, including absolute greenhouse gas emissions (GHG), energy and water consumption and waste generated.

Issuers will need to consider GHG emission disclosure beyond Singapore’s national boundary, especially for listed companies in shipping and aviation sectors. If a company fails to disclose the information, it will be made to explain why. 

“Lenders, insurers and investors increasingly want climate-related information for decision-making. The proposals…are aimed at helping our issuers meet these demands and to build their resilience to climate risks,” said Tan Boon Gin, chief executive officer of SGX RegCo.

“Some business sectors are more carbon intensive and hence climate risks affect them more significantly compared to others. These should therefore be among the first to make climate disclosures,” he said in press comments. 

Carbon-intensive industries, according to the TCFD, include agriculture, food and forest products, energy, materials and buildings, transportation and financial. The SGX has not confirmed which industries will be in the first batch of mandatory disclosures.

From 2023, climate reporting will be mandatory for some sectors, with more industries following from 2024, according to the regulatory arm of the Singapore Exchange Ltd.

The move comes amid growing pressure on investors to meet Paris Agreement targets to slash carbon emissions. About US$3.5 trillion of investor’s assets are parked in the city-state.  However, too few firms have shown enough awareness of climate risks, Tan told reporters at a briefing about the plans. 

Only one third of listed companies surveyed by SGX RegCo identified climate change as a “material” topic, while 86 per cent of banks, asset managers and insurers placed importance on firms’ disclosures of carbon emissions.

“Our companies must start giving better climate information to meet the demands of their investors, insurers and lenders, or risk being marginalised in terms of allocation of capital and access to financial facilities,” Tan said.

SGX is the first exchange in Asia to propose mandating climate disclosures in accordance with TCFD recommendations, Tan said. Success to bring companies in-line with tougher disclosure rules could help establish Singapore’s credentials as a finance hub.

Boards under scrutiny

The regulator is also exploring one-time sustainability training for all directors amid growing concern that company leaders are ill-equipped to tackle environmental, sustainability and governance (ESG) issues. 

legal opinion published in April by a team of independent legal counsel, said that a failure by corporate directors to incorporate climate risk into their mandate could result in legal action for their companies and themselves personally.

Board diversity is also under the spotlight and the regulator will require issuers to have a board diversity policy and provide disclosures on related targets, plans and timelines in annual reports from 1 January 2022. 

BlackRock, the world’s biggest asset manager, voted against the re-election of 1,862 directors at nearly 1,000 companies globally because of a lack of board diversity, it said in its annual voting record published in July. In Hong Kong, Singapore and Malaysia, BlackRock voted against either the chair of the board or a member(s) of the nomination committee at companies with all-male boards in a bid to exert pressure on the companies it invests in, to change.

Public consultations on the proposal are open until 27 September 2021.

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