SGX RegCo Proposes to Phase in Mandatory Climate Reporting

Exchange proposes an assurance requirement for sustainability reports and the introduction of a new ESG data portal for issuers and investors.

Singapore Exchange Regulation (SGX RegCo) has issued a consultation paper proposing to strengthen disclosure requirements for listed companies around climate risk and board diversity.

The proposals involve changes to the listing rules for both the Mainboard and Catalist markets to facilitate better disclosures around climate-related information, consistent with the Task Force on Climate-Related Financial Disclosure (TCFD) recommendations.

“The TCFD’s internationally recognised recommendations will guide companies in providing consistent and decision-useful information for market participants,” SGX RegCo said. “This is a first step to better prepare issuers for reporting against anticipated global baseline sustainability reporting standards to be developed by the IFRS Foundation.”

A phased approach to mandatory climate reporting is proposed, where all issuers will adopt climate reporting on a ‘comply or explain’ basis for financial years commencing in 2022. Climate reporting will become mandatory for specific sectors in subsequent years.

Beyond climate reporting, SGX will encourage listed companies to disclose 27 quantitative ESG metrics in their sustainability reports. The metrics were identified as the most commonly reported items through a review of more than 330 sustainability reports published by issuers.

“While not mandatory, all issuers are encouraged to consider reporting against this list of metrics as a baseline,” the consultation paper says. “Issuers should still conduct a materiality assessment to ensure the relevance of reported metrics.”

The metrics cover areas such as greenhouse gas (GHG) emissions, energy consumption, water consumption, and waste generation, as well as metrics on board, management, gender and age-based diversity.

To enhance board diversity, SGX RegCo plans to require issuers to have a board diversity policy in place and provide disclosures on related targets, plans and timelines for achieving diversity targets in annual reports.

Issuers will have to describe how the combination of skills, talents, experience and diversity of directors on the board serves their needs and plans. To ensure boards have common knowledge of their roles and responsibilities, it is proposed that all directors attend a one-time training on sustainability.

In respect of assurance, SGX RegCo proposes to require issuers to subject their sustainability reports to assurance by internal auditors to confirm reported data is accurate and complete. Issuers may also use external auditors or service providers for assurance.

SGX also proposes to introduce a data portal that would allow investors to access ESG data in a structured format with the desired level of consistency and comparability. The ESG data portal would also guide issuers in providing ESG disclosures in alignment with global reporting frameworks as they evolve.

The portal would include direct data input templates for streamlined reporting; bulk CVS/XBRL/XML upload capabilities; API access to issuers’ existing internal reporting tools; data mapping to reporting frameworks; and sustainability report generation.

The consultation paper, available here, is open for comment until 27 September 2021.

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