Sustainability Reporting in Singapore Improves but Gaps Remain

Climate disclosures are useful tools in tracking long-term company growth, Singapore DPM notes at SGX Review 2023 launch.

Singapore-listed companies have shown improved sustainability reporting although climate-related disclosures remain relatively underdeveloped, particularly among smaller firms. 

A lack of climate transition plans and inadequate involvement of board and management were some of the gaps that were revealed in a new study conducted by the Singapore Exchange Regulation (SGX RegCo) and the Centre for Governance and Sustainability (CGS) at the NUS Business School. 

The SGX’s biennial sustainability reporting review, which was first conducted in 2019, assessed sustainability reports for the financial year 2022 that were available as of 31 July 2023. This third edition of the review is the first to consider climate-related disclosures, which many companies are reporting for the first time. 

“This latest review offers a comprehensive evaluation of sustainability reporting by more than 530 listed companies in Singapore across sectors and revenue sizes,” said Deputy Prime Minister and Coordinating Minister for Economic Policies Heng Swee Keat in a keynote address at the SGX Sustainability Reporting Review 2023 launch event. 

“I am very happy to hear that 99.6% of listed companies released their latest sustainability reports in time to be assessed. This signals the companies’ commitment to address the global sustainability and climate change challenge. Indeed, sustainability has become an increasingly serious pillar of good corporate governance,” he noted. 

Out of 537 eligible SGX-listed companies, 535 submitted sustainability reports by 31 July this year. Their reports were evaluated on a scale of 100, with specific weightings assigned to various criteria, including material ESG factors (15%), climate-related disclosures (25%), policies, practices, and performance (15%), targets (15%), sustainability reporting framework (15%), and board statement and governance structure (15%). 

The average 2023 score was 75 out of 100, compared to 72 in 2021 and 61 in 2019. Financial and tech companies scored 65 on average. Most listed firms (72%) scored above 70, indicating strong alignment with SGX’s reporting requirements. A score below 50 suggests limited alignment. 

Apart from improving scores, listed companies also showed progress in various aspects with 86% of them disclosing at least one of their Scope 1, 2, or 3 greenhouse gas emissions. Notably, 30 issuers opted for external assurance, surpassing the mandatory internal review requirement. 

However, listed companies need to pay more attention to areas such as climate-related risks and opportunities, the involvement of board and management in overseeing and managing climate-related risks and opportunities as well as scenario analysis providing insights into resilience of the climate strategy.  

While 65 companies disclosed a climate transition plan, only 34 of them had quantitative and time-based targets. 

Room for improvement 

With climate-related disclosures being newly mandated, the study found to them to be relatively underdeveloped especially among smaller listed firms. Only 73% of 535 SGX-listed firms that published their sustainability reports had provided climate-related disclosures based on the Task Force on Climate-related Financial Disclosures (TCFD) framework. 

Additionally, the review pointed out that Singapore listed firms lag their global peers in climate disclosures as the 43% that disclosed information relating to at least five of the 11 TCFD recommendations is lower than the global average of 58% based on the 2023 TCFD Status Report. 

“Good disclosures help decision makers allocate resources to entities and projects that show strong commitment and progress. It also enables us to learn from one another so that we can adopt more effective practices,” Heng pointed out. 

He shared that in this regard, the Singapore government is leading by example in reporting how it systematically incorporates sustainability in decision making and risk management frameworks, reaching concrete outcomes. Government agencies, such as the Monetary Authority of Singapore, Maritime and Port Authority, and the National Environmental Agency, have long published sustainability reports. 

Building business resilience 

Addressing SGX- listed companies, Heng emphasised that sustainability reporting is an important part of public communications for companies and demonstrates the commitment of businesses to address key challenges as well as invest for the long term. 

“Reflecting the rising expectations of business’s responsibilities to ESG issues, more and more stock exchanges have issued reporting guidelines over the years. In 2015, less than 10% of stock exchanges around the world provided guidance on ESG reporting. Today, the figure is 59%,” he said. 

Heng highlighted that the increasing demands for sustainability reporting and climate-related disclosures should be viewed as tools to aid in tracking a company’s long-term growth roadmap. 

“Effective sustainability reporting is critical in demonstrating the resilience of business plans, and how companies are positioning themselves to capture opportunities from the climate transition,” he added. 

Heng pointed out that adopting internationally recognised sustainability reporting allows companies to disclose sustainability information in a structured and comparable manner. This allows investors to conduct benchmarking across the same set of metrics with other companies—an area where SGX-listed companies have performed strongly. According to the SGX review, nearly all listed companies have adopted at least one sustainability reporting framework. 

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

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