Nearly all issuers listed on the Singapore Exchange (SGX) have begun including climate-related disclosures in their sustainability reports as at July 31, 2024, according to a review conducted by Singapore Exchange Regulation (SGX RegCo) and the NUS Business School’s Centre for Governance and Sustainability (CGS).
Some 97% of 529 sustainability reports by issuers provided at least one disclosure based on the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. This is up from 73% in the previous review in 2023.
However, full adoption of the TCFD framework remains limited. While over half of the issuers (61%) provided at least nine TCFD disclosures, only 28% of issuers provided all 11 disclosures across the framework’s four pillars: governance, strategy, risk management, and metrics and targets.
On average, each issuer produced eight TCFD disclosures, up from four in 2023. Disclosures on climate scenario analysis, integration of risk management processes and climate targets were among the most lacking across the review.
The Climate Reporting Review 2024, released on March 11, is a follow-up study to the Sustainability Reporting Review 2023, which examined FY2022 sustainability reports that were available as of July 31, 2023.
SGX has introduced a phased approach to mandatory climate reporting based on the recommendations of the TCFD following a public consultation in 2021.
Issuers in the agriculture, food and forest products, energy and financial industries must provide disclosures based on all 11 recommendations from FY2023. Issuers in the materials, buildings and transportation industries must do the same from FY2024. Remaining issuers are to continue providing climate-related disclosures on a “comply or explain” basis.
All issuers in the mandated industries for FY2023 produced TCFD disclosures but only 36% met the SGX RegCo requirement of providing all 11 required disclosures.
Companies should detail the board and management's role in monitoring climate-related issues and link climate issues to strategic decision-making, says Professor Lawrence Loh, director of CGS.
Speaking to the media, Loh says climate risks “should be incorporated into enterprise risk management” to ensure that climate risks are not viewed in “isolation”.
Measure business travel for Scope 3 emissions: Loh
The report’s authors note that disclosure of Scope 1 and Scope 2 greenhouse gas (GHG) emissions — one of the TCFD’s 11 recommended disclosures — was high at 80% and 87% respectively of all issuers. In comparison, only 50% of issuers disclosed their Scope 1 emissions back in the 2023 review, and only 61% of issuers did so for Scope 2.
Accounting for Scope 3 emissions is still not mainstream practice. Only 29% of issuers disclosed Scope 3 emissions, which include emissions arising from business travel and the business’ value chain, up from 15% in 2023.
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Large issuers were “far ahead” of smaller ones in terms of reporting Scope 3 emissions, say SGX RegCo and CGS.
The bulk of issuers (64%) with large market capitalisation of over $1 billion reported Scope 3 emissions, up from 51% in 2023. In contrast, just 22% of smaller companies with a market capitalisation of less than $300 million did so, though this was up from 6% in the previous review.
In order to improve, Loh says companies could start with gathering Scope 3 emissions data in “more measurable categories” such as business travel and “gradually build up capability” to gather data from other relevant categories.
In total there are 15 categories of Scope 3 emissions, split between upstream and downstream categories. They include purchased goods and services, capital goods, franchises, business travel and employee commuting, among others.
‘No fixed timeline’ yet for Scope 3 reporting: RegCo
SGX RegCo announced in September 2024 that all issuers must report their Scope 1 and Scope 2 emissions from FY2025. Their climate-related disclosures must also start incorporating the climate-related requirements in the IFRS sustainability disclosure standards, which were issued by the International Sustainability Standards Board (ISSB) in June 2023.
However, the regulator also flagged challenges, especially for smaller issuers, around reporting Scope 3 emissions. Hence, SGX RegCo will review issuers’ experiences and their readiness before establishing the implementation roadmap for reporting Scope 3 emissions.
SGX RegCo says plans are not yet fixed for Scope 3 reporting, echoing the September 2024 announcement. The regulator had said then that it would “prioritise larger issuers by market capitalisation” and expects them to begin Scope 3 emissions reporting from FY2026.
This timeline takes into account the one-year transition relief for Scope 3 emissions reporting that is built into the IFRS sustainability disclosure standards. This means companies that fully implement the climate-relevant requirements of the IFRS standards will be on track to report their Scope 3 emissions from FY2026.
“I do not have a fixed timeline for you on when we’ll announce but we’ve said that the first batch of Scope 3 disclosures we expect [will] be made in FY2026 and that will give ample time for companies to prepare,” says Michael Tang, head of sustainable development office and listing policy and product admission, SGX RegCo. “That’s something that we’re really looking at closely right now and hopefully [it will] come to the market soon.”
In response to The Edge Singapore, Tang reiterates that the regulator will prioritise issuers with the “largest market cap” for Scope 3 emissions reporting and not phase-in requirements by sector, which was how it introduced TCFD-aligned reporting. SGX RegCo has also yet to define this exact market capitalisation.
Tang notes that the regulator has worked with the Institute of Singapore Chartered Accountants (ISCA) to help executives navigate mandatory climate reporting.
The latest scheme is a one-day training workshop explaining the key differences between Global Reporting Initiative (GRI) and ISSB standards. The first session will take place on April 17, with seven more identical sessions scheduled till September. SGX RegCo will partially sponsor workshop fees for up to 400 attendees.
In October 2024, ISCA launched an “illustrative” sustainability report designed as a reference when listcos compile their own climate-related disclosures.
With SGX RegCo’s support, the 62-page document is based on a hypothetical listed entity operating in the real estate industry in Singapore with a mix of commercial and retail properties. The mock sustainability report also includes “section context” and “guidance notes” at the foot of each chapter, which explain the rationale behind certain reporting requirements and recommended steps.
“SGX RegCo will continue to speak to companies to find out if there are additional things that might be useful for them,” says Tang.
Charts: SGX RegCo, CGS
Read more about how Singapore is adopting the ISSB standards:
- SGX RegCo will require ISSB-aligned climate-related disclosures from all listed issuers starting FY2025 (September 2024)
- ‘Huge momentum’ in Asia for ISSB adoption, says vice-chair of climate reporting standards body (September 2024)
- SGX RegCo launches consultation on incorporating ISSB standards into sustainability reporting rules (March 2024)
- Large private companies must report annual climate-related disclosures from FY2027: Acra, SGX RegCo (February 2024)
- SGX RegCo to seek feedback by year-end on mandating ISSB-aligned climate reporting (September 2023)
- ISSB standards 'best chance we have' at consistent sustainability reporting: SGX RegCo (July 2023)
- ISSB issues inaugural standards, creating common language for climate-related impact on companies (June 2023)
