In turn, Tan says SGX RegCo has been “working closely with industry partners to offer training” and has been “monitoring companies’ progress through regular reviews of companies’ sustainability and climate reports”.
“We therefore welcome the SBF paper and appreciate the effort to gather feedback from the business community, particularly smaller listed companies,” reads Tan’s response, without confirming whether SGX RegCo accepts the proposals. “Ultimately, we want our companies to produce quality reports that are accurate and decision-useful.”
All SGX-listed companies (listcos) are required to make ISSB-aligned climate-related disclosures for their financial years starting on or after Jan 1. Their sustainability reports must also be issued no later than four months after the end of the financial year.
Earlier on June 26, SBF made four recommendations to SGX RegCo via a media release, including offering small- and mid-caps an extension of “one to two years” to comply with the climate reporting requirements.
See also: Nearly all listcos have begun climate reporting; SGX RegCo still mulling Scope 3 roadmap
SBF’s other recommendations are to make disclosure requirements “proportionate” for these smaller listcos, which typically have a market capitalisation of below $1 billion; provide “Singapore-relevant cross-sector and sector-specific guidance”; and to designate a central platform for digital reporting of climate-related disclosures.
SBF says it partnered SGX RegCo in April and May to engage “close to 40” Mainboard- and Catalist-listed companies, each with market capitalisation of below $800 million. Through a roundtable and survey, SBF assessed these companies’ readiness to meet SGX RegCo’s mandatory climate reporting requirements.
According to SBF, only 4% of these companies surveyed are “very confident” in meeting the timeline.
See also: ACRA and SGX RegCo extends timelines for climate reporting requirements
“Citing challenges such as incomplete understanding of disclosure requirements, lack of time and resources to build internal capabilities, having to set up robust data collection processes to fulfil the more detailed and extensive reporting requirements — more than 90% said extending the timeline for mandatory ISSB disclosures, for example by one or two years, would be useful for them to prepare higher quality ISSB reports,” says SBF.
According to SBF, these companies also said any time extension granted would not “detract them from the preparation work that they have started”.
The case for extension
The listcos surveyed told SBF that it was “quite an imposition” for them to be held to the same disclosure standards as larger listcos, “given their more limited resources”.
SBF says a deadline extension will allow small- and mid-caps to “take guidance” from the FY2025 ISSB-aligned reports by larger listcos “to produce higher quality reports”.
Furthermore, a later deadline would also allow small- and mid-caps to be eligible for the Sustainability Reporting Grant by the Economic Development Board (EDB) and Enterprise Singapore (EnterpriseSG). The grant is only applicable for reports issued before it is mandatory to do so.
Sustainability reporting obligations “ought to be proportional” to the size and resources of each company, say SBF.
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Although the ISSB standards incorporate built-in proportionality mechanisms, this may not be well understood by smaller listcos, adds SBF. “More can be done to increase awareness and application of the proportionality mechanisms for small- and mid-caps.”
One proportionality relief mechanism in the ISSB standards allows firms to temporarily “use all reasonable and supportable information that is available to the entity at the reporting date without undue cost or effort”.
The reporting entity is also not required to disclose its Scope 3 emissions and its comparative information in the first annual reporting period when it applies IFRS S2, one of the two inaugural standards issued by the ISSB in June 2023.
Calls for more guidance
SBF also calls for a “common set of climate-related scenarios”, which could be “pre-selected” for small- and mid-caps to assess their climate resilience.
“Reference material or templates could also be developed for localised skills and competencies for climate governance, as well as management of physical risks, [such as] heat, rainfall [and] sea level rise; and transition risks, [such as] policy and market [readiness],” adds SBF.
Financial data is centralised today on platforms such as SGX’s Stock Screener website. However, there is no central repository for sustainability data, says SBF.
“A central platform, which hosts reliable sustainability data in a standardised format for Singapore companies, will facilitate national- and sectoral-level benchmarking for meaningful analysis and decision-making,” adds the apex business chamber.
SBF CEO Kok Ping Soon says small- and mid-caps continue to face practical barriers like misunderstanding of disclosure requirements, and manpower issues, such as a lack of time and resources to build internal capabilities.
SBF’s “key recommendation” is to extend SGX RegCo’s compliance deadline, adds Kok. “This does not represent a step back from Singapore’s climate reporting ambitions, but is a practical measure to provide smaller listcos more time to strengthen internal readiness and incorporate best practices after larger listcos make their ISSB disclosures for FY2025.”
SGX RegCo's Tan, in his response, says the insights from its collaborative paper with SBF “will be valuable in helping us strike the right balance between advancing corporate sustainability goals and recognising the operational realities that businesses face today”.
Read more about how Singapore is adopting the ISSB standards:
- Nearly all listcos have begun climate reporting; SGX RegCo still mulling Scope 3 roadmap (March)
- 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)
