Singapore Exchange (SGX) has, on Dec 15, unveiled its roadmap for issuers to provide climate-related disclosures.
The disclosures will be based on recommendations of the exchange’s task force on climate-related financial disclosures (TCFD).
From the financial year beginning 2022, all issuers will have to provide climate reporting on a “comply or explain” basis in their sustainability reports.
Climate reporting will subsequently be mandatory for issuers in the financial; agriculture, food and forest products; and energy industries from FY2023.
In FY2024, the materials and buildings, as well as the transportation industries, must do the same.
There will be other key changes that will be effective come Jan 1, 2022, reads the statement released by SGX.
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The key changes include requiring issuers to subject sustainability reporting processes to internal review.
From 2022, all directors will have to undergo a one-time training on sustainability. Sustainability reports are to be issued together with annual reports unless issuers have conducted external assurance. Finally, issuers have to set a board diversity policy that addresses gender, skill and experience, and other relevant aspects of diversity. Issuers must also describe the board diversity policy and details such as diversity targets, plans, timelines and progress in their annual reports.
The requirements come after a public consultation on both sustainability reporting and board diversity disclosures, which received “broad support”, says SGX.
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“The market recognises that climate reporting is important as a first step towards efforts to mitigate the effects of climate change. Decision-makers also want climate information when they allocate assets, extend financing, and price risks. These factors make climate reporting most urgent for industries with the biggest impact,” says Tan Boon Gin, CEO of SGX RegCo.
“We are also mandating specific disclosures around board diversity. Recent uncertainties have posed financial and governance challenges for boards. Having a broad set of perspectives will better enable companies to anticipate and face these challenges. It is therefore crucial that boards are diverse and have the necessary skill and experience to deal with the complexities of today’s operating environment,” he adds.
Mildred Tan, co-chair on the Council for Board Diversity expressed her excitement about SGX RegCo’s new listing rules.
“When companies have more diverse boards, including more female directors, stakeholders know they have invested time and effort in succession planning and board renewal. These are all hallmarks of quality corporate governance and show commitment towards long-term value creation,” she says.
“Higher levels of board diversity also contribute towards solidifying Singapore’s position as a leading and progressive business hub. This positive development is also in line with feedback from our conversations with Singapore women who aspire to have greater participation in leadership roles. Capable and board-ready women with relevant skillsets and experiences are available and we hope the new SGX board diversity requirements will pave the way towards more of them in our corporate boardrooms,” she adds.
The Corporate Governance Advisory Committee (CGAC) has also expressed its support on the introduction of the new rules.
“Climate change is an important and pressing issue,” reads the statement issued by the CGAC. “The CGAC recognises that such reporting entails increased costs and resources, and that it is helpful to provide issuers with time to adjust to the new requirements. Accordingly, the CGAC supports the phased approach to climate reporting in line with the recommendations by the Task Force on Climate-related Financial Disclosures, which begins with a comply-or-explain regime for all issuers before mandating climate reporting for industries most impacted by climate change.”
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“The CGAC also supports SGX RegCo’s capability building efforts for issuers to assist them in their preparation for climate reporting,” it adds.
In addition, the CGAC is also welcoming the new listing rule, where issuers are required to disclose a board diversity policy that addresses the relevant aspects of diversity.
Following a review done by KPMG, commissioned by the committee, CGAC says it feels “more can be done by Singapore listed companies to strengthen board diversity, including female presence on boards”.
“In many cases, it is observed that the implementation of board diversity policies is lagging behind stated intentions,” it adds.
Lim Tuang Lee of the Monetary Authority of Singapore says SGX’s roadmap for mandatory TCFD-aligned disclosures will help issuers in the Singapore market achieve globally consistent and comparable climate-related reporting.
"It will enable market participants to better manage and price climate risks, and facilitate Asia’s transition to a low-carbon economy," says Lim, who is MAS's assistant managing director (Capital Markets).
In addition, this requirement puts issuers in good stead to subsequently adopt global climate reporting standards that are being developed by the International Sustainability Standards Board.
"The move also sets out clear requirements for issuers to enhance disclosure on policies and targets relating to board diversity, a key aspect of good corporate governance," adds Lim.
Shares in SGX closed 2 cents lower or 0.21% down at $9.37 on Dec 15.
