Key Takeaways
- Sustainability reporting rates and report quality in Singapore continues to improve
- Room for improvement in external assurance and reporting scope comprehensiveness
- Changes ahead with phasing in of mandatory reporting of climate-related risks for select industries
As countries around the world strive towards carbon neutrality and sustainable development, Singapore ramps up efforts in ESG disclosure in line with international standards. Starting from 2017, the Singapore Exchange began mandating sustainability reports, and, beginning in 2023, it will slowly phase in the mandatory disclosure of climate-related risks by select industries according to TCFD requirements. At the same time, investors and consumers alike are paying increasing attention to the ESG performance of corporations, further increasing the pressure for corporations to champion sustainability as a core pillar in business operations. How are Singaporean corporations navigating this transitory landscape? We have summarized the latest trends about ESG Disclosure in Singapore.
In 2021, 4 years after SGX’s introduction of mandates for sustainability reporting, Singaporean corporations have performed relatively well in complying with authority regulations, with 99.5% of firms satisfying SGX requirements and the Average Sustainability Reporting Score, calculated by SGX based on the quality of sustainability reports, increasing from 60.6 to 71.1 between 2019 and 2021. Particularly, the variability of Sustainability Reporting scores between industries have seen a large decrease, with significant improvements in report quality from Utilities, Information Technology, and Energy industries. With increasing experience and familiarity with ESG reporting, Singaporean companies are pushing ESG disclosure within the country to new heights. Alongside increasing government and local authority investments into sustainable development, such as MAS’ (Monetary Authority of Singapore) investment of SG $2.7 billion into the ‘Green Investments Programme’ and the Government’s SG $1 billion investments into local and carbon efficiency, Singapore is living up to its fond-nickname of “City in a Garden.”
Although Singapore’s ESG disclosure is on the right path, there continues to be room for improvement in certain areas. In 2021, according to SGX reports, only 61.1% Sustainability Reports disclosed evaluated ESG performance of subsidiaries and an even lower percentage of 21.4% evaluated full business operations from supply-chain to final product. Under Singapore’s current ‘comply-or-explain’ regulations, as suggested by such figures, there is insufficient incentive for firms to bear additional costs and procedures of completing entire value-chain ESG data collection and analysis. Similarly, with no requirements of external validation, only 2.8% of firms’ Sustainability Reports are verified by third party organizations – a figure unchanged between 2019 and 2021. With ESG disclosure being a complicated process, smaller firms on average produce lower quality reports, where small cap (<S$300 million) scored an average of 70.3, mid cap (S$300-S$1 billion) firms 72.0, and big cap (>S$1 billion) firms 78.6.
However, ESG disclosure in Singapore may experience changes in upcoming years. With mandatory disclosure of climate-related risks according to TCFD standards for select industries beginning in 2023, without support from third party organizations, relevant corporations may find it difficult to comply with government regulations. Depending on the success and quality of disclosures, we will also have to wait and see if SGX decides to extend these regulations to other industries.