SGX requires mandatory sustainability disclosure

Companies listed on the exchange will have to make sustainability and diversity disclosures in their annual reports starting in 2023.

The Singapore Exchange Regulation (SGX RegCo) told a media briefing last week that it will be compulsory for stock issuers to make climate-related disclosure in their sustainability reports, in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

Singapore will become the first stock exchange in Asia to propose mandating climate disclosures in accordance with the TCFD recommendations.

“Climate-related information has now become a material consideration for stakeholders, and it is therefore imperative for companies to provide such information,” said Bobby Chin, chairman of the corporate governance advisory committee.

For the financial year starting in 2022, all listed issuers will have to publicise such information in their annual report — or explain why they did not do so.

Beginning in 2023, climate reporting will be mandatory for some key industry sectors, while other sectors will continue to adopt a “comply or explain” basis. The number of sectors will be increased in the following year.

SGX RegCo said a consultation will take place to decide on which sectors will be chosen for sustainability disclosure. Nevertheless, two task forces have already identified suitable sectors such as agriculture, energy, materials and buildings, transportation, financials and industrials.

The sustainability reports will also be subject to internal or external assurances, which will assess whether the data reported is accurate and complete. Internally assured sustainability reports will be required to submit in accordance with their annual report four months after their financial year ends, while those externally assured are due five months after the financial year ends.

Other major economies, such as Australia, UK, Hong Kong, and the US have all set targets to mandate TCFD reporting in the coming years.

The SGX RegCo is also consulting on a list of 27 ESG metrics to help issuers provide an aligned set of ESG data.

Meanwhile, first-time directors are now required to take training courses on roles and responsibilities. In the future, the courses will include a component on sustainability, and all directors will have to undergo one-time training on the component.

Board diversity

Apart from environmental factors, the SGX RegCo will also require companies to ramp up governance by disclosing board diversity policies in their annual reports.

Firms must disclose their board diversity policy, targets for achieving stipulated diversity, accompanying plans and timelines for achieving targets in their annual reports, starting from the financial year 2022.

“Global investors have publicly announced their intentions to use their voting influence to enhance board diversity in their portfolio companies. Our companies need to move beyond making broad, general statements on diversity, to showing their specific plan and targets,” said Tan Boon Gin, CEO of SGX RegCo.

“Ultimately, our companies will be judged, not by the glossiness of the pages in their annual reports, but by the real concrete steps they commit to take in their actions,” he said.

The public consultation is open until 27 September, and SGX RegCo expects to implement the new rules by the end of this year.