Listed companies in Singapore could be required to make climate-related disclosures and provide details on their board diversity policy in the coming years, with changes to listing rules proposed by Singapore Exchange Regulation (SGX RegCo).
Issuers must also subject their sustainability reports to assurance in future, and all directors could also be required to attend a one-time training on sustainability.
These were among proposals set out in two consultation papers yesterday as SGX RegCo looks to enhance its sustainability reporting regime amid a growing focus on environmental, social and governance (ESG) factors worldwide.
The regulator, which has mandated sustainability reporting on a comply-or-explain basis since 2016, said the proposed road map to introduce mandatory climate-related disclosures comes amid "urgent demand for such information from lenders, investors and other key stakeholders".
At a press briefing, SGX RegCo chief executive Tan Boon Gin said experts have warned that the effects of climate change will be widespread, rapid and intensifying.
Most financial institutions in Singapore surveyed by SGX RegCo place importance on disclosures of carbon emissions. Yet, a review of sustainability reports showed that only a third of companies identify climate change as a material topic.
The proposed road map for mandatory climate-related disclosures is based on recommendations by the Task Force on Climate-related Financial Disclosures. The recommendations, released in 2017, are based on four pillars: governance, strategy, risk management, and metrics and targets.
Under a phased approach, all issuers would start by adopting climate reporting on a comply-or-explain basis for their financial year, starting next year. This will be stepped up to mandatory reporting for issuers in certain sectors from 2023. More sectors would be added thereafter.
SGX RegCo is seeking feedback on the industries for prioritisation or on alternative approaches.
Mr David Gerald, president of the Securities Investors Association (Singapore), said: "These disclosures are critical for better pricing of climate-related risks, more effective risk management and market discipline, and effective allocation of capital towards financing green and transition activities."
On broader ESG reporting, meanwhile, SGX RegCo noted "a need for some basic level of convergence on data definition to alleviate the difficulties faced by financial institutions, investors and other financial market participants".
SGX RegCo is therefore also consulting the market on a list of 27 proposed ESG metrics. These are quantitative in nature, have defined standardised units and are mapped against globally accepted sustainability-reporting frameworks.
It is also consulting on a proposed data portal where investors can access ESG data in a structured format as reported by issuers.
SGX RegCo is also proposing that issuers subject their sustainability reports to assurance by internal auditors. Alternatively, they may use external auditors or service providers.
It also wants all directors to undergo one-time training on sustainability to ensure that they know their roles and responsibilities.
Finally, it is seeking feedback on mandating a board diversity policy. It is proposing that issuers disclose in annual reports their board diversity policies, targets for achieving this, and how the combination of skills, talents, experience and diversity of directors serves the needs and plans of the issuers.
Feedback to both consultation papers should be provided by Sept 27.
THE BUSINESS TIMES