Disclosures on climate, assurance of sustainability and board diversity needed for better corporate governance in S'pore

A review of listed companies' sustainability reports found that climate-related information is still lacking.
A review of listed companies' sustainability reports found that climate-related information is still lacking.ST PHOTO: NG SOR LUAN

SINGAPORE - Listed firms improved corporate governance standards this year, but investor expectations continue to evolve, and disclosure requirements, including in areas such as sustainability, must evolve in tandem, noted the chief executive of Singapore Exchange Regulation.

Mr Tan Boon Gin made his remarks at Wednesday's (Aug 4) launch of the Singapore Governance and Transparency Index 2021, which assesses the performance of listed companies in these areas.

Companies have been required since 2016 to produce sustainability reports, which outline their environmental and social activity.

Mr Tan noted that investors are increasingly interested in non-financial statement disclosures involving climate, sustainability and board diversity.

He said Singapore companies should build upon that momentum and prepare for "intensifying scrutiny" by investors on the climate-related aspects of their businesses.

A survey of local financial institutions found that climate-related disclosures are taken into consideration when evaluating which businesses to lend to, what risks to underwrite, or what assets to invest in.

"Companies are increasingly having to prove to financial institutions that they have the wherewithal to deal with climate risk," said Mr Tan.

A review of listed companies' sustainability reports found that climate-related information is still lacking, with little assurance and standardisation of the data reported.

Financial institutions have noted that there is a need for quality data metrics that are consistent with international frameworks, which would permit comparability between companies so they can make more effective investment decisions.

There is still limited consensus on standard setting for sustainability reporting in Singapore, Mr Tan said.

He also pointed to the need for more board diversity, noting that it is important that companies benefit from perspectives that directors with different backgrounds and experience may offer.

The Council for Board Diversity found that participation of women on boards of the top 100 listed companies improved by 1.4 percentage points from 2019 to 17.6 per cent in 2020. However, this was still below the 20 per cent target set for 2020.

"We believe that more can be done at a faster pace in Singapore to build diverse corporate boards capable of steering companies into the future," Mr Tan said.