SGX rolls out mandatory climate reporting for financial, energy issuers from 2023

SGX RegCo said the prioritisation is based on industries identified by the task force as being most affected by climate change. ST PHOTO: KUA CHEE SIONG

SINGAPORE (THE BUSINESS TIMES) - Climate reporting will be mandatory for issuers in the financial, energy, agriculture, food and forest products industries from the 2023 financial year, the Singapore Exchange (SGX) said on Wednesday (Dec 15).

The same rule will apply to companies from the materials and buildings and transport industries from 2024.

The requirements follow recommendations from the Task Force on Climate-related Financial Disclosures and a public consultation that began in August on sustainability reporting and board diversity disclosures which the SGX said "received broad support".

"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," said SGX Regulation (SGX RegCo) chief executive Tan Boon Gin.

"These factors make climate reporting most urgent for industries with the biggest impact."

SGX RegCo said the prioritisation is based on industries identified by the task force as being most affected by climate change and the transition to a lower-carbon economy.

Listed issuers will also have to subject their sustainability reporting processes to internal review from January. All directors will also have to undergo a one-time training on sustainability.

Sustainability reports will also have to be issued together with annual reports unless issuers have conducted external assurance. Previously, standalone sustainability reports could be submitted five months after the financial year ended, a month longer than the deadline for annual reports.

The SGX added that its separate public consultation on 27 proposed core environmental, social and governance (ESG) metrics and a portal for issuers to input ESG data also received "strong market support".

The metrics are not mandatory, but companies can use them as a starting point on what to disclose in their sustainability reports.

Apart from climate and ESG topics, issuers will also be required to set a board diversity policy that addresses gender, skill and experience and other relevant aspects. They must also describe this policy in their annual reports and include details such as diversity targets, plans, timelines and progress.

"Recent uncertainties have posed financial and governance challenges for boards," SGX RegCo's Mr Tan said. "Having a broad set of perspectives will better enable companies to anticipate and face these challenges."

The Corporate Governance Advisory Committee noted that a review of disclosures by listed companies showed that about 87 per cent of the 3,700 directors was male, and 45 per cent of the companies reviewed had all-male boards.

It also found that the average age of directors was 59, with more than half above 60. The average tenure of independent directors was 6.6 years, with around a quarter having served for more than nine years.

From next year, independent directors who have served nine years or more would no longer be considered independent, unless two-tier approval is obtained: from all shareholders; and from shareholders excluding directors, the chief executive officer and their associates.

Mr Tan said last month that two-tier voting is expected to be used sparingly.

The Corporate Governance Advisory Committee will effect changes to the Code of Corporate Governance's Practice Guidance to guide issuers towards improved board diversity.

It noted that "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".

Mrs Mildred Tan, co-chairman of the Council for Board Diversity, said in a statement: "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."

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