S'pore companies getting better at sustainability reporting: SGX-NUS review

Of the 566 companies reviewed, almost half saw climate change as an economic, environmental, social and governance factor.
Of the 566 companies reviewed, almost half saw climate change as an economic, environmental, social and governance factor.ST PHOTO: LIM YAOHUI

SINGAPORE - Companies listed in Singapore have improved their sustainability reporting, despite the challenges from the Covid-19 pandemic, according to a joint review by Singapore Exchange Regulation (SGX RegCo) and the Centre for Governance and Sustainability (CGS) at the National University of Singapore Business School.

The review comes amid heightened concerns about the impact of climate change and a boom in sustainability-linked financing.

It also notes that there is ample room for improvement in quality and depth of disclosures on quantifiable sustainability targets.

The review found that the average overall score based on the SGX-CGS Sustainability Reporting Scorecard 2021 rose to 71.7 points from 60.6 in 2019. The gain was broad-based and regardless of listing board, size and industry sector.

Small-capitalisation issuers posted the largest increase in average scores of 13 points, followed by mid-cap issuers with 10 points and big-cap issuers with 6 points.

The scores represent an overall increase in the depth and understanding of sustainability reporting, as well as sustainability management among Singapore-listed issuers, SGX and CGS said in a joint statement on Wednesday (May 19).

Of the 566 companies reviewed, 64 per cent disclosed performance in the context of targets versus just 22 per cent in the 2019.

But 66 per cent disclosed unfavourable aspects of sustainability performance, up from 55 per cent in 2019.

Fifty per cent disclosed both positive and negative performance trends, compared with just 26 per cent that did so in 2019.

The review also explored the impact of Covid-19 and climate change in closer detail.

Capturing information up to mid-2020, the review found that 61 per cent of issuers made disclosures related to the pandemic in their sustainability reports.

Almost half of them discussed climate change as an economic, environmental, social and governance factor.

At a virtual briefing on the review, Minister for Sustainability and the Environment Grace Fu said: "Sustainability and addressing climate change must be a priority for businesses to thrive in the long term. Companies need to embed sustainability in their DNA and recognise that going green is not only good for the environment."

She said the government would do its part by providing companies the support they need.

To be more resource efficient, companies can tap on existing grants, such as the Energy Efficiency Fund and the 3R Fund, she said.

Enterprise Singapore is also developing the Enterprise Sustainability Programme to support local enterprises in developing new capabilities in sustainability and capture new opportunities in the green economy, Ms Fu said.

Details of the programme will be shared later this year, she added.

Mr Tan Boon Gin, chief executive officer of SGX RegCo, said: "The call globally for efforts on the climate change and sustainable development fronts has grown exponentially and with a new urgency. Singapore too has stepped up measures in these areas and SGX is similarly committed."

In response to these needs, SGX will consult the market in due course on proposals to place greater emphasis on climate-related disclosures, assurance and structured formats for reporting, he said.

Last year, SGX had announced that it would spend $20 million on a multi-year plan to enhance its environmental, social and governance (ESG) capabilities and initiatives.

Half of this amount will go towards new ESG-focused products, services and platforms - spanning asset classes including fixed income, equities, commodities and indices.

The other half will be channelled into capacity building for the financial ecosystem to catalyse change for a sustainable future, strengthening SGX's internal capabilities and increasing its corporate social responsibility commitments.

Associate Professor Lawrence Loh, director of CGS, said: "Better sustainability reporting can help companies attract environmentally conscious customers, obtain lower-cost financing and gain better access to capital. This improves resilience in the face of future challenges.

"We hope that this review aids companies in prioritising and pursuing these potential benefits."

And while sustainability reporting performance has come a long way since 2016, there are signs that point to areas that need more work, he said.

The review found that a modest 26 per cent of the companies linked top executive remuneration with EESG (economic, environmental, social and governance) performance. However, that was still a significant jump from just 8 per cent in 2019.

Among companies that disclosed sustainability targets, 70 per cent linked those goals to their business strategy, up from 33 per cent. However, reporting of long term targets fell to 53 per cent from 63 per cent.

Independent assurance of targets and disclosures about the underlying processes and stakeholder engagement in determining the size and scope of impact remained low.

Mr Tan in his remarks at the briefing said independent assurance of sustainability targets may become mandatory as SGX along with regulators worldwide continue to upgrade reporting requirements.

He said SGX is looking at launching public consultation on its own reporting rules with a focus on climate related disclosures as well as the question of assurance.

“I urge issuers to join us in raising the floor to drive companies and the society towards a more sustainable and greener future,” he said.

Correction note: This article has been amended to reflect Singapore Exchange Regulation (SGX RegCo) chief executive Tan Boon Gin's name as Mr Tan on second reference, instead of Mr Gin as first published.