Singapore Exchange Regulation (SGX RegCo) is proposing a roadmap for climate-related disclosures to be made mandatory in issuers’ sustainability reports (SRs) amid urgent demand for such information from lenders, investors and other key stakeholders.

At the same time, SGX RegCo also proposes to step up efforts to enhance board diversity by requiring issuers to have a board diversity policy and provide disclosures on related targets, plans and timelines in annual reports (ARs).

On climate reporting, SGX RegCo wants issuers to make disclosures based on recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). The TCFD’s internationally recognised recommendations will guide companies in providing consistent and decision-useful information for market participants. This is a first step to better prepare issuers for reporting against anticipated global baseline sustainability reporting standards to be developed by the International Financial Reporting Standards Foundation, which build on existing work of leading sustainability reporting organisations, including TCFD.

A phased approach to mandatory climate reporting is proposed:

• all issuers to adopt climate reporting on a ‘comply or explain’ basis for their financial year (FY) commencing in 2022
• from the FY commencing in 2023 onwards, climate reporting will be mandatory for some sectors of issuers while ‘comply or explain’ will remain the approach for the others
• from the FY commencing in 2024 onwards, more sectors of issuers will adopt mandatory climate reporting with the rest doing so on a ‘comply or explain’ basis.

In respect of assurance, SGX RegCo proposes to require issuers to subject their SRs to assurance by their internal auditors. The scope should minimally include assurance on whether the data being reported is accurate and complete. Issuers may also choose to have their SRs externally assured through external auditors or an independent assurance services provider.

To ensure boards have common knowledge of their roles and responsibilities, it is proposed that all directors attend a one-time training on sustainability.

Separately, to assist issuers in providing, and investors in accessing, an aligned set of environmental, social and governance (ESG) data, a list of 27 proposed ESG metrics is being consulted on.  While not mandatory, these metrics may be used by issuers in conjunction with their sustainability reporting.  SGX RegCo is also consulting on a proposed data portal where investors can access ESG data in a structured format as reported by issuers in accordance with aligned metrics and disclosure requirements.

Additionally, SGX RegCo is seeking feedback on proposals to mandate issuers having in place a board diversity policy and to disclose in their ARs:

• a board diversity policy including targets, accompanying plans and timeline for achieving the stipulated diversity on its board
• a description of how the combination of skills, talents, experience and diversity of directors in the board serves the needs and plans of the issuers.

SGX RegCo is also proposing that issuers be required to adopt these enhancements for their sustainability reports and annual reports for financial years beginning on or after January 1 2022.

“Lenders, insurers and investors increasingly want climate-related information for decision-making,” says Tan Boon Gin, CEO of SGX RegCo. “The proposals are aimed at helping our issuers meet these demands and to build their resilience to climate risks. Some business sectors are more carbon intensive and, hence, climate risks affect them more significantly compared to others. These should therefore be among the first to make climate disclosures.”