CATEGORY: NEWS AND ANNOUNCEMENTS, PRESS RELEASES
Singapore,
8 July 2024 – A study by
the Accounting and Corporate Regulatory Authority (ACRA) and the Sustainable
and Green Finance Institute (SGFIN) at the National University of Singapore
found that larger listed companies, 78% of which are from the carbon-intensive sectors1, are
making good progress in climate reporting. The study also recommends strategies
to strengthen climate-related disclosures to meet investors’ expectations and mandatory
reporting requirements.
2 As
announced by Second Minister for
Finance, Mr Chee Hong Tat at the Ministry of Finance Committee of Supply in
February 2024, Singapore will introduce mandatory climate reporting to
help companies ride the green transition, in line with Singapore’s national
agenda on sustainable development. The mandatory climate reporting, to be
implemented in a phased approach, will start from financial year 2025, with listed
issuers reporting using International Sustainability Standards Board (ISSB)-aligned
requirements. Larger non-listed companies will start to report from the
financial year 2027, with some exceptions. Companies that exhibit strong alignment
with Task Force on Climate-related Financial Disclosures (TCFD) Framework will
be well-positioned to fulfil ISSB-aligned reporting requirements.
3 The
study, undertaken by ACRA, together with Dr Sean Shin, Research Affiliate at SGFIN,
examined the climate-related disclosures2 of 51
larger listed issuers3 for
the financial year 2022 based on the Task Force on Climate-related Financial
Disclosures (TCFD) framework. The key findings include:
-
Governance: Almost all
companies studied [94%] have assigned roles or formed committees to deal with
climate risks and opportunities, demonstrating a strong commitment to these
matters. Notably, around three-quarters [75%] have fully described their
process of reporting to and involving the Board in climate matters. However,
the study noted the need to strengthen the disclosure on how the Board was involved
in shaping performance objectives as this would allow investors to assess the Board’s
involvement and strategic alignment with climate goals.
- Strategy: Most companies
studied [88%] have disclosed the physical and transitional risks related to
climate, but only close to two-thirds [61%] have disclosed the related opportunities.
While three-quarters [75%] have carried out scenario analyses to assess how
well their operations and financial positions or performance could withstand
the effects of climate change, they should explain why they chose certain scenarios,
clarify the assumptions they relied on, and most importantly, describe how resilient
and effective their strategy is. Only a few companies studied [16%] have fully disclosed
how they incorporated climate risks in their financial planning.
- Risk Management: Over two-thirds
[71%] have fully disclosed how they identified, assessed, and managed
climate-related risks. However, only
24% of companies made full disclosures on the significance of climate-related
risks compared to other risks and only 10% explained their potential magnitude.
This suggests room for improvement, as such information is necessary for
investors to evaluate the company's readiness in facing the upcoming economic
and regulatory changes, including the transition to a lower-carbon economy.
- Metrics and Targets: Companies
studied did well in this aspect, with commendable disclosures for Scope 1 and 2
GHG emissions [at 96% and 100%, respectively] and notable progress for Scope 3
emissions [59%]. Most companies studied [80%] have set targets and the
timeframes to reduce emissions, indicating a strong commitment to becoming more
environmentally friendly. However, more could be done in terms of setting interim
milestones to track tangible and timely progress. Transparency could also be
enhanced in disclosures for opportunity metrics and how executive pay was tied
to climate performance as less than 10% companies studied have done so.
4 The
study shows how some local and overseas companies disclose climate-related information,
which can serve as a guide for best practices. The study also recommends
strategies on how companies can enhance their climate reporting, such as prioritising
progress over perfection, making meaningful links to financial reporting, and
working towards future-proofing the strategy and business model.
5 Several initiatives have been launched to
assist companies in meeting the upcoming reporting requirements:
a. In view of the increasing demand for companies to
publish climate-related disclosures, including upcoming regulations to mandate
climate-related disclosures for some Singapore-incorporated companies,
Singapore Economic Development Board and Enterprise Singapore will launch a Sustainability Reporting Grant4 to
provide funding support for companies who may be impacted by mandatory
reporting requirements (i.e. large companies annual revenue of $100 million and
above5), to
produce their first sustainability report in Singapore, before mandatory
reporting takes effect. This will help companies kickstart their sustainability
strategy and sustainability performance reporting journey. The disclosures are
to be consistent with the ISSB standards;
b. The Ministry of Trade and Industry and SkillsFuture
Singapore, in collaboration with the private sector, have established the Green Skills Committee to develop skills and training programs for the
low-carbon economy. With Sustainability Reporting and Assurance as one of its
focus areas, the initiative aims to upskill workers within companies and
assurance providers in sustainable reporting capabilities to keep pace with the
demand to transit into a sustainable, lower-carbon economy;
c. The Infocomm Media Development
Authority (IMDA) has curated a list of digital sustainability solutions, under the Advanced Digital Solutions (ADS) scheme, to help eligible enterprises kickstart their
sustainability journey by measuring, monitoring and managing their
emissions, enabling them to stay competitive with customers and improve
the oversight and reporting of Scope 3 emissions within their supply
chain. Beyond the ADS scheme, IMDA is also supporting enterprises who
are keen to collaborate with value chain partners to drive sustainability
through digitalisation; and
d. Singapore Business Federation, in collaboration with
Agency for Science, Technology and Research, PwC Singapore, and Singtel, are
creating a Singapore Emission Factors Registry. This registry will provide conversion factors that
translate different business activities into corresponding greenhouse gas
emissions, thus supporting the existing reporting solutions in our ecosystem.
6
"ACRA is dedicated to supporting companies throughout their climate
reporting journey. Our aim is to inspire and guide companies in adopting both
local and global best practices through this study. Together, we can empower
companies to make transparent disclosures, enhance their access to green
financing, and facilitate their transition to a greener business model,"
said ACRA Assistant Chief Executive, Ms Kuldip Gill.
7 “Our
study has unveiled some of the best business practices and climate-related
disclosure by our listed companies. This underscored their adept management of
climate-related challenges and commitment to ride the green transition. This
will also place them in a good position to report using the ISSB standards,” said
Dr Sean Shin, Research Affiliate at SGFIN.
8 The
full report, "Unveiling Climate-related Disclosures in Singapore: Getting
ready for the ISSB Standards" is available here: www.go.gov.sg/acra-nus-study.
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[1] The TCFD framework has identified the (i) financial, (ii) agriculture, food and forest products, (iii) energy, (iv) materials and buildings, and (v) transportation as sectors most affected by climate change and the transition to a lower carbon economy.
[2] These disclosures were prepared using the TCFD framework, which is intended to provide investors, lenders, insurers, and other stakeholders with better information to understand the potential financial impact of climate change.
[3] Each company had a market capitalisation exceeding $1 billion as of 4 July 2023.
[4] The grant defrays up to 30% of qualifying costs, capped at the lower of S$150,000 per company or 30% of the qualifying costs, in the preparation of their first ISSB-aligned sustainability reports.
[5] Companies which are exempted from Singapore's mandatory sustainability reporting requirements will be ineligible to apply for the SR. This includes large non-listcos whose parent company reports CRD using ISSB-aligned local reporting standards or equivalent standards.
2024/07/08