A report by Ernst & Young (EY) found that 96% - or 346 - of 362 listed companies here have begun climate-related reporting for the financial year ended Dec 31, 2023, a 44% increase over the previous year’s 65% - or 240 - of 370 issuers.
This comes two years after the Singapore Exchange S68 (SGX) made it mandatory for all local issuers to make climate-related disclosures on a “comply or explain” basis.
For issuers in industries slated for FY2023 mandatory reporting, such as those in the agriculture, energy, financial and food and forestry industries, nearly 100% provided some form of climate-related disclosures, according to EY’s report titled Transparency in focus: State of Climate Reporting in Singapore. The report was done with accountancy firm Certified Practising Accountant (CPA) Australia and released on July 8.
Even for other industries, EY noted a significant improvement — from 56% in FY2022 to 93% in FY2023.
Currently in its second edition, the study aims to provide insights into the current state of climate reporting in Singapore, following the SGX’s 2022 mandate. The study analysed data from 362 Singapore-listed companies whose financial year ended on Dec 31, 2023, and whose sustainability reports were published by May 31.
The information published in the sustainability reports must also be based on recommendations by the Task Force on Climate-related Financial Disclosures (TCFD).
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Ken Ong, Partner, Assurance at EY says: “Robust climate-related disclosures are vital for investors, customers and the broader business community, so they can make informed decisions that contribute to a sustainable future. A good and transparent disclosure not only contributes to investor trust and a lower cost of capital for responsible businesses, it also enables investors to identify companies that are well-positioned for long-term value creation.”
More issuers disclosing climate-related risks and opportunities
From the study, more issuers disclosed climate-related risks and opportunities this year, with 87% describing climate-related risks and opportunities in their FY2023 report, a slight increase from last year’s 80%.
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For companies in the FY2023-mandated industries, more than 95% did so, up from 77% in FY2022.
Meanwhile, in terms of climate-related opportunities, 65% of issuers disclosed in this year’s reports, up from 47% in FY2022. The study also revealed that 21% of issuers committed to net-zero greenhouse gas emissions, of which 32% have embarked on disclosures of their transition plans.
In March, SGX Regulation (SGX RegCo) issued a public consultation paper on how the International Sustainability Standards Board (ISSB) standards should be incorporated into sustainability reporting rules for climate-related disclosures.
It proposed that all SGX-listed issuers should provide climate-related disclosures aligned with the ISSB standards from FY2025.
These include International Financial Reporting Standards (IFRS) S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures. The IFRS S2 is consistent with the four core recommendations and 11 recommended disclosures published by the TCFD.
Nhan Quang, partner, climate change and sustainability services at EY says: “A core tenet of the IFRS S2 is the requirement for companies to assess climate-related risks and develop and publish a transition plan that aligns with their strategy. While it’s heartening to see that some issuers are making efforts to cite their transition plans, it needs to go beyond broad-based statements to include an implementation plan with time-bound actions that are linked to interim targets and metrics to monitor progress, as well as any capital deployments required to realise that plan.”
She adds: “While we are glad to see encouraging year-on-year improvements in climate-related disclosures among SGX-listed companies, more needs to be done — and done quickly — to stay ahead of proposed ISSB-aligned climate disclosures requirements in SGX RegCo’s public consultation paper.”
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The study also found that more issuers are seeking external assurance on their climate-related data — from 23 that did so in FY2022 to 38 in FY2023.
On this, Ong says: “The uptake in external assurance reflects a growing commitment to credible sustainability disclosures and in bolstering stakeholders’ confidence in the data disclosed.”
Chng Lay Chew, a councillor of CPA Australia’s Singapore Division and a member of its ESG Committee adds: “The progress in climate-related disclosures is commendable and reflects the commitment of SGX-listed companies to sustainability and transparency. As companies make the transition toward the ISSB-aligned climate disclosures, it is imperative for issuers to enhance the depth and the quality of their reporting.”
Moving forward, the report suggests three core actions for companies to accelerate their climate reporting journey, including reframing their mindset from “compliance to strategic advantage”.
EY also suggests that companies should collaborate between teams within organisations to build confidence in climate-related financial data as well as integrate governance practices for climate-related data.
Ong concludes: “The tone from the top is an important driver for many strategic developments for organisations. To further advance their sustainability journey, boards and C-suites need to work more closely together to drive change throughout the enterprise, ensuring that teams collaborate more effectively and cohesively to obtain and uphold the integrity of the data for reporting, while leveraging the insights for decision-making for organisational growth.”
