Study Jointly Issued by ACRA and NUS Finds Larger Listed Companies on Track for Mandatory Climate Reporting in FY 2025

Mandatory climate reporting requirements are set to commence in a phased approach from financial year (“FY“) 2025, as announced by Second Minister for Finance, Mr Chee Hong Tat, at the Ministry of Finance Committee of Supply speech in February 2024. Ahead of their commencement, the Accounting and Corporate Regulatory Authority (“ACRA“) and the Sustainable and Green Finance Institute at the National University of Singapore jointly released a study titled “Unveiling Climate-related Disclosures in Singapore: Getting ready for the ISSB Standards” (“Study“) on 8 July 2024.

The ISSB standards refer to the International Sustainability Standards Board (“ISSB“)-issued standards – IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures.

By way of background, on 28 February 2024, ACRA and the Singapore Exchange Regulation announced details of ISSB-aligned mandatory climate-related disclosure for: (i) issuers listed on the Singapore Exchange Securities Trading Limited (“listed issuers“) from FY 2025; and (ii) large non-listed companies limited by shares with annual revenue of at least S$1 billion and total assets of at least S$500 million (“Large NLCos“) (unless exempted) from FY 2027, as part of a finalised climate reporting and assurance implementation roadmap. This followed consultations on the recommendations from the Sustainability Reporting Advisory Committee. A snapshot of the upcoming and/or anticipated key mandatory climate reporting requirements for listed issuers and Large NLCos can be found in our March 2024 Legal Update here.   

The Study examined the climate-related disclosures that were based on the Task Force on Climate-related Financial Disclosures (TCFD) framework for FY 2022 of 51 larger listed issuers, each of which had a market capitalisation above S$1 billion as of 4 July 2023. The Study found that larger listed companies, particularly those from carbon-intensive sectors, are making significant progress in climate reporting.

Key findings, among others, include:

(a)      Governance. A strong commitment to climate matters is evident, with 94% of companies studied forming committees or assigning roles for climate risks and opportunities. However, the Study highlighted the need to strengthen the disclosure on Board involvement in performance objectives related to climate matters.

(b)      Strategy. While 88% of the companies studied disclosed the physical and transitional climate-related risks, there was a gap in those disclosing related opportunities (61%) and the resilience of their strategies against climate change effects (75%). Only 16% of the companies studied disclosed how they have incorporated climate-related risks in their financial planning. 

(c)      Risk Management. About 71% of the companies studied made substantial disclosure of the processes for identifying and assessing climate-related risks, but only 24% reported on their significance relative to other risks and 10% reported on their potential magnitude. Hence, the Study noted the need for companies to contextualise climate-related risks to provide actionable insights. 

(d)      Metrics and Targets. There was commendable reporting on Scope 1 and 2 greenhouse gas (“GHG“) emissions at 96% and 100% of the companies studied respectively and 59% for Scope 3 emissions. However, the disclosures on opportunity metrics and executive pay linked to climate performance require improvement as less than 10% of the companies studied had done so.

The Study also shared examples of best practices by some local and overseas companies, particularly in disclosing climate opportunities and strategy resiliency as well as linkages between climate factors and financial information, which Singapore companies can learn from. The Study also shared recommendations on how companies can enhance their climate disclosure and work towards future-proofing their strategies and business model.

Companies can take note of the following initiatives to help them meet the upcoming reporting requirements:

(a)      Sustainability Reporting Grant. Launched by the Singapore Economic Development Board and Enterprise Singapore, this grant provides funding support for large companies with annual revenue of S$100 million and above to produce their first sustainability report in Singapore before mandatory reporting takes effect. 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. The disclosures are to be consistent with the ISSB standards.

(b)      Green Skills Committee. Established by the Ministry of Trade and Industry and SkillsFuture Singapore in collaboration with the private sector, this committee aims to develop skills and training programs for the low-carbon economy. With a focus on sustainability reporting and assurance, the initiative seeks to upskill workers within companies and assurance providers in sustainable reporting capabilities. 

(c)      Advanced Digital Solutions (“ADS”) Scheme. Curated by the Infocomm Media Development Authority (“IMDA“), the digital sustainability solutions under the ADS scheme help eligible enterprises kickstart their sustainability journey by measuring, monitoring, and managing their emissions. This enables them to stay competitive with customers and improve the oversight and reporting of Scope 3 emissions within their supply chain. IMDA also supports enterprises keen to collaborate with value chain partners to drive sustainability through digitalisation. 

(d)      Singapore Emission Factors Registry. Created by the Singapore Business Federation in collaboration with the Agency for Science, Technology and Research, PwC Singapore, and Singtel, this registry will provide conversion factors that translate different business activities into corresponding GHG emissions. This supports the existing reporting solutions in the ecosystem. More information on the registry can be found in our April 2024 NewsBytes write-up titled “Singapore to Establish Emission Factors Registry to Help Singapore Businesses Track and Report Carbon Emissions More Accurately” here (page 19).