In June 2022, as part of its aim to support Singapore’s position as a leading global business hub and advance the objectives of the Singapore Green Plan 2030, the Accounting and Corporate Regulatory Authority (“ACRA”) and the Singapore Exchange Regulation (“SGX RegCo”) formed the Sustainability Reporting Advisory Committee (“SRAC”) to set out a roadmap for the wider implementation of sustainability or climate reporting by companies in Singapore.
We Following a public consultation on SRAC’s recommendations, the SRAC announced in February 2024 that climate-related disclosures (“CRDs”) will be mandatory for all listed companies and certain large non-listed companies (“NLCs”) with effect from FY2025 and FY2027, respectively. Such CRDs will have the same reporting and filing timelines as financial statements to facilitate timely communication to shareholders and other stakeholders.
1. Mandatory climate reporting for all listed companies from FY2025
i. Requirements prior to 1 January 2025
Prior to 2025, listed companies were required under the Singapore Exchange Listing Rules (the “SGX Listing Rules”) to publish an annual sustainability report for each of their (the companies’) financial years on a “comply-or-explain” approach. This means that listed companies had to either comply with such reporting requirements or otherwise explain the reason for their non-compliance to the satisfaction of the SGX. This is contrasted with the “strict compliance” approach under the new CRD requirements to be discussed later.
The said annual sustainability report must be submitted within the same timeframe as the company’s annual report, and must describe the company’s sustainability practices with reference to certain primary components set out in the SGX Listing Rules. These components include:
ESG (which is short for Environmental, Social and Governance) is a framework that is used by customers, investors and employees of a company to assess the impact of the company's business operations and practices on the environment and society at large. Material ESG factors, in turn, refer to ESG factors that could have a significant impact on the company’s growth and value. Examples of such factors are data privacy, workplace safety and health, and board diversity and tenure.
At that time, only listed companies in the following industries (“selected listed companies”) were subject to the more stringent mandatory climate reporting requirements.
(i) Financial;
(ii) Agriculture;
(iii) Food and forest products;
(iv) Energy;
(v) Materials and buildings; and
(vi) Transportation.
Unlike other listed companies, it was mandatory for selected listed companies in the aforementioned industries to submit an annual sustainability report that minimally included CRDs that were consistent with the recommendations of the Task Force on Climate-related Financial Disclosures (“TCFD”). These CRDs span across four areas - governance, strategy, risk management, and metrics and targets. Examples include: (i) description of the board’s oversight of climate-related risks and opportunities; (ii) description of the climate-related risks and opportunities identified by the organisation over the short, medium and long term; and (iii) description of the organisation’s processes for identifying and assessing climate-related risks. To be sure, the submission of, and inclusion of the CRDs in, the annual sustainability report was mandatory for the selected listed companies (i.e., they could not simply explain their non-compliance). The comply or explain approach however continues to apply in relation to the inclusion of the other primary components of the sustainability report listed above.
ii. Requirements on and to 1 January 2025
With effect from 1 January 2025, mandatory climate reporting requirements were extended to cover all listed companies. This means that all listed companies (regardless of industry) were not required to report CRDs. Further, the scope of the CRDs was also expanded to include disclosures regarding greenhouse gas emissions. In particular, all listed companies are required to report and file annual CRDs including Scope 1 and 2 greenhouse gas (“GHG”) emissions (i.e., emissions that are direct emissions from owned or controlled sources, and emissions that are indirect emissions from the generation of purchased energy). Larger listed companies (as determined based on market capitalisation) may also be required to file CRDs including Scope 3 GHG emissions from FY2026. This will depend on the outcome of SGX’s review of listed companies’ experience in filing CRDs for Scope 1 and 2 GHG emissions, and their readiness to file the same for Scope 3 GHG emissions.
Further, all CRDs must now be reported using International Sustainability Standards Board’s (“ISSB”) sustainability disclosure standards (i.e., the IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures) (collectively, the “ISSB Standards”). This was not required for selected listed companies that were subject to the CRD requirements prior to 1 January 2025. Notwithstanding the foregoing, listed companies may, in addition to the ISSB Standards, include disclosures using other standards and frameworks in the same CRD report if such other standards and frameworks applied are prominently disclosed and the additional disclosure does not contradict or obscure the information required by the climate-related requirements of ISSB Standards (“Alternative Disclosure Standards”). To be sure, listed companies may elect to include disclosures based on Alternative Disclosure Standards in addition to, but not in lieu of, disclosures based on the ISSB Standards.
Further, with effect from FY2027, all listed companies are required to have the GHG Scope 1 and Scope 2 emissions data included in their CRD Reports independently verified by an external party to ensure the accuracy and reliability of the data. Such independent verification can be done by ACRA-registered audit firms and Testing, Inspection, Certification firms accredited by the Singapore Accreditation Council.
2. Mandatory climate reporting for large NLCs from FY2027
(i) Current Requirements
Currently, only non-listed companies that are regulated under the Energy Conservation Act 2012 (“ECA”) or the Carbon Pricing Act 2019 (“CPA”) are subject to mandatory climate reporting obligations. Under the ECA, registrable corporations (e.g., entities in the manufacturing, supply of electricity, gas, water, or waste management sectors with an annual energy consumption exceeding 54 terajoules) are required to, among others, submit energy use reports and energy efficiency improvement plans to the Energy Market Authority.
Under the ECA, registrable corporations (e.g., entities in the manufacturing, supply of electricity, gas, water, or waste management sectors with an annual energy consumption exceeding 54 terajoules) are required to, among others, submit energy use reports and energy efficiency improvement plans to the Energy Market Authority.
Under the CPA, entities that directly emit at least 25,000 tonnes of GHG (CO₂ equivalent) annually at a single facility are liable to pay a carbon tax and are required to, among other things, prepare and submit to the National Environment Agency (NEA) an emissions report that has been independently verified by an accredited external auditor.
(ii) Requirements on and from 1 January 2027
With effect from 1 January 2027, large NLCs with an annual revenue of at least S$1 billion and total assets of at least S$500 million will be required to report and file annual CRDs including Scope 1 and 2 GHG emissions for their (the NLC’s) FY2027. They will also be required to report and file CRD for Scope 3 GHG emissions with effect from FY2029. Similar to listed, all CRDs by NLCs must comply with the ISSB Standards (although NLCs may choose to additionally include CRDs based on the Alternative Disclosure Standards in their sustainability report).
Conclusion
It is clear from the above that Singapore is progressively aligning its regulatory framework on CRDs with international developments in this area, and is showing signs of moving away from a light touch regulatory approach (where listed companies were only required to report CRDs on a “comply or explain basis”, with some limited exceptions) to a more stringent regulatory approach (which requires strict compliance by all listed companies and certain NLCs). Moreover, the scope of CRDs has also been expanded to include disclosures regarding greenhouse gas emissions and must now be prepared in accordance with ISSB Standards. Looking ahead, the Monetary Authority of Singapore (MAS) also intends to step up disclosure requirements for all financial institutions over the next few years by introducing mandatory sustainability disclosure requirements, following the publication of the baseline sustainability reporting standards by the ISSB.
In light of the increasing regulatory emphasis on mandatory sustainability disclosures, companies and financial institutions in Singapore should proactively review and enhance their internal reporting frameworks and governance structures to ensure compliance with upcoming sustainability disclosure requirements.
