All listed companies must provide climate reporting on a “comply or explain” basis in their sustainability reports from the financial year commencing 2022. The requirements are based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
Climate reporting will subsequently be mandatory for issuers in the financial, agriculture, food and forest products, and energy industries from the start of the financial year 2023. The materials and buildings, and transportation industries must do the same from 2024.
“The market recognises that climate reporting is important as a first step towards efforts to mitigate the effects of climate change. Decision-makers also want climate information when they allocate assets, extend financing, and price risks. These factors make climate reporting most urgent for industries with the biggest impact,” said Tan Boon Gin, CEO of SGX RegCo in a statement.
Other key changes effective from 1 January 2022 include requiring issuers to subject sustainability reporting processes to internal review; that all directors undergo a one-time training on sustainability; and that sustainability reports be published together with annual reports unless issuers have conducted external assurance.
Diversity policies
In addition, companies must set a board diversity policy that addresses gender, skill and experience, and other relevant aspects of diversity. They also have to describe the board diversity policy and details such as diversity targets, plans, timelines and progress in their annual reports.
“We are also mandating specific disclosures around board diversity. Recent uncertainties have posed financial and governance challenges for boards. Having a broad set of perspectives will better enable companies to anticipate and face these challenges. It is therefore crucial that boards are diverse and have the necessary skill and experience to deal with the complexities of today’s operating environment,” said Tan.
These requirements follow a public consultation on both sustainability reporting and board diversity disclosures which received “broad support”, according to a media release by the SGX.
ESG metrics
A separate public consultation on 27 proposed core ESG metrics and a portal for issuers to input ESG data also received strong market support, it said.
Though not mandated, the metrics will be a starting point for what companies can disclose in their sustainability reports. Issuers should still conduct a materiality assessment to ensure the relevance and completeness of their reported metrics.
Respondents to the consultation noted that an ESG data portal will not only make information more accessible and comparable but will also save costs, make data more transparent, and simplify decision-making for investors.
SGX expects the portal to house ESG information beyond the core ESG metrics. Information recorded in the portal may include material ESG factors, commentaries and explanations for reported metrics, and discussions on strategies, processes, board statements and targets relating to ESG matters.
