Singapore consults on adopting mandatory climate-related corporate disclosure requirements in line with the ISSB sustainability disclosure standards

The Sustainability Reporting Advisory Committee (SRAC) published a public consultation paper seeking market feedback on proposals to make climate-related disclosures mandatory for listed and certain non-listed companies in Singapore. The consultation paper was published on 6 July 2023 and closes on 30 September 2023.

In a nutshell - the consultation proposes to mandate listed issuers to report climate-related disclosures in line with the requirements of the International Sustainability Standards Board (ISSB) climate disclosure standards starting from financial year 2025 (FY2025). Large non-listed companies with annual revenue of at least S$1 billion will follow suit in FY2027.

This development is in line with the general regulatory trend seen in other markets towards increased transparency and making the disclosure of climate and other sustainability issues mandatory.

Background and process

The ISSB published the final versions of the first two global sustainability disclosure standards - IFRS S1 on General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 on Climate-related Disclosures - in June 2023 (see our previous blog post).

The ISSB standards are voluntary but a number of countries - including Canada, Japan, Malaysia, Nigeria, Chile, Brazil and Egypt - have said they plan to implement them in their national regimes. In July 2023, the UK’s Financial Reporting Council published a call for evidence to inform the proposed endorsement of the ISSB standards in the UK and in April 2023, the Hong Kong Stock Exchange published a consultation paper seeking market feedback on proposals to essentially upgrade the current “comply or explain” requirement to a mandatory climate-related disclosure requirement for listed issuers in Hong Kong and align with the ISSB standards (see here and here).

The SRAC was set up by the Singapore Accounting and Corporate Regulatory Authority (ACRA) and Singapore Exchange Regulation (SGX RegCo) in June 2022 to advise on a roadmap for wider implementation of sustainability reporting by companies in Singapore.

Since 2017, listed issuers have been required to publish sustainability reports. Currently, only listed issuers in five prioritised industries are required to provide Task Force on Climate-related Financial Disclosures (TCFD)-aligned climate-related disclosures progressively from FY2023. All other listed issuers are required to apply TCFD on a “comply-or-explain” basis. The recommendations of SRAC in this consultation, therefore, significantly expands the number of companies that will have to report climate-related disclosures, and which shall be in line with the ISSB standards. This development is part of the wider aim to uphold Singapore’s attractiveness as a global business hub while contributing to its national agenda on sustainable development under the Singapore Green Plan 2030.

What are the key recommendations of the SRAC?

Mandatory climate-related disclosures for listed issuers

All listed issuers (including those incorporated overseas, business trusts and real estate investment trusts) are required to report on climate-related disclosures from FY2025.

To note that issuers of listed debt securities are excluded as they are largely offered to wholesale investors and typically traded over the counter. Issuers of listed debt securities may continue to adopt international sustainability bond standards, such as the International Capital Market Association (ICMA)’s Green Bond Principles, Social Bond Principles or Sustainability Bond Guidelines.

Mandatory climate-related disclosures for non-listed issuers

All large non-listed companies with an annual revenue of at least S$1 billion will be required to report climate-related disclosures from FY2027. This is estimated to cover 300 companies.

A review will be conducted by 2027 with the view to mandate climate reporting by large non-listed companies with revenue of at least S$100 million to less than S$1 billion, by around FY2030. This is estimated to cover 2,200 companies. The review will consider factors such as international developments, industry capacity and the implementation experience of large non-listed companies.

This gradual approach aims to strike a balance between ambition and market readiness and will allow companies of different sizes and industries to better understand and incorporate climate-related disclosures into their reporting practices.

The revenue threshold for non-listed company should be measured using company-level financials, unless the non-listed company is a parent (according to the prescribed accounting standards in Singapore), in which case, revenue should be measured based on group-level financials.

An exemption applies for a large non-listed company if: (a) its immediate, intermediate or ultimate parent (local or foreign) is minimally preparing climate or sustainability reports in accordance with prescribed climate-related disclosures in Singapore or deemed equivalent; and (b) its activities are included in that parent’s report, which is available for public use.

Adoption of the ISSB standards

Both listed issuers and large non-listed companies should report climate-related disclosures using the local prescribed standards that mirror the requirements in the ISSB standards, to the extent practicable.

The ISSB standards include (temporary) transition reliefs for certain requirements to provide more time to certain companies to implement the requirements. The SRAC recommends applying at least the same duration of the temporary transition reliefs in the ISSB standards to all companies that are subject to mandatory reporting.

In addition, SRAC recommends extending the duration of relief on reporting on Scope 3 GHG emissions for non-listed companies, allowing such companies to opt to make climate-related disclosures on their Scope 3 GHG emissions two years after the mandatory reporting requirements kick in.

A review will be conducted in due course on the application of the ISSB standards for disclosure of sustainability-related risks and opportunities beyond climate-related disclosures for all companies subject to mandatory reporting.

To cater to the diverse needs and circumstances of companies (for example where companies operate in jurisdictions that mandate the use of other standards) the recommendation is to allow for disclosures in compliance with other standards and frameworks in the same report if both of the following conditions are met:

• the standards and frameworks applied are prominently disclosed; and
• the additional disclosure does not contradict or obscure the information required by the prescribed climate-related disclosure.

External assurance requirements

Companies subject to mandatory climate reporting should obtain external limited assurance on Scope 1 and Scope 2 GHG emissions two years after the mandatory reporting requirements take effect (i.e., from FY2027 for all listed issuers, and FY2029 for large non-listed companies with annual revenue of at least S$1 billion). This will allow time for companies to be “assurance ready”.

Companies are encouraged to voluntarily obtain “reasonable assurance” over their entire climate report (including Scope 3 GHG emissions).

The external assurance can be provided by ACRA-registered audit firms and testing, inspection, certification firms accredited by the Singapore Accreditation Council (SAC), the national accreditation body that manages and promotes accreditation schemes and registration programmes. To align with global best practices, it is also recommended that assurance be conducted based on:

• a Singapore standard equivalent to ISSA 5000 (General Requirements for Sustainability Assurance Engagements) that is being developed by the IAASB; or
• SS ISO 14064-3 (Greenhouse gases – Part 3: Specification with guidance for the verification and validation of greenhouse gas statements) – this is Singapore’s national standard which is the identical national adoption of ISO 14064-3 published by the ISO.

Reporting and filing timelines

Climate-related disclosures for companies should have the same reporting and filing timelines as financial statements under the Companies Act 1967.

The SRAC also recommends that climate-related disclosures should be filed in a digital structured format.

Listed Issuers can include climate-related disclosures in a separate report or as part of the annual report. If the climate-related disclosure is included in a separate report, both reports must be published at the same time.

Other legal requirements

The requirements will be mandated through the Companies Act 1967 and the SGX listing rules.  

Legal responsibilities should also be imposed on the company, its directors, and/or officers to ensure accountability for climate-related disclosures. It is recommended that the existing legal requirements related to financial reporting should be imposed on climate reporting, except for internal controls that should be encouraged.

What’s next?

The consultation is open for responses and feedback until 30 September 2023.

The proposed recommendations by SRAC signal a strong commitment by Singapore to address climate risks and promote sustainable business practices. As the push for enhanced climate-related disclosures gains momentum globally, Singapore companies must rise to the challenge and embrace the opportunities presented by this important shift in the corporate reporting landscape.