SGX RegCo mulling common digital format for sustainability reports, planning to mandate ISSB standards

SINGAPORE Exchange Regulation (SGX RegCo) is considering whether to mandate all listed companies to prepare their sustainability reports using a common digital format.

The frontline regulator is also preparing to incorporate International Sustainability Standards Board (ISSB) standards into the listing rules as mandatory disclosure requirements for listed companies when they are issued.

These are part of efforts to ensure that climate-related information is available, comparable and trusted to tackle the issue of greenwashing, SGX RegCo chief executive Tan Boon Gin said on Tuesday (Jul 19).

Tan was speaking at the Climate Reporting in ASEAN – State of Corporate Practices webinar, organised by Centre for Governance and Sustainability (CGS) at NUS Business School and the Global Reporting Initiative (GRI).

In his speech, Tan said that greenwashing is the “biggest threat” when it comes to the market having accurate climate information to drive decision making. He noted that greenwashing involves “false and misleading” information that could result in an unlevel playing field.

“Greenwashing left unchecked will allow companies that do not incur the cost of greening to enjoy the climate incentives and avoid the penalties,” he said.

“In the long run, the genuinely green companies and products may end up failing, because if the market cannot tell the difference, it may choose the lower-cost greenwashed companies.”

Tan said that regulators need to act on the issue of greenwashing by making information available, comparable and trusted, and some of these initiatives are already in place.

In terms of information availability, Tan noted that SGX-listed companies are already subject to various disclosure requirements, such as climate reporting in accordance with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

“The market provided strong feedback that it wants all the companies’ climate disclosures available in a single platform that users can easily access,” he added.

SGX had also previously consulted on a proposed digital data portal for investors to access ESG data in a structured format, and it is currently developing the “ESGenome disclosure portal”, Tan said.

“Apart from giving users a single point of access, we also hope to develop features that will help issuers, such as guiding companies to enter the necessary information to meet our disclosure requirements and autogenerating sustainability reports.”

The regulator believes that digitalising ESG data is key and is considering whether to mandate all listed companies to prepare sustainability reports using a common digital format.

“ESGenome may be one such solution to achieving this,” Tan said.

On the comparability front, Tan noted that there has been a lack of consistency and comparability in terms of climate disclosures, with different standards and frameworks.

Tan noted that the ISSB - which was set up to develop a global baseline standard for sustainability reporting - has been seeking public comment on general sustainability disclosures and climate-related disclosures.

“If all goes well, these standards will be issued by the end of the year,” he said, adding that reporting to a common global standard will promote more consistent and comparable disclosures.

“When the ISSB standards are issued, we will begin the process of incorporating the ISSB standards into our listing rules as mandatory disclosure requirements for our listed companies,” he said.

SGX RegCo has set up a Sustainability Reporting Advisory Committee together with the Accounting and Corporate Regulatory Authority (ACRA) to prepare for this. The committee will also advise on a sustainability reporting roadmap for all Singapore companies, including non-listed companies.

He noted that ISSB builds upon TCFD for climate reporting and applies it to sustainability reporting as a whole. Issuers already using TCFD will find it familiar and relatively easier to apply to the rest of their sustainability reporting.

Even so, SGX RegCo would “consider very carefully” the pace and cadence at which the ISSB standards are adopted, particularly for Scope 3 emissions

Tan added that information also needs to be reliable, on top of being available and comparable.

He noted that the International Auditing and Assurance Standards Board has announced last month that it is targeting to propose new sustainability assurance standards for public comment during the second half of 2023 and SGX RegCo will “keep a close eye on this space”.