Asean capital market regulators: Let global sustainability disclosure standards be tailored to Asean context
Janice Lim
REPRESENTATIVES of Asean capital market regulators who took part in a panel discussion on Tuesday (Jun 27) said they welcomed a global baseline for sustainability disclosure standards, but said they would tailor them to the state of reporting practices in their respective jurisdictions.
This is so that, when implemented, these standards would be practical and relevant for the companies in each of these markets. The standards were launched on Monday by global accounting standards body, the International Sustainability Standards Board (ISSB).
The panellists, who included senior officials of the Securities Commission Malaysia and the Philippine central bank, were taking part in a discussion organised by the ISSB and the Asean Capital Markets Forum, a group comprising all 10 Asean capital market regulators.
The managing director of the Securities Commission Malaysia, Azalina Adham, said the reality was that the reporting practices within Asean will take time to develop: “The majority (of companies) are probably trying to get familiar with what sustainability reporting is, pivoting their own business, dealing with all the climate conversations in the boardroom, struggling with quality data that is not available.”
Add to this the other reality on the ground, which is the time needed to build up talents in the area of sustainability reporting, she added. “There must be flexibility around the pace of change and the adoption rate,” she stressed.
Among the various reporting requirements laid out in the two newly launched sustainability disclosure standards, known as S1 and S2, companies would have to conduct climate-scenario analysis and report on their “Scope 3” emissions, which are the indirect emissions arising from operations along a company’s value chain.
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Recognising that companies across the world are at different stages of sustainability reporting, the ISSB, the standard setter, has provided temporary reliefs for companies, such as a relaxed deadline for some of the more complex disclosure requirements. Flexibility is also being exercised, in that some companies are required, for a start, to report only what they can manage to, given their current ability and resources.
Even as national regulators assess how best to adopt the ISSB standards, they have the discretion to decide how they will customise these disclosure requirements for companies in their jurisdictions. Securities Commission Malaysia’s Azalina said it would be good if the standard-setter could provide more guidance on this flexibility.
In Singapore, a committee set up by the Accounting and Corporate Regulatory Authority (Acra) and Singapore Exchange Regulation is proposing a model to vary the implementation date for the reporting of some complex disclosures, said Bong Yap Kim, senior technical director of Acra’s sustainability reporting office.
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“It will allow companies that are more ready to lead the way, and allows others to learn from their experience,” said Bong, who was also on the discussion panel.
She added that doing this would also stagger the demand for consultants who are needed along the way, so capacity building can take place more systematically and holistically.
Rhodora Brazil-De Vera, deputy director of supervisory policy and research for the financial services sector in the Philippine central bank, said it will also consider a phased approach when issuing its sustainability reporting regulations.
It may categorise companies, including small and medium-sized enterprises (SMEs), based on their emissions profiles, to determine which groups would have to make ISSB-aligned disclosures.
The Philippine central bank may also provide a longer transitioning or monitoring period, said Brazil-De Vera.
Indonesia’s capital market regulator Financial Services Authority (OJK) is considering a phased approach as well.
At the panel discussion, Novira Indrianingrum, head of issuer and public company supervision of OJK, said that reporting of Scope 3 emissions and the use of scenario analysis will be made voluntary.
Several of these regulators talked about the need to accommodate the wide range of companies in their markets, including the needs of the 70 million SMEs across the Asean bloc, many of which are still recovering from the effects of the Covid-19 pandemic.
To increase SMEs’ adoption of ISSB-aligned sustainability reporting, Brazil-De Vera said that the benefits of making such disclosures – including having a competitive edge over their peers – should be highlighted to these smaller businesses.
Bong pointed out that some SMEs, including unlisted ones, are finding that they have to make voluntary sustainability disclosures, or risk losing the business of their overseas customers. This is particularly so for those with operations outside Singapore.
Some with substantial operations in the European Union may also be required to comply with the region’s regulations, even if they are not incorporated there.
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