SINGAPORE could become the first country in Asia to roll out mandatory climate-related disclosures on non-listed companies, as its business regulators mull imposing this requirement on large entities from their financial years starting on or after Jan 1, 2027.

Currently, only the United Kingdom, New Zealand, the European Union (EU) and Switzerland have mandated climate-reporting requirements for non-listed companies. Requirements of China, Indonesia, Japan and Vietnam cover only listed companies.

The idea – mooted by an industry-led 15-member panel set up by the Accounting and Corporate Regulatory Authority (Acra) and Singapore Exchange Regulation (SGX RegCo) – was put up on government feedback unit Reach’s platform for public consultation on Thursday (Jul 6).

The Sustainability Reporting Advisory Committee recommends that all listed issuers – including business trusts, real estate investment trusts and those incorporated overseas – “lead the way” by making disclosures aligned with the International Sustainability Standards Board (ISSB) from their financial year beginning 2025. The ISSB published standards for a new global baseline of sustainability disclosures just last week.

Following that, non-listed companies with an annual revenue of at least S$1 billion should start making ISSB-aligned disclosures from FY2027. The committee proposed this with a view to mandating reporting by entities with an annual revenue of at least S$100 million by around FY2030.

While other jurisdictions have based their benchmark criteria on the companies’ turnover and total assets, the committee chose to use revenue as it is a “good proxy for emissions”. The information is also widely available and consistently prepared.

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While almost none currently volunteer their climate-related disclosures, the committee assessed that the FY2027 requirements could draw out disclosures from some 300 entities. This estimation takes into account exemptions for subsidiaries which could have a parent company make disclosures on their behalf.

Non-listed companies with an annual revenue of at least S$100 million number more than 2,000. The committee recommends that a review be conducted in 2027 to assess whether this group should require reporting. Factors weighing on the decision include international developments, industry capacity and the implementation experience of large non-listed companies.

Before these latest recommendations that are expected to affect 664 listed issuers, only listed companies in five prioritised industries were required to provide full climate-related disclosures. The requirement kicked in progressively from FY2023, with these entities having to align disclosures with the Task Force on Climate-related Financial Disclosures (TCFD), the framework which the ISSB had built upon. All other issuers were only required to apply TCFD on a “comply or explain” basis.

The committee’s chairperson Esther An, who is also listed property developer City Developments Limited’s chief sustainability officer (CSO), said non-listed companies are included because there is recognition that a “critical mass” is needed to facilitate the transition to a net-zero economy.

“We cannot just rely on listed companies alone... Only with more companies, more organisations adopting climate-related disclosures will we be able to really drive change and create the impact that we want, and then create a value for everyone,” she added.

Committee member and DBS chief sustainability officer Helge Muenkel additionally told The Business Times (BT) that the rationale behind starting with large, “economically significant” non-listed companies was to spark a “domino effect” for better-quality environmental, social and governance (ESG) data across the value chain. 

Particularly, the effect would be salient on Scope 3 greenhouse-gas emissions, a category understood to be the largest but most complex, given that it entails emissions caused by suppliers and customers, he noted. Large non-listed companies, with their higher carbon footprints and exposure to climate-related risks, have the potential to drive changes through their value chain.

Greater climate action comes with companies making better disclosures, regardless of listing status, Muenkel stressed. “Setting a standardised reporting benchmark is particularly significant in giving organisations a clear yardstick to work towards.”

Nevertheless, he said policy change must be accompanied by “practical help” to equip and enable companies to achieve compliance.

The committee catered for that by recommending the adoption of temporary reliefs in ISSB’s standards, which include waiving the need for companies to provide Scope 3 emissions and comparative information in their first year of reporting.

In addition, the committee also recommended extending Scope 3 relief for non-listed companies by one more year than what the ISSB introduced, such that they would need to report this disclosure only from FY2029. This is meant to help non-listed companies work on disclosures on an incremental basis, since they are new to climate reporting.

Lastly, the committee recommended the imposition of external limited assurance in respect of its Scope 1 and 2 emissions two years after the mandatory reporting requirements take effect, to meet the information needs of investors, lenders and other users. Scope 1 covers the entity’s direct emissions; Scope 2 covers indirect emissions from the generation of the electricity it purchased.

An said the independent audit will raise credibility over the sustainability disclosures, just as statutory audit had raised the credibility of financial statements.

To keep the talent pool large enough to meet the new audit needs, the committee has suggested that both audit firms and certain testing, inspection and certification firms be allowed to provide assurance.

This would complement upcoming nation-wide capacity building efforts by the Green Skills Committee, set up by the Ministry of Trade and Industry in part to identify jobs and skills required for sustainability reporting and assurance, and build the training framework and programmes for these jobs.

More than 90 stakeholders, comprising company preparers, assurance providers, readers of sustainability reports, trade associations and professional bodies, were consulted in the lead up to the current set of recommendations. A number of non-listed companies are in the mix.

The Business Times understands that the closed-door consultation had raised the question of whether climate reporting should be put on equal footing as financial reporting when it comes to legal sanctions. The committee has recommended for the same legal responsibilities applied on financial reporting to be applied on climate reporting.

The government will decide accordingly, based on the feedback it receives from the public consultation, which runs till Sep 30.

In addressing the potential cost of compliance, the consultation paper cited that EU’s estimated administrative costs for its regime, which involve reporting on a broader range of ESG factors, range from 0.004 per cent to 0.008 per cent of a company’s yearly revenue. Auditing costs tied to its limited assurance requirement range from 0.013 per cent to 0.026 per cent of revenue.

There is no readily available data for cost analysis in Singapore.

The Monetary Authority of Singapore on Thursday voiced support for the committee’s proposal for a climate-disclosure roadmap.

Calling it “an important step” in Singapore’s journey towards the adoption of ISSB’s standards, its spokesperson said: “Corporates and financial institutions must work together to develop robust sustainability reporting, which will enable the economy’s climate transition.”