Over two-thirds of SGX companies unprepared for new sustainability reporting standards: EY study
Firms with financial years ending Dec 31 have under six months to prepare for the transition to ISSB-aligned disclosure standards
[SINGAPORE] More than two in three Singapore-listed companies are less than prepared to meet climate-related disclosure requirements, a study from EY has found.
The deadline to transition to the new International Sustainability Standards Board (ISSB)-aligned climate disclosures will be at the end of FY2025, which could be as early as Dec 31 this year for some companies.
Of the 359 companies that published sustainability reports for the financial year ended Dec 31, 2024, 98 per cent had disclosures that met at least one of the 11 recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). The average stood at nine disclosures in FY2024, up from eight in FY2023.
But since the end of FY2022, only 32 per cent have made disclosures in line with all 11 TCFD recommendations. While 60 per cent of the 62 large-cap companies surveyed did so, only 35 per cent of mid-cap and 25 per cent of the small-cap companies did so.
Companies with financial years ending on Dec 31 now have less than six months to ensure full preparedness for the transition.
The ISSB standards are built on the four core themes – namely, governance, strategy, risk management, and metrics and targets – of the TCFD recommendations, but demand more detailed information.
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As at the end of FY2024, only 14 per cent of the companies examined were early adopters of the new ISSB standards and had considered them for their climate-related disclosures.
Although there are no specific punitive measures for failure to transition to ISSB-aligned climate-related disclosures by the FY2025 deadline, companies may face penalties for failing to comply with listing rules, said EY in response to a query from The Business Times.
However, the group noted that regulators will take into account the difficulties companies may face with the new reporting standards.
Transition plans indicate climate resilience
Of the companies that published sustainability reports for FY2024, just under half disclosed a semblance of a transition plan, up from 20 per cent in FY2023. Notably, only a third of the companies that have set net-zero targets have disclosed such plans.
A transition plan is a time-bound plan that details how a company’s existing business model, operations and resources will change in response to climate-related changes and risks.
“Companies with a transition plan are more likely to exhibit better business resilience towards climate events,” said EY partner Nhan Quang. “They would have assessed the related impacts and developed the necessary response.”
The study also found that fewer than one in five companies (20 per cent) linked sustainability-related performance to remuneration in FY2024. At the end of FY2023, the figure was 15 per cent.
Large-cap companies were over-represented in this metric, with nearly 62 per cent integrating environmental, social and governance (ESG) considerations into their remuneration structure, compared with 23 per cent and 15 per cent for mid-cap and small-cap firms, respectively.
“Having sustainability-linked remuneration suggests accountability from the business to help ensure proper management of their exposure to climate-related risks,” said Quang.
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