Not necessary for Singapore to compete with the region on sustainability reporting, says Ravi Menon
The city-state’s ambassador for climate action says that all countries share a common objective of addressing the climate crisis
[SINGAPORE] It is not necessary for Singapore to compete with its Asean neighbours when it comes to sustainability reporting, as the region shares a common objective of addressing the climate crisis, said Ravi Menon, the city-state’s ambassador for climate action.
He was addressing a question during a wide-ranging interview with the media on whether Singapore’s decision to delay mandatory sustainability reporting was a missed opportunity for the country to be a regional leader in this area.
“It’s not necessarily in competition with other countries, because we’re all in this together... In some regards, we are ahead. In others, we are behind other countries. That doesn’t matter. We have to choose a pace that our companies are capable of achieving,” said Menon during the interview on Tuesday (Oct 21).
This was Menon’s first interview with the media since retiring as managing director of the Monetary Authority of Singapore and taking up his new role as climate change ambassador from April last year.
After the Accounting and Corporate Regulatory Authority and Singapore Exchange Regulation in August pushed back requirements on listed companies to comply with reporting standards put forth by the International Sustainability Standards Board (ISSB), Malaysia now has the most ambitious sustainability reporting regime in the region.
Singapore had intended for ISSB-aligned reporting to start during the 2025 financial year. However, that has been delayed for small and mid-sized listed companies – defined as non-constituents of the Straits Times Index (STI) with a market capitalisation below S$1 billion – by five years to FY2030.
A NEWSLETTER FOR YOU
Friday, 12.30 pm
ESG Insights
An exclusive weekly report on the latest environmental, social and governance issues.
Non-STI constituents with a market capitalisation of S$1 billion and above will have to comply from FY2028, an extension of three years, while it remains a requisite for STI constituents.
The extension follows a recommendation by the Singapore Business Federation in June. The umbrella association of businesses had asked for a one to two-year delay for listed small and mid-sized companies to comply, citing feedback that the majority were not confident about meeting the original timeline.
Addressing questions on the rationale behind the delay, Menon said: “The main reason for pushing back the timelines is simply to accept the reality that some of our mid-sized companies are not ready. And so if you make it mandatory, then they will be in breach of a mandatory requirement. So we have to build capabilities for them.”
SEE ALSO
When asked why Singapore decided to delay reporting requirements beyond what businesses are asking for, he said that the changes do not just take into account the differences in the sizes of the companies, but also the type of disclosures.
All listed companies – regardless of size – will still have to report their operational emissions (Scope 1) as well as those from electricity use (Scope 2). However, Scope 3 reporting – which refers to indirect emissions resulting from their supply chain – is not required yet, except for STI constituents, as regulators have not found a pathway for mid-sized companies to measure these emissions, said Menon.
Besides greenhouse gas reporting, there is an “in-between” category of climate-related disclosures that are more qualitative, as it mainly involves making public their governance structures, sustainability strategies as well as risk management.
“So it’s not just measuring, it’s actually what you’re going to do about it. Now that takes a little bit more effort. So that, we thought we’ll give them a bit more time. So we differentiated the timeline. Some timelines, we stick to it – Scope 1 and Scope 2. This middle category, we gave more time. And then Scope 3, we left it actually quite open-ended,” he added.
Getting ahead of the curve
Despite the delay, Menon said that there was no slackening of commitment towards climate action on Singapore’s part, as the renewable energy-disadvantaged city-state is still pushing on with its energy transition plans, with a long-term target of achieving net-zero carbon emissions by 2050.
That is because governments and companies that start early on this journey will be ahead of the curve. This means putting in place the necessary capabilities, policies and practices to facilitate the net-zero transition before an entity is forced to.
In fact, he noted that there would only be greater pressures in the future for sustainability reporting, as companies will likely face higher standards and more requirements. This is similar to how countries have to submit their national climate targets – known as nationally determined contributions – as part of their legal obligations under the Paris Agreement.
With the latest science indicating that climate change is happening at a faster pace than initially expected, and risk of severe climate impacts are “staring at us in the face”, governments, companies and people will be forced to respond, he noted.
“I think between the next 10 and 20 years, climate change will be one of the major preoccupations of governments, of businesses and of the general public. It’s going to dominate all your news. It is both the devastation caused by climate change and then the urgent actions that will be sped up. So it’s better to start preparing early than to be caught up in a rushed, disorderly transition which will be forced upon us,” said Menon.
“Rather, get ahead of the curve, change at our own pace in a manner of our choosing, rather than delay action and be forced to change. I think some countries and some businesses will delay, and therefore be forced. Those who continue to work early, I think will be in a better position, and Singapore has made that calculation,” he added.
Transition credits
Menon said that transition credits were an “indispensable part of the solution” to the climate crisis, even as he recognised the scepticism towards this novel financial instrument.
First conceived in September 2023 as an additional mechanism to improve the commercial viability of the early closure of coal-fired power plants, this new class of carbon credits has received its fair share of criticism, arising over concerns about its integrity and effectiveness.
Some have questioned the rationale of developing a new and complicated asset class to facilitate the region’s decarbonisation, instead of doubling down on building up its renewable energy market, especially considering that these sources, particularly solar, are now some of the cheapest.
However, Menon said that just focusing on renewables will not work in Asia, as most renewable energy being developed currently are used to meet new energy demand, which is a result of the region’s fast-growing economy, instead of existing needs.
“Most of the renewable energy investments are going to meet new demand, but existing demand is being met largely by fossil fuel energy, and that’s going to continue emitting carbon emissions,” he said.
Transition credits are currently being tested to finance the early retirement of two coal plants in the Philippines. One of them is the South Luzon Thermal Energy Corporation (SLTEC), which was formerly owned by Acen, the energy arm of Philippine conglomerate Ayala Group.
Menon said that the pilot in SLTEC was making good progress, despite the difficulties.
“It’s not a trivial task to actually shut down a coal plant. You have to dismantle the turbine so that it’s never put back together again. You have to find jobs for the coal workers – 200 of them in the plant. And so there’s quite a lot of effort involved.”
Copyright SPH Media. All rights reserved.
