Companies must act as market and regulatory forces align
Large buyers need accurate emissions data to meet their own reporting obligations, and that pressure is cascading down the supply chain
[SINGAPORE] Driving climate reporting through regulation alone has proven to be an uphill battle. Without clear market incentives, many companies perceive sustainability disclosures as a compliance burden rather than a strategic advantage.
But this perception is shifting, and recent developments suggest that market forces are beginning to align with regulatory efforts – creating a powerful momentum for change.
A recent article by Chuah Bee Kim in The Business Times captured this shift vividly. She highlighted how large listed companies are now demanding climate data from their suppliers, effectively creating an unofficial compliance regime for smaller firms.
This isn’t driven by regulation – it’s driven by market needs.
Large buyers need accurate emissions data to meet their own reporting obligations, and that pressure is cascading down the supply chain.
Chuah referenced a 2024 Schneider Electric survey revealing that 78 per cent of small and medium-sized enterprises (SMEs) had lost contracts due to gaps in emissions reporting.
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One example stood out: a precision parts company lost a major client simply because it failed to provide Scope 1 and 2 emissions data on time.
These stories underscore a critical point – even small companies are beginning to see climate reporting not just as a regulatory requirement, but as a business opportunity. The market is demanding it, and those who respond stand to benefit.
Singapore’s climate reporting rules are designed to achieve a similar outcome.
From FY2025, the largest listed companies in the Straits Times Index (STI) must comply with International Sustainability Standards Board (ISSB) standards, and produce Scope 3 emissions reporting by FY2026. Other listed companies must report Scope 1 and 2 emissions to support the broader ecosystem.
Regulation is therefore aligned with market forces. Market demand alongside an official regulatory reporting regime provides consistency, comparability and credibility to the data. Together, they enable a more efficient market – one that rewards leaders and penalises laggards.
Building culture
But what does it take to build a market-driven climate reporting culture? Three key factors stand out.
First, major policy moves such as carbon taxes and emissions caps are essential. These measures typically target the largest emitters first, creating ripple effects throughout the economy. They also influence the more complex aspects of ISSB standards, such as climate scenario and supply chain analyses. That’s why Singapore has adopted a phased approach, starting with its biggest companies.
Second, large companies must forecast and design their green mandates, and apply supply chain compliance pressures to meet their goals. This creates demand from the market, encouraging smaller companies to prepare their own climate scenario analyses and identify risks and opportunities.
Third, a shift in skillset and mindset is needed. Acquiring technical skills is achievable through capacity-building programmes, but the mindset shift is more challenging. Rather than a silo of sustainability functions from finance and operations, those that integrate sustainability across departments are more likely to see it as a strategic opportunity.
Beyond climate reporting, the market can also drive broader corporate governance reforms.
Consider the recent DBS report predicting the STI could reach 10,000 by 2040. This optimism is fuelled by initiatives from the Equities Market Review Group – particularly the Equity Market Development Programme (EQDP). For the first time, public funds will be deployed into Singapore’s equity market – not just into large caps, but also mid and small caps – via Singapore-focused active fund managers.
Is STI 10,000 achievable on the back of EQDP? Japan’s experience suggests it is.
When Japan’s pension fund began investing in the market, it wasn’t just about capital – it was about engagement.
Fund managers worked closely with companies, laying the groundwork for Japan’s “value up” strategy. Singapore is now following a similar path. EQDP managers such as Avanda and Fullerton have embraced the “value up” theme, signalling a commitment to unlocking shareholder value.
Minister for National Development Chee Hong Tat uses the term “value unlock”, suggesting that the value already exists – it simply needs to be revealed.
A recent BT article noted that 55 per cent of Singapore Exchange (SGX)-listed companies trade below book value, and 46 per cent have net-cash balance sheets.
Many large firms have begun unlocking value through strategic restructuring, capital management and shareholder returns. Mid and small caps are starting to follow suit.
To sustain this momentum, companies must become “institutional grade”. This means their financial and climate disclosures must be trusted by institutional investors.
Chartered accountants – ranked the second-most trusted professionals globally – can play a key role in building this trust.
Many companies, especially in the mid and small-cap space, have already been surprised by the level of interest from fund managers. But interest alone isn’t enough. Companies must be prepared to articulate their growth stories, capital allocation plans and long-term strategies.
Encouragingly, the government may soon offer support to help companies develop these skills.
The Securities Investors Association (Singapore) is working with SGX Group to raise awareness of mid-sized firms through its Corporate Connect series.
Meanwhile, SGX is reviewing disclosure practices around dividends and investor relations – critical elements for investors assessing capital management and shareholder value.
Ultimately, the alignment of market and regulatory forces presents a unique opportunity. Companies that embrace this shift will not only meet compliance requirements – they will position themselves for growth, resilience and long-term value creation.
The market is beginning to care. Now, companies must act.
The writer is CEO of Singapore Exchange Regulation.
This article is adapted from a speech he delivered at the ISCA-SIAS Corporate Governance Conference 2025.
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