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Singapore Exchange proposes mandatory climate reporting in key sectors from 2023

Highlights

Climate-related disclosure to be consistent with TCFD framework

Issuers to disclose GHG emissions, energy and water consumption, waste generated

Disclosure beyond Singapore's national boundary for shipping, aviation

Singapore Exchange Regulation, the regulatory arm of Singapore Exchange or SGX, proposes to make climate-related disclosures mandatory for companies in their sustainability reports from Jan. 1, 2023 in key sectors, it said on Aug. 26 in a statement.

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It also suggested the reporting of environment-related metrics covering greenhouse gas or GHG emissions, energy consumption, water consumption and waste generation. The proposal is driven by urgent demand for such information from lenders, investors and other key stakeholders, SGX said.

SGX is the first exchange in Asia to propose mandating climate disclosures in accordance with the Task Force on Climate-related Financial Disclosures or TCFD recommendations, Tan Boon Gin, CEO of Singapore Exchange Regulation, said at a press briefing on Aug. 25.

"When we conducted a survey of financial institutions in Singapore, which included banks, asset managers and insurers, we found that 86% of respondents placed importance on disclosures of carbon emissions," Tan said, adding that only one third of companies identified climate change as a material topic in its review of sustainability reports.

The Financial Stability Board, or FSB, an international body monitoring the global financial system, established TCFD in 2015 to boost climate-related disclosures that allow investors to better understand carbon-related assets and exposures to climate-related risks. SGX started recommending the TCFD framework for sustainability reporting in 2017 on a voluntary basis.

Under TCFD, companies need to disclose climate-related risks and opportunities that impact finances. SGX has proposed a roadmap under which disclosures will be on a 'comply or explain' basis from Jan. 1, 2022 and mandatory for some key sectors from Jan. 1, 2023, after which more sectors will be included.

TCFD has identified the types of industries that are carbon-intensive, including agriculture, food and forest products, energy, materials and buildings, transportation and financial, while SGX has not confirmed which industries will be in the first batch of mandatory disclosures.

"We are seeking views on what are the industry sectors that we should prioritize mandating TCFD disclosures of," Michael Tang, SGX Head of Listing Policy and Product Admission, told reporters.

On top of the TCFD framework, SGX suggested seven environment-related metrics for reporting, including absolute GHG emissions, emission intensity, total energy consumption, energy consumption intensity, total water consumption, water consumption intensity and total waste generated.

SGX proposed that sustainability reports be audited initially for the accuracy and completeness of data reported, which can be done through external auditors or independent assurance services providers.

For emission disclosure, TCFD recommends disclosure of GHG emissions in Scope 1 and Scope 2, and if appropriate, Scope 3 GHG emissions. Scope 1 refers to direct emissions from sources owned or controlled by issuers, Scope 2 refers to indirect GHG emissions from issuers' electricity consumption, and Scope 3 refers to indirect emissions from other sources, such as employees' business travels, purchased goods and services.

Notably, issuers will need to consider GHG emission disclosure beyond Singapore's national boundary, especially for listed companies in shipping and aviation sectors.

If global emissions are going to be material and important to the issuers and their investors, companies should consider including these numbers in their sustainability reports, Tang explained.

SGX is one of the backers of Climate Impact X, Singapore's carbon market to be launched by the end of 2021, together with state investor Temasek, DBS, and Standard Chartered. Enhancing climate-related disclosures will help Singapore establish this carbon credit marketplace.

Definitely, having better climate disclosure will help us to better price actual carbon costs within the ecosystem, and hopefully such information will span carbon credit markets, including the market that we and our partners establish, Tang said.

Public consultations on the proposal are open till Sept. 27, 2021.