Singapore ESG Regulatory Reporting Requirements

In the past couple years, Singapore’s financial regulator and its leading securities trading exchange laid out guidelines and metrics for Singapore ESG disclosure. This year and next, these two parties are setting a taxonomy for disclosures and shorter-term pans for the next three years to make disclosures of climate risk (the environmental piece of ESG) mandatory.

These actions are a foundation for longer-term plans to ensure that environmental sustainability is accurately reflected in investment vehicles and to promote longer-term plans for sustainability through 2030.

In December 2020, the Monetary Authority of Singapore (MAS), the country’s financial regulator, issued guidelines on environmental risk management. This set out parameters for environmental risks, strategies for setting risk management frameworks to deal with those risks, guidance for what asset managers should consider when building portfolios of investments, and methods of managing portfolio risks, including monitoring, analyzing scenarios, and building capacity. The guidelines also state that asset managers have to be sound stewards of corporate behavior relevant to sustainable business practices, plus standards for disclosure consistent with international reporting frameworks and clear to stakeholders.

Singapore ESG Disclosure takes shape

MAS started providing more specifics in the form of a taxonomy containing criteria and thresholds for greenhouse gas emissions for the energy, transportation and real estate sectors. Published by MAS’s Green Finance Industry Taskforce in May 2022, the taxonomy will be further updated this year for additional sectors and open for public consultation through the end of the year, with a plan to finalize it in 2023. The taxonomy classifies economic activity on a traffic light system of green, amber (yellow) and red to differentiate effects on climate change mitigation.

The SGX has also aligned its climate change mitigation goals with those of Hong Kong regulatory and market organizations, as represented by the Task Force on Climate-Related Financial Disclosures (TCFD). During 2022, SGX will make climate reporting mandatory for all issuers on a “comply or explain” basis, which still allows a choice to explain why they are not or cannot report on climate risk. During 2023, for a report in 2024, climate risk will become mandatory for issuers in the financial, agriculture and energy industries, without the “comply or explain” option. During 2024, for a 2025 report, SGX will add the transportation, materials and buildings industries to fully mandatory reporting, while all others remain on a “comply or explain” basis. This aligns Singapore with the international goal of 2025 set by Hong Kong to align climate-related disclosures.

Lastly, MAS has a “Green Finance Action Plan” intended to set a sustainable finance strategy through 2030, in collaboration with other Singapore government agencies directly concerned with climate change and sustainability issues. In the most recent MAS Sustainability Report, Dr. Darian McBain, the authority’s chief sustainability officer, notes MAS has worked with TCFD to align recommended targets for emissions reductions, energy and water efficiency, and emissions intensity reduction, all by 2030.