Ms Grace Fu, Minister for Sustainability and the Environment
Professor Andrew Rose, Dean, NUS Business School
Ladies and gentlemen
1. Good morning!
2. We have heard a lot about the need for businesses, governments and regulatory bodies around the world to play their part in helping to tackle climate change and step up efforts to promote sustainability. At the same time, investors are increasingly conscious about sustainable investing options. More will likely choose this kind of investing in the future.
3. These trends put sustainability reporting front and centre. Rather than a nice-to-have, companies are beginning to find that their reports are receiving much more attention.
4. We mandated sustainability reporting in 2016, and encouraging progress has been tracked since then. This year’s review of reports shows marked improvement versus the last assessment carried out in 2019. but the need for more granular, transparent reporting will only increase. While we now benchmark the extent to which sustainability reporting has been embedded by listed issuers in Singapore, we know further progress is needed. So, where do we go from here?
5. In considering this question, I would like to reference the recent keynote speech by Mairead McGuinness, European Commissioner for Financial Services, Financial Stability and Capital Markets Union at the high-level conference titled, "Proposal for a Corporate Sustainability Reporting Directive – The Way Forward"1.
6. In her speech, Ms McGuinness touched on the opportunity to strengthen the European economy and society by making the right choices through sustainable investing. In order to do that, comparable and reliable information is critical. This is where the proposed Corporate Sustainability Reporting Directive comes in; to set out the sustainability information needed from companies in the EU. Ms McGuinness focuses on two elements of the proposal – clarity and coherence.
Clarity
7. In her remarks on the need for enhanced clarity, Ms McGuinness addressed the fragmented landscape of sustainability reporting. She echoed growing calls for the convergence of standards to establish an EU sustainability reporting framework that will be able to create consensus about best practice information that all stakeholders can expect.
8. Europe has an abundance of differing reporting standards. We are dealing with a similar challenge here in Asia. Calls for standardisation and ways to improve comparability have increased. It is imperative that we as regulators respond by identifying ways that will better disclosures. We need therefore to discuss and decide whether a harmonised standard and assurance for sustainability reporting are necessary for Singapore and across the region, and if so, how to go about getting there.
9. At its core, a harmonized standard means reporting the same things in the same way. It is of course ideal to have a final authoritative list of things to measure and ways to measure them. But this is not something that needs to result in a binary outcome, and we are only too conscious that time is not on our side. We are better served by adopting a targeted approach in the interim to address the most pressing areas first, even if this means starting with chapters rather than verse.
10. Increasing stakeholder and shareholder confidence in the accuracy and completeness of information is also crucial. This indicates that assurance will continue to grow in importance over the coming years. Currently, few issuers are obtaining assurance for their sustainability reports, though the trend points to an increase from 2019. This is further compounded by the scarcity of external assurance.
11. For now, the SGX Sustainability Reporting Guide outlines recommendations for listed issuers to internally verify reports before progressing to obtain external assurance. Realistically, companies can expect that external assurance for sustainability reporting will eventually become a requirement. We are also keeping a close eye on the debate around the fiduciary duty of board directors to consider climate issues, because these are a growing priority for issuers and stakeholders alike. All these may well translate to a demand for assurance both within and without the boardroom.
Coherence
12. Turning now to coherence. In her remarks, Ms McGuinness also talks about the central role coherence plays in the EU’s strategy, with the need for reporting standards to be aligned with the EU’s own green and climate neutrality goals, as well as global initiatives.
13. Alignment with the global markets must be taken into consideration as well. The European Commission’s proposal incorporates core concepts in the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). In this regard, Ms McGuinness mentioned the need to “see global standards as a floor, but not a roof”. This is a point that I believe we should adhere to. Alignment to global climate related disclosures should be the minimal benchmark for all companies.
14. As a consensus appears to be building round the recommendations of the TCFD, we ourselves are planning to consult the market on whether we should incorporate their recommendations into our rules. This will thereby set a regulatory floor to climate disclosures. I must make clear at this point though that our issuers are already cognisant of climate matters. Almost half the listed issuers already discuss climate change as an economic, environmental, social and governance (EESG) factor in their sustainability reports. For around one third of listed issuers, it is a material topic.
Conclusion
15. To conclude, in the past few years, we have seen an exponential rise in the level of interest in sustainability. When the COVID-19 pandemic struck, it sparked a catalytic change in the way issuers looked at sustainability and EESG factors. As sustainability reporting practices around the world evolve, our role as regulators requires us to be a guide for companies in terms of measurable and comparable information.
16. While we have seen an overall improvement in sustainability reporting, more must be done, especially in terms of the depth of disclosures. In the coming months, we are looking to launch a public consultation on our own sustainability reporting rules, with a focus on climate-related disclosures, as well as the question of assurance. I urge issuers to join us in raising the floor to drive companies and society towards a more sustainable and greener future.
17. Thank you once again for joining us.
