Good morning everyone.
1.I am sure all of you are closely tracking the developments on the sustainability front globally given its importance.
2. Just two weeks ago, the Intergovernmental Panel on Climate Change issued a stark reality check. This panel of experts warned that the effects of climate change will be widespread, rapid and intensifying. More punishing heatwaves, more severe coastal flooding, bouts of heavier rain leading to flash floods. We have experienced some of these phenomena, and it is likely to get worse. If we are to have any chance of reversing this course, we must collectively undertake immediate and large-scale reductions in greenhouse gas emissions.
3. This is one of the reasons why we are proposing that our issuers do climate reporting, guided by the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Today’s public consultation charts the way forward with a roadmap towards mandatory TCFD reporting. I believe we are the first exchange in Asia to propose mandating climate disclosures in accordance with the TCFD recommendations. My colleague Michael and his team worked on the consultation and will run you through the details in a little while. Before he does so, I would like to take the opportunity to emphasise three other points about today’s consultation.
4. First, I recognise that the consultation comes at a time when many issuers are struggling with the impact of COVID-19 and global economic and business conditions. I do not doubt that this is a difficult time for many companies, employers, and employees.
5. But this has also become a time when many stakeholders are looking beyond the pandemic and focusing on longer-term developments such as climate risks and opportunities. When we conducted a survey of financial institutions in Singapore, which included banks, asset managers and insurers, we found that 86% of respondents place importance on disclosures of carbon emissions. Yet, in our review of our companies’ sustainability reports, we found that less than a quarter of them identified climate change as a material topic.
6. In other words, our companies must start giving better climate information to meet the demands of their investors, insurers and lenders, or risk being marginalised in terms of allocation of capital and access to financial facilities.
7. Even customers and suppliers are factoring climate information into their decision-making processes and if our companies fall behind in providing this information, they risk losing their places in the supply chain.
8. Indeed, we have an opportunity here to incorporate climate disclosures into sustainability reports as soon as possible, to have our companies become sustainability leaders. This is important not just for obviously the climate agenda, but also to keep our companies at the forefront of the minds of their most demanding stakeholders.
9. Second, a theme that runs through today’s proposals is the focus on governance. Financial institutions we surveyed have told us that without a strong governance structure, sustainability reporting becomes more of a recording exercise, instead of a cohesive framework that can be used to achieve desired business outcomes. This ranges from ensuring that our directors are equipped to steer the company’s sustainability strategy, to assurance that the sustainability report is accurate and complete. In addition to the current responsibility placed on boards to oversee the sustainability report, we now also want companies to disclose in more detail the governance structure itself, including the respective roles of boards and senior management.
10. Third, on board diversity. The benefits are well-known, and global investors have publicly announced their intentions to use their voting influence to enhance board diversity in their portfolio companies. Our companies need to move beyond making broad, general statements on diversity, to showing their specific plan and targets. In other words, they need to move from intent to outcomes, to quote a PwC report on the state of board diversity.[1] We have thus proposed that targets, plans and timelines in relation to targets, must be disclosed. Ultimately, our companies will be judged, not by the glossiness of the pages in their annual reports, but by the real concrete steps they commit to take in their actions.
11. On this note, I wish everyone a good briefing. Thank you.
[1] PwC, “Board diversity disclosures in Singapore: From intent to outcomes” (2021).
