Good morning Mr Masagos Zulkifli, Minister for the Environment and Water Resources
Associate Professor Lawrence Loh, Director of Centre for Governance, Institutions and Organisations at NUS Business School.
Mr Kwa Chong Seng, Chairman SGX
Ladies and gentlemen
1. First, I would like to warmly welcome everyone to SGX and my sincere thanks to Minister Masagos for gracing our event. Minister, you’ve been kept busy with all the good work that your Ministry has done on climate change and zero waste, among other important matters, so I want to thank you for taking time to attend our event today on sustainability reporting.
2. Investing based on environmental, social and governance (or ESG) factors, or ESG investing as we know it today was first brought to the forefront over 16 years ago when the UN Global Compact published a report called “Who cares wins”.
3. The paper made clear that companies that are good at managing their ESG factors, can increase shareholder value.
4. In other words, it’s not just about caring for ESG and doing the right thing. It’s about winning. And when I say winning, I mean that when a company cares about ESG, it will perform better. And investors in companies that care about ESG will see better returns. Hence the report’s title “Who cares wins”.
5. There are numerous studies that show the relationship between a company’s sustainability performance and its financial performance. I need only cite research in the local context led by Professor Lawrence Loh on Singapore-listed companies which found that sustainability reporting is positively related to firm value.[1]
6. In order to inculcate this winning mentality, there are three keys to success:
i. First, we need more data that shows the link between caring about ESG and superior performance. We need this to build awareness, interest and conviction around ESG reporting.
ii. Second, companies need to produce useful, actionable data for ESG investors.
iii. Third, investors need to consume the data in making their investments. They must show superior returns from adopting ESG investing to validate this virtuous circle.
7. So is what we have in Singapore today enough to foster the right environment for ESG investing? Are we focusing on the right things? In order to answer these questions, we have reviewed the progress made so far by listed companies in sustainability reporting.
8. Without giving too much away before Lawrence’s presentation on the results, let me share a few thoughts with you.
i. Our regulatory framework focuses on mandating ESG reporting by companies. However, our requirements are not prescriptive when it comes to the content of the report. In other words, we are not prescriptive about the reporting format. While this means that companies have greater flexibility to choose the material matters to report, it also means that the data produced is less comparable and it is less useful for investors.
ii. On the other hand, there are many many reporting formats in the market to organize ESG data. These tend to be more prescriptive and harmonised in the way ESG data is captured and presented, especially when it comes to industry-specific formats. However, these formats are voluntary.
9. How then do we bridge the gap between our mandatory reporting framework and the voluntary reporting formats that are out there? That is a challenge that lies ahead and what we are working on next.
i. We are going to start by engaging investors who look at ESG investing globally, for their views on how to improve the quality of the reports our listed companies have produced.
ii. From there, we can provide more guidance to companies about producing ESG data that is more useful to investors. We expect to do this over the next 6 months.
10. What we have seen over the past couple of years is an astronomical rise in the level of interest on sustainability. Let us work together to capture the momentum and make Singapore a global sustainable financial centre. Thank you.
[1] Loh, L., Thomas, T., & Wang, Y. (2017). Sustainability reporting and firm value: Evidence from Singapore-listed companies. Sustainability, 9(11), 2112.
