Closing Speech by Tan Boon Gin, CEO, SGX RegCo
1. Thank you everyone for tuning in to our symposium and a special thank you to our panelists and to Stef and Herry for moderating our two panels on SPACs and sustainability. What a great job! Thank you.
2. They were both fascinating discussions, so let me try and respond to some of the things that were raised. Starting with SPACs, I believe I can hear at least three messages.
3. The first is: if we make too many changes to the US SPAC model, is anyone going to come and use our framework? The second is: whether we can simply leave it to market discipline by the investor community to take care of everything? And finally: are we, as a market, the retail market, ready for SPACs?
4. In many quarters, SPACs have been described as a bridge between the public and private markets: a way to give public market investors the early entry high return opportunities normally reserved only for private equity.
5. An early entry high return opportunity necessarily means that it is a high variance investment. What I am hearing is that SPAC sponsors and SPAC investors need to be properly compensated for taking on this risk and the success of the SPAC model depends on getting this risk-reward balance right.
6. Having said that, the US experience has also revealed concerns such as excessive dilution and a rush to de-SPAC. So, the challenge then for us is how to address these concerns without tilting the risk-reward balance too much.
7. Is there a role for market discipline? Absolutely. For this to work, investors at the IPO stage, the de-SPAC stage, and the PIPE stage, must vote responsibly, either with their hands or their wallets. The issue rather could be more to do with the alignment of their interests. Ultimately what we want is to have a quality company listed on our exchange post de-SPAC, and as far as possible, we want to make sure that sponsors and investors at every stage are aligned in terms of achieving that goal. This could mean getting the balance right along a different axis of the risk-reward continuum, in terms of skin in the game.
8. Finally, if we want to do this, we must prepare ourselves as a market to be ready for it. We need to work with our friends from SIAS to make sure that investors, particularly retail investors, understand how SPACs trade, how redemptions work, and how SPACs de-SPAC. And we need to work with our partners from SID, to make sure that independent directors on SPAC boards know what to do when there are rumors of a de-SPAC in terms of the trading and disclosure requirements, and their duties when recommending a de-SPAC to shareholders.
9. Turning to sustainability, I can hear at least one clear message: given the urgency, isn’t it time to think about raising the bar and updating your rules? The answer is yes, absolutely. Thus far, we have mandated a sustainability reporting requirement, but not a format, because there are many recognized reporting standards and no convergence on a single unified standard.
10. But recently, given the focus on climate and the acknowledgment that harmonization of standards would be helpful, a consensus appears to be building round the recommendations of the Taskforce on Climate-related Financial Disclosures and we are planning to consult the market on whether we should incorporate the recommendations into our rules. In other words, introduce a format for climate disclosures.
11. The next question then is whether we should continue to wait for consensus to build behind a single format before prescribing what should be disclosed in our rules. While there is clearly an international push towards a single standard, who knows how long that will take. From our engagements with market participants, we are already able to discern the specific areas where they want to see more precise disclosures. Should we still wait, or should we at least start providing some guidance on disclosures in these areas? Surely, we must seriously consider this option.
12. Finally, there is the question of assurance. I have written in other fora that climate disclosures could have become so important that they are now considered material information, and I have been reading with some interest about the legal debate over whether directors owe a fiduciary duty to consider climate issues which is something the panel alluded to as well. Given these trends, surely it is only a matter of time before the board demands assurance that the climate information being disclosed by the company is accurate. Is now the time to start requiring assurance in our rules?
13. So a lot of questions then to talk about over lunch. I am so glad that we had the chance to come together today to discuss these interesting topics. Thank you once again for joining us, and please, do keep giving us your feedback, that is really how we stay on track. Thank you.
