1. Mandatory Climate Reporting for All Listed Companies from FY2025
Requirements Prior to 1 January 2025
Prior to 2025, listed companies were required under the Singapore Exchange Listing Rules (the “SGX Listing Rules”) to publish an annual sustainability report for each of their financial years on a **“comply-or-explain”** approach. This is contrasted with the “strict compliance” approach under the new CRD requirements to be discussed later.
The said annual sustainability report must be submitted within the same timeframe as the company’s annual report, and must describe the company’s sustainability practices with reference to certain primary components set out in the SGX Listing Rules. These components include:
(i) Material ESG factors;
(ii) Policies, practices, and performance in relation to such factors;
(iii) Targets in relation to each factor; (iv) A sustainability reporting framework; and
(v) A statement from the board of directors confirming oversight.
ESG (which is short for Environmental, Social and Governance) is a framework used by stakeholders to assess the impact of a company’s operations. Material ESG factors, in turn, refer to ESG factors that could have a significant impact on the company’s growth and value. Examples include data privacy and workplace safety.
At that time, only listed companies in the following selected industries were subject to the more stringent mandatory climate reporting requirements
- Financial;
- Agriculture;
- Food and forest products;
- Energy;
- Materials and buildings; and
- Transportation.
Unlike other listed companies, it was mandatory for selected listed companies in the aforementioned industries to submit an annual sustainability report that minimally included CRDs that were consistent with the recommendations of the Task Force on Climate-related Financial Disclosures (“TCFD”). These CRDs span across four areas – governance, strategy, risk management, and metrics and targets. Examples include: (i) description of the board’s oversight of climate-related risks and opportunities; (ii) description of the climate-related risks and opportunities identified by the organisation over the short, medium and long term; and (iii) description of the organisation’s processes for identifying and assessing climate-related risks. To be sure, the submission of, and inclusion of the CRDs in, the annual sustainability report was mandatory for the selected listed companies (i.e., they could not simply explain their non-compliance). The comply or explain approach however continues to apply in relation to the inclusion of the other primary components of the sustainability report listed above.
Requirements on and from 1 January 2025
With effect from 1 January 2025, mandatory climate reporting requirements were extended to cover all listed companies (regardless of industry). The scope of CRDs was also expanded to include disclosures regarding greenhouse gas (GHG) emissions.
All listed companies are required to report and file annual CRDs including Scope 1 and 2 GHG emissions (direct and indirect emissions from purchased energy). Larger listed companies may also be required to file CRDs including Scope 3 GHG emissions from FY2026, pending SGX’s review.
Further, all CRDs must now be reported using **International Sustainability Standards Board’s (“ISSB”) sustainability disclosure standards (IFRS S1 and IFRS S2, collectively, the “ISSB Standards”). Listed companies may include disclosures using other standards and frameworks (“Alternative Disclosure Standards”) in addition to, but not in lieu of, the ISSB Standards.
With effect from FY2027, all listed companies are required to have the GHG Scope 1 and Scope 2 emissions data included in their CRD Reports independently verified by an external party (ACRA-registered audit firms or SAC-accredited firms) to ensure accuracy and reliability.
2. Mandatory Climate Reporting for Large NLCs from FY2027
Current Requirements for Non-Listed Companies
Currently, only non-listed companies (NLCs) regulated under the Energy Conservation Act 2012 (“ECA”) or the Carbon Pricing Act 2019 (“CPA”) are subject to mandatory climate reporting obligations.
Under the ECA, registrable corporations (e.g., entities in the manufacturing, supply of electricity, gas, water, or waste management sectors with an annual energy consumption exceeding 54 terajoules) are required to, among others, submit energy use reports and energy efficiency improvement plans to the Energy Market Authority.
Under the CPA, entities that directly emit at least 25,000 tonnes of GHG (CO₂ equivalent) annually at a single facility are liable to pay a carbon tax and are required to, among other things, prepare and submit to the National Environment Agency (NEA) an emissions report that has been independently verified by an accredited external auditor.
Requirements on and from 1 January 2027
With effect from 1 January 2027, large NLCs with an annual revenue of at least S$1 billion and total assets of at least S$500 million will be required to report and file annual CRDs including Scope 1 and 2 GHG emissions for their (the NLC’s) FY2027. They will also be required to report and file CRD for Scope 3 GHG emissions with effect from FY2029. Similar to listed companies, all CRDs by NLCs must comply with the ISSB Standards (although NLCs may choose to additionally include CRDs based on the Alternative Disclosure Standards in their sustainability report).
As an exception to the general rule above, a large NLC whose parent company reports CRD using ISSB-aligned local reporting standards or equivalent standards will be exempted from reporting and filing CRDs itself. Further, a large NLC whose parent company reports CRD using other international standards and frameworks will be exempted from reporting and filing CRD for a transitional period of 3 years, from FY2027 to FY2029. However, to qualify for either exemption, the NLC’s activities must be included in its parent company’s report, which must be available for public use.
With effect from FY2029, large NLCs will also be required to have the disclosures relating to GHG Scope 1 and Scope 2 emissions independently verified by ACRA-registered audit firms and Testing, Inspection, Certification firms accredited by the Singapore Accreditation Council.
Conclusion
It is clear from the above that Singapore is progressively aligning its regulatory framework on CRDs with international developments in this area, and is showing signs of moving away from a light touch regulatory approach (where listed companies were only required to report CRDs on a “comply or explain basis”, with some limited exceptions) to a more stringent regulatory approach (which requires strict compliance by all listed companies and certain NLCs). Moreover, the scope of CRDs has also been expanded to include disclosures regarding greenhouse gas emissions and must now be prepared in accordance with ISSB Standards. Looking ahead, the Monetary Authority of Singapore (MAS) also intends to step up disclosure requirements for all financial institutions over the next few years by introducing mandatory sustainability disclosure requirements, following the publication of the baseline sustainability reporting standards by the ISSB.
In light of the increasing regulatory emphasis on mandatory sustainability disclosures, companies and financial institutions in Singapore should proactively review and enhance their internal reporting frameworks and governance structures to ensure compliance with upcoming sustainability disclosure requirements.
