ACRA and SGX RegCo are consulting on recommendations for climate-related disclosure reporting for Singapore companies. The recommendations cover both listed and large non-listed companies. The requirement will be rolled out in phases starting with listed issuers on the Singapore Exchange. In this note, we look at what has been proposed, and how it may affect organisations operating in Singapore.

The Sustainability Reporting Advisory Committee, set up by the Accounting and Corporate Regulatory Authority (ACRA) and Singapore Exchange Regulation (SGX RegCo), issued its recommendations for climate-related disclosure reporting for Singapore companies on 6 July 2023 (the Recommendation). In brief, the recommendation is for all companies with an annual revenue above S$100 million to be required to prepare and issue climate-related disclosure reports by 2030. The requirement will be rolled out in phases starting with listed issuers on the Singapore Exchange. In this note, we look at what has been proposed, and how it may affect organisations operating in Singapore.

A graphic overview of the recommended implementation timeline

The PDF below shows the proposed timeline for the implementation of climate-related disclosure reporting:

Timeline for the implementation of climate related disclosure

Download PDF

As noted above:

• All issuers listed on the Singapore Exchange (including those incorporated overseas, business trusts and real estate investment trusts) will be required to issue climate-related disclosures from 1 January 2025. As from 2027, parts of their reports will also need to be verified by an external party (limited assurance).
• Non-listed companies with an annual revenue of at least S$1 billion will be required to start climate-related disclosures as from FY2027, with the requirement for external verification to commence two years later in FY2029.
• For non-listed companies with an annual revenue of between S$100 million to S$1b, these requirements are proposed to apply as from FY2030 and FY2032 respectively, although this is subject to review in FY2027.

Proposed reporting standard

Climate-related disclosures are to be made in accordance with the standards set by the International Sustainability Standards Board (ISSB): IFRS S1 on General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 on Climate-related Disclosures. These standards are based on the recommendations on climate disclosures by the Taskforce on Climate-Related Financial Disclosures (TCFD).

It should be noted that listed issuers from the agriculture, energy, financial, and food and forest products sectors have already been subject to the mandatory requirement to provide climate-related disclosures from 1 January 2023 in line with the recommendations of TCFD, while those from the materials and buildings and transportation sectors will have to do so from 1 January 2024. For these issuers, the Recommendation will therefore require them to enhance their reporting by bringing their disclosures in line with the ISSB standard.

For other listed issuers not from these specific sectors, climate-related disclosures would no longer be on a ‘comply or explain’ basis but would be mandatory from 1 January 2025. This will be in addition to their existing obligation to issue sustainability reports.

Expanding the scope of reporting to large non-listed companies

The biggest change will be for non-listed companies as they are not currently required to engage in either sustainability or climate-related disclosures. If the Recommendations are implemented, non-listed companies with an annual revenue of at least S$1b will be required to start climate-related disclosures from FY2027. The financial threshold will be determined based on the financial results of each of the previous two financial years. Accordingly, for such companies, this will mean that their revenue as from FY2025 will used to determine if they qualify to start climate-related disclosures in FY2027, and they would be required to report if they meet the financial threshold in each of FY2025 and FY2026.

The financial threshold will be applied on a company level, except for parent companies, where the threshold will be applied on a group level. A company that meets the financial threshold will, however, not need to file its own climate-related disclosures if its parent is already doing so and that company’s activities are covered in the parent’s report, which must be publicly available.

The requirements for making climate-related disclosures will also incrementally extend to smaller non-listed companies with an annual revenue of between S$100m to S$1b from around FY2030, although the Sustainability Reporting Advisory Committee will review circumstances in FY2027, taking into consideration international developments, industry capacity and the experience of the S$1b-revenue companies before finalizing the details of this recommendation.

The Sustainability Reporting Advisory Committee has recommended prioritizing companies limited by shares for mandatory reporting, so limited partnerships, foreign branches and companies limited by guarantee are not covered by the Recommendations. How Variable Capital Companies and unlisted trust structures are to be treated has not been addressed.

Third party verification and assurance

In addition, the Sustainability Reporting Advisory Committee has also recommended that there be third party verification of some of the information in the climate-related disclosure reports. Specifically, it is proposed that verification be required for the following information contained in climate-related disclosure reports:

• Information on direct greenhouse gas emissions from sources owned or controlled by the company (Scope 1 Greenhouse Gas emissions information)
• Information on indirect greenhouse gas emissions from the generation of purchased energy (Scope 2 Greenhouse Gas emissions information)

It is not currently proposed to require verification for Scope 3 Greenhouse Gas emissions information. These are also known as value chain emissions, and are indirect greenhouse gas emissions that occur in the value chain of the reporting company, including both upstream and downstream emissions. These would include the greenhouse gas emissions referable to, for example, purchased goods and services, employee commuting, business travel and waste generated in operations.

The requirement for third party verification is proposed to commence two years after the introduction of the requirement for climate-related disclosures. For listed companies, this will therefore be as from FY2027, while for S$1b-revenue companies this will be as from FY2029.

Verification is proposed to be on a limited assurance basis. This primarily involves procedures such as inquiries and analytical procedures and would not necessarily include a consideration of whether internal controls have been effectively designed. In addition, the conclusion will usually be provided in a negative form of expression (e.g., “nothing has come to our attention”). This is intended to be less comprehensive than verification on a reasonable assurance basis where the conclusion would usually be provided in a positive form (e.g., “the subject matter information presents fairly…”).

The limited assurance should be provided by a registered climate auditor, which may be either an ACRA-registered audit firm or a Testing, Inspection and Certification firm that has been accredited as such by the Singapore Accreditation Council.

Where and when the reports are to be issued

The climate-related disclosures report verified on a limited assurance basis should be circulated to shareholders, tabled at the company’s annual general meeting (unless the company has resolved to dispense with annual general meetings) and lodged with ACRA in the same way and at the same time as the company’s financial statements. They may be included as part of the company’s annual report or provided as a separate document. For lodgement with ACRA, the Sustainability Reporting Advisory Committee has recommended that a digital structured format be used. This will be developed and prescribed at a later date.

The cross-border perspective

These developments should come as no surprise to corporations operating in Singapore. Indeed, several jurisdictions have already mandated sustainability or climate reporting on non-listed companies, notably the EU and the UK, while Australia is also currently consulting on requiring climate reporting for large non-listed companies. In addition to these, both Switzerland and New Zealand have mandated climate reporting for large public listed companies and large non-listed companies in the financial sector.

To see where Singapore’s proposals stand against global trends, we have set out below a brief snapshot table of the key jurisdictions that have or are intending to impose climate-related disclosures for non-listed companies. It should be noted that the applicable rules and laws for each jurisdiction, as well as the extent of applicability, are more complex than this snapshot can capture.