SGX proposes mandatory TCFD, diversity reporting

The Singapore Stock Exchange (SGX) has proposed making the Task Force on Climate-Related Financial Disclosures (TCFD) guidelines mandatory for all entities listed on the exchange.

The Singapore Exchange Regulation (SGX RegCo) is also proposing enhancements to board diversity by requiring issuers to have a board diversity policy and disclose related targets, plans and timelines in annual reports.

The SGX mandated sustainability reporting for all listed entities in 2017, and recently released a discussion paper to enhance and adapt regulations related to sustainability disclosures for listed entities.

SGX RegCo wants issues to use the TCFD guidelines as the basis for climate-related disclosures, and has proposed a phased approach to mandatory climate reporting. SGX RegCo proposes all issuers will adopt climate reporting on a 'comply or explain' basis for their financial year (FY) commencing in 2022.

Beginning with the 2023 financial year, climate reporting will be mandatory for some sectors, and from the start of the 2024 financial year, more sectors of issuers will adopt mandatory climate reporting with the rest doing so on a 'comply or explain' basis.

SGX proposes that the sectors with the highest climate-related risks be prioritised for mandatory climate reporting.  SGX states that the financial industries, agriculture, food and forest products, energy, materials and buildings and transport are the priority sectors.

In the same paper, SGX RegCo also proposes to step up efforts to enhance board diversity by requiring issuers to have a board diversity policy and provide disclosures on related targets, plans and timelines in annual reports (ARs).

"Lenders, insurers and investors increasingly want climate-related information for decision-making," said SGX RegCo CEO Tan Boon Gin. "The proposals today are aimed at helping our issuers meet these demands and to build their resilience to climate risks.

"Some business sectors are more carbon intensive and hence climate risks affect them more significantly compared to others. These should therefore be among the first to make climate disclosures. We are also proposing to codify board diversity disclosures in response to investor requirement."

Singapore's Minster for Sustainability and the Environment Grace Fu noted that climate risks are of increasing concern to investors.

"Climate-related disclosures allow companies to demonstrate that they are preparing for the challenges of climate change," Fu said. "I encourage companies to use the opportunity to give stakeholders confidence in the future of their businesses."

SGX RegCo is also proposing that listed entities provide a description of how the combination of skills, talents, experience and diversity of directors in the board serves the needs and plans of the issuers. These enhancements are proposed to begin for financial years beginning on or after 1 January 2022.

Public comment on the proposed changes are open until 27 September.

Read more: Singapore Stock ExchangeTask Force on Climate-Related FinancialTan Boon Gin