Singapore: Sustainability Reporting: Towards More Holistic Disclosure

Last Updated: 8 December 2016
Article by Wong Gang, Tan Wei Shyan, Pearlyn Xie and Johnny Lim
Most Read Contributor in Singapore, December 2017

Investors these days are increasingly looking to assess not just the financial performance and status of the companies they invest in, they are also looking at the non-financial aspects – how the investee performs in its interaction with its physical environment, social community and its governance (i.e. how sustainable is the business in the long-run?) In this article, we briefly examine the new sustainability reporting framework announced by the Singapore Exchange in June 2016.

In 2011, the Singapore Exchange ("SGX") introduced voluntary guidelines for sustainability reporting, with a view to encouraging listed issuers ("Issuers") to disclose and account to investors and stakeholders the extent to which their businesses are conducted in a sustainable manner.

In view of increased global interest in sustainability, and taking into account regulatory developments in the European Union, US, Japan and Hong Kong, sustainability reporting has now progressed from a "voluntary" basis to one of "comply or explain". In this article, we seek to summarily address the "why", "what", "when" and "how" of the new "comply or explain" sustainability reporting framework announced by SGX in June 2016.

Why the movement for Sustainability Reporting?

Sustainability reporting deals with how an Issuer views and handles perceived material risks and opportunities, with targets and performance assessed in qualitative and quantitative terms. This complements traditional financial reporting to give a more meaningful and holistic view of the Issuer. With sustainability reporting, investors and other stakeholders are better-positioned to assess the quality of management, and future prospects, of the Issuer.

Sustainability reporting also brings about benefits to the Issuer itself. Amongst others, the Issuer would be better-positioned to manage its risks and opportunities, having performed a realistic and comprehensive self-assessment (annually), and be able to align its management and staff towards common priorities. Sustainability reporting also allows investors and other stakeholders to develop a better understanding of the Issuer's business, which over time is likely to contribute positively towards investor confidence and trust.

What are Issuers required to report on?

There are five (5) primary components to be included in a sustainability report:

  1. Reporting Framework

    The Issuer is required to select a sustainability reporting framework(s) to guide its reporting and disclosure. The name of the framework(s) should be stated, and the Issuer should explain its reasons for choosing the framework(s), as well as provide a general description of the extent of the Issuer's application of the framework(s). The Global Reporting Initiative (GRI) Sustainability Reporting Guidelines1 has been cited as one of the well-known and globally-recognised reporting frameworks that Issuers can consider. There are other frameworks that may be relevant depending on the nature of the Issuer's business; for instance, the provisions of the Climate Disclosure Standards Board or the Carbon Disclosure Project may be particularly relevant for industries sensitive to environmental matters, such as mining, minerals and agriculture.
  2. Material ESG Factors

    These are the most important Environmental, Social and Governance ("ESG") risks and opportunities that will act as barriers or enablers to achieving an Issuer's business goals in the short, medium and long term, and where the omission or misstatement of these risks could influence the decisions of investors. These factors include: (i) in relation to "Environmental" – materials, energy, water, emissions, effluents and waste as well as environmental complaint mechanisms; and (ii) in relation to "Social and Governance" – health and safety, employment practices and labour rights (such as collective bargaining), anti-corruption and supplier assessments. An Issuer is expected to identify these ESG risks, and describe both the reasons for and process of selection, taking into consideration their relevance to the business, strategy, business model and key stakeholders.
  3. Policies, Practices and Performance

    The report should set out the Issuer's policies, practices and performance in relation to the material ESG factors identified, providing descriptive and quantitative information on each of the identified material ESG factors for the reporting period. Performance should be described in the context of previously disclosed targets (if available).
  4. Targets

    The report should also set out the Issuer's targets for the forthcoming year in relation to each material ESG factor identified. Issuers are encouraged to disclose long-term targets although this is not an essential component of a sustainability report.
  5. Board Statement

    The report must contain a statement of the board of directors of the Issuer ("Board") on the Board having considered sustainability issues as part of its strategic formulation, determined the material ESG factors and overseen the management and monitoring of the material ESG factors.

When are Issuers required to issue their sustainability reports?

While the new framework takes effect from 20 July 2016, the bulk of new sustainability reports would only be seen in 2018. This is because SGX has implemented a phased approach to allow Issuers adequate time to comply with the new framework. There is a grace period for sustainability reporting to only take effect for any financial year ending on or after 31 December 2017. Issuers in their inaugural year of sustainability reporting have a grace period of 12 months from the end of their financial year to issue their first sustainability report (i.e. likely 2018 or 2019).

Thereafter, Issuers are required, as part of their continuing listing obligations, to issue sustainability reports on a "comply or explain" basis no later than five (5) months after the end of their respective financial years.

In terms of content, the expectation is for Issuers to at least have an assessment of material ESG factors in the first reporting year, together with policies and/or practices to address these factors. Where reporting for any aspect is inadequate (in terms of qualitative or quantitative descriptions for the first year of reporting), Issuers need only state progressive targets for reaching maturity of reporting and do their best to meet these targets in subsequent years.

How should Issuers approach the preparation of their sustainability reports?

There are various options available for consideration, subject to the over-arching principle that the Board is ultimately responsible for an Issuer's sustainability reporting. The Board may, for instance, constitute a risk management sub-committee or designate person(s) to assist with the identification, analysis and reporting of material ESG factors, and may (where required) enlist the assistance of external professional advisers.

Concluding Remarks

It is important to bear in mind that sustainability reporting is on a "comply or explain" basis, as is the approach presently taken for compliance with the Code of Corporate Governance 2012 ("Code"). Issuers are required to disclose their corporate governance practices in their Annual Reports to address the requirements of the Code, and provide appropriate explanation where they deviate from doing so.

The other aspect to bear in mind is that sustainability reporting does not detract from an Issuer's obligation to disclose material information. If the sustainability issue at hand is material – it goes without saying that the Issuer should promptly make appropriate disclosure of the same. If the Issuer assesses that the sustainability issue may not presently be material but may have wider and longer-term implications, then the Issuer can consider making disclosure in its sustainability report. In cases of doubt, it would be prudent to seek professional advice.


1 Further information can be found at  

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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