IFRS Sustainability Disclosure Standards to be incorporated into SGX climate reporting rules from FY 2025

28 October 2024

On 23 September 2024, Singapore Exchange Regulation (“SGX RegCo”) issued a press release announcing that SGX RegCo has enhanced its sustainability reporting regime and will start incorporating the latest international standards into its sustainability reporting regime. SGX RegCo also released its response to feedback received on its consultation on “Sustainability Reporting - Enhancing Consistency and Comparability” conducted in March 2024 (“Response”), noting broad support from respondents. Our previous article “SGX RegCo issues consultation paper on incorporation of ISSB standards in sustainability reporting” provides an overview of the key consultation areas.

Enhanced sustainability reporting regime from FY 2025

From FY 2025, SGX RegCo will require all issuers to report on Scope 1 and Scope 2 GHG emissions. The climate-related disclosures must also start incorporating the climate-related requirements in the IFRS Sustainability Disclosure Standards issued by the International Sustainability Standards Board (ISSB).

Requiring the use of the IFRS Sustainability Disclosure Standards builds on the recommendations of the Task Force on Climate-related Financial Disclosures that SGX RegCo has mandated in a phased approach since FY 2022.

Scope 3 GHG emissions reporting for larger issuers from FY 2026 planned

SGX RegCo will review the experience and readiness of issuers before establishing the implementation roadmap for reporting Scope 3 GHG emissions. The current plan is to prioritise larger issuers by market capitalisation with the intention that they report Scope 3 GHG emissions from FY 2026. This is the timeline for the disclosure of Scope 3 GHG emissions if the climate-relevant requirements of the IFRS Sustainability Disclosure Standards were fully implemented in FY 2025, due to the in-built one-year transition relief. Issuers will be provided with ample notice before the effective date.

SGX RegCo encourages issuers that have not been reporting Scope 3 GHG emissions to build up their capabilities in the interim period, noting the in-built proportionality mechanisms in the IFRS Sustainability Disclosure Standards applicable to such disclosures. SGX RegCo will continue to provide capacity building sessions on Scope 3 GHG emissions.

Impact on timeline for compliance for other sustainability components which are not climate-related disclosures

To provide time for issuers to focus on climate-related disclosures in FY 2025, other primary components of a sustainability report (other than climate-related disclosures) will be mandated from FY 2026. The other primary components of a sustainability report are (i) material ESG factors, (ii) policies, practices, and performance, (iii) targets, (iv) sustainability reporting framework, and (v) Board statement and associated governance structure for sustainability practices.

In the Response:

(a) it was reiterated that the incremental effort by issuers in respect of the other primary components (other than climate-related disclosures) is not expected be significant given that they have previously already considered the primary components under the “comply or explain” sustainability reporting regime. Issuers still have flexibility to tailor their sustainability disclosures to their own circumstances, for example, by choosing the ESG factors most material to them and by choosing a sustainability reporting framework (or a portion thereof) for non-climate-related disclosures;

(b) SGX RegCo stated that whilst it encouraged issuers to report against the SGX 27 Core ESG Metrics to facilitate the consistency and comparability of sustainability disclosures, this is not a mandatory requirement. Where an issuer applies a portion of a particular framework, the issuer should provide a general description of the extent of the issuer’s application of the framework; and

(c) SGX RegCo further clarified that all issuers can use the in-built proportionality mechanisms in the IFRS Sustainability Disclosure Standards.

Statement of compliance not required at this stage

The Response explained that IFRS S1 requires entities that report their sustainability related financial disclosures in accordance with the IFRS Sustainability Disclosure Standards to make an explicit and unreserved statement of compliance, which may not be made unless an entity complies with all the requirements in the IFRS Sustainability Disclosure Standards. Given that currently (i) only the climate-related reporting requirements under the IFRS Sustainability Disclosure Standards are being adopted, (ii) there is no local equivalent of the IFRS Sustainability Disclosure Standards, and (iii) feedback received by SGX RegCo indicates that Boards may require more assurance before making a statement of compliance, SGX RegCo will not require issuers to make such a statement at this stage and will review this requirement in the future.

It was conveyed in the Response that SGX RegCo permits and encourages issuers of any size to (i) use and fully apply the Sustainability Disclosure Standards, and (ii) start reporting or continue reporting their Scope 3 GHG emissions. SGX RegCo clarified that an issuer that complies with all the requirements in IFRS S1 and IFRS S2 can, but is not mandated to, make an explicit and unreserved statement of compliance with the IFRS Sustainability Disclosure Standards. Further, to facilitate understanding of the application of the climate-related requirements in the IFRS Sustainability Disclosure Standards, an issuer that complies with all the requirements in IFRS S2 and the climate relevant provisions in IFRS S1 can, but is not mandated to, state that it complies with the climate-related requirements in the IFRS Sustainability Disclosure Standards.

Reporting timeframe for sustainability reports

Issuers that do not conduct external assurance on their sustainability reports must issue their sustainability reports together with their annual reports from FY 2026.

Issuers that conduct external assurance on their sustainability reports will continue to have up to five months after the end of their FY to issue their sustainability reports. The extra month is a transitional measure aimed at encouraging issuers to conduct external assurance. SGX RegCo will also remove the requirement to include a summary of the standalone sustainability report in the annual report if the annual report is concurrently issued with the standalone sustainability report.

Summary of changes

The following is a summary of enhancements to SGX RegCo’s sustainability reporting regime:

For FY commencing on or after

Baseline reporting practice

Calendar year in which report is published

1 January 2025
  • Climate reporting on a mandatory basis that starts incorporating the climate-related requirements in the IFRS Sustainability Disclosure Standards
    • The key difference with the climate-related requirements in the IFRS Sustainability Disclosure Standards is that the requirement on Scope 3 GHG emissions is under review and not yet implemented by SGX RegCo
  • Other primary components of a sustainability report are to be disclosed on a “comply or explain” basis
  • Existing timeline to issue sustainability report applies. Under the existing timeline, an issuer must issue a sustainability report for its FY, no later than four months after the end of the FY, or where the issuer has conducted external assurance on the sustainability report, no later than five months after the end of the FY

2026

1 January 2026
  • Primary components of a sustainability report are to be disclosed on a mandatory basis
  • Sustainability report to be issued with the annual report, or where the issuer has conducted external assurance on the sustainability report, no later than five months after the end of the FY
  • There is an expectation that large issuers will be required to report on Scope 3 GHG emissions and thus the content in their climate reporting will be aligned with the climate-related requirements in the IFRS Sustainability Disclosure Standards

2027

(Source: SGX website www.sgx.com)

Upcoming consultations

The consultation only covered specific recommendations of the Sustainability Reporting Advisory Committee (“SRAC”) to advance climate reporting in Singapore. A separate public consultation will be conducted to implement other recommendations of the SRAC such as requiring (i) external limited assurance on Scope 1 and Scope 2 GHG emissions from the FY commencing on or after 1 January 2027, and (ii) digital filing of climate-related disclosures.

Reference materials

The following materials available on the SGX website www.sgx.com:

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