Introduction

The Singapore Stock Exchange (SGX) came into being in 1999 after three exchanges in the country decided to unite in structure. It is not only Singapore’s primary place for asset exchange but also the most powerful exchange platform in Southeast Asia. Notably, the institution has a global reach. The SGX attracts investors from all over the world and has ownership stakes in numerous exchanges worldwide. This gives it the power to influence others regarding financial matters and movements related to the environment, social, and governance procedures.
 

ESG Values and the SGX

The SGX is among the top financial institutions in the world when it comes to implementing ESG values. The Exchange relatively early recognized that sustainability is crucial to assure successful long-term value creation. For that reason, the institution decided to strictly demand transparency from companies listed in Singapore. Those interested in investing at the SGX have access to ESG stock ratings together with research and sustainability reports. Sustainability reporting is supposed to come hand in hand with financial reporting. All issuers, inclusive of Real Estate Investments Trusts (REITs), business trusts, Special Purpose Acquisition Companies (SPACs), and Exchange Traded Funds (ETFs), are obligated to publish information annually.

Sustainability reporting at the SGX

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In order to fulfill the demands of investors, starting from 2022, all issuers must include climate reporting in their sustainability reports. Those statements need to incorporate the following components: material ESG factors, climate-related disclosures consistent with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations, policies, practices and performance, targets, sustainability reporting framework, as well as board statement and associated governance structure for sustainability practices. Moreover, from 2023, for all companies in the financial, agriculture, food, and forest, along with energy industries, climate reporting will become mandatory. In 2024, companies from the materials, buildings, and transportation fields will join that group of sectors. What’s more, all of the directors of listed companies must undergo a one-time training on sustainability. Those in charge of the SGX believe that sustainability reporting will enable a better assessment of the issuer’s financial prospects.

When it comes to battling social issues, from 2022, issuers are also required to adopt a board diversity policy that addresses inequality among those with different skills, requirements, and genders. The issue of gender inequality may seem significant as, according to the statistics, 87% of directors in the surveyed pool of 3000 companies were male. Consequently, issuers need to develop agendas that include diversity targets, plans, timelines, and progress in their annual reports.

As for the governance part, the sustainability report should cover the roles of the board and the management in relation to the governance of sustainability issues. Since the board takes all the responsibility for the long-term value creation of the issuer, it is also obligated to supervise the strategic direction of solving sustainability issues. One of the tasks of corporate managers is to ensure that the ESG factors are precisely monitored and managed.

ESG Portal

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Furthermore, all corporations in the highlighted industries will be judged based on their progress in ESG-related matters. The board of SGX prepared 27 core ESG metrics as well as a portal for the issuers to input data related to all three areas. The transparency of provided data assures that both investors and the general public will be capable of observing the development of the corporate actors they follow. In addition, the ESG data portal is promised to save costs and simplify the decision-making process for investors. Besides the raw data on ESG values, the portal will also incorporate commentaries, explanations of reported metrics, a place for discussion, board statements, and more.

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Conclusions

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The SGX board advises all listed companies to continue their progress among all three ESG components. Suppose the new regulations remain unchanged; all issuers will continue to be obligated to put out sustainability reports together with their financial statements. In that case, the transparency of ESG values in Singapore should increase significantly. Together with the upcoming ESG portal, those will become a crucial tool for investors that care about sustainability.

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