As climate change intensifies, the role of financial transparency and accountability in mitigating environmental risks has become paramount. Singapore, a global financial hub, is proactively aligning its corporate reporting landscape with international sustainability standards to address climate-related challenges. This article delves into how global accounting and auditing standard-setters are influencing Singapore’s approach to climate change, highlighting the nation’s initiatives to enhance climate-related disclosures and corporate accountability.

Global Momentum: The ISSB’s Role in Climate Disclosures

The International Sustainability Standards Board (ISSB), established under the IFRS Foundation, aims to create a comprehensive global baseline for sustainability disclosures. In June 2023, the ISSB released its inaugural standards: IFRS S1, focusing on general sustainability-related disclosures, and IFRS S2, dedicated to climate-related disclosures. These standards build upon the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), emphasizing the need for consistent and comparable information for investors.​

Emmanuel Faber, Chair of the ISSB, has been instrumental in promoting these standards globally. He emphasizes the importance of financial materiality to attract capital market involvement in sustainability challenges. Approximately two dozen countries have begun adopting these frameworks, ensuring comparability across different jurisdictions.

Transition Reliefs: Facilitating Adoption of ISSB Standards

Recognizing the challenges companies may face in implementing comprehensive sustainability disclosures, the ISSB has introduced transition reliefs to ease the adoption process. Notably, a “climate-first” approach allows companies to focus initially on climate-related disclosures under IFRS S2, deferring other sustainability-related disclosures under IFRS S1 to the second year of reporting. This phased implementation provides organizations with additional time to develop robust systems and processes for comprehensive sustainability reporting.

Regarding greenhouse gas emissions, IFRS S2 mandates the disclosure of Scope 3 emissions, encompassing indirect emissions throughout a company’s value chain. Companies are required to disclose which of the 15 categories of Scope 3 emissions, as outlined in the Greenhouse Gas Protocol, are included in their reporting.

Singapore’s Commitment to Sustainability Reporting

Singapore has demonstrated a strong commitment to sustainability through initiatives like the Singapore Green Plan 2030, which sets ambitious targets for achieving net-zero emissions by 2050. In alignment with global efforts, the Singapore Exchange (SGX) mandated climate reporting for listed companies on a “comply or explain” basis starting from the financial year 2022. A study revealed that 96% of Singapore-listed companies have commenced climate-related reporting efforts, a significant increase from 65% the previous year. Furthermore, 87% of issuers described climate-related risks and opportunities in their FY 2023 reports.

Integration of ISSB Standards into Singapore’s Framework

Singapore is actively working to integrate ISSB standards into its sustainability reporting framework. In September 2024, the Singapore Exchange Regulation (SGX RegCo) announced that, beginning with financial year (FY) 2025, all listed issuers will be required to report Scope 1 and Scope 2 greenhouse gas (GHG) emissions. Their climate-related disclosures must also start incorporating the climate-related requirements in the IFRS Sustainability Disclosure Standards issued by the ISSB. ​

Additionally, the Accounting and Corporate Regulatory Authority (ACRA) plans to mandate climate reporting for large non-listed companies with annual revenue of at least S$1 billion and total assets of at least S$500 million, starting from FY 2027. These companies will be required to obtain external assurance on Scope 1 and Scope 2 GHG emissions from FY 2029. ACRA will review in 2027 whether to extend the climate reporting requirements to non-listed companies with annual revenue of at least S$100 million by around FY 2030.

Addressing Challenges and Building Capacity

While the integration of global standards is a significant step forward, Singaporean entities have raised concerns about harmonization, comparability, and the readiness of companies to comply with new requirements. Feedback to the ISSB highlighted the need for phased implementation and additional guidance to help companies navigate the complexities of sustainability reporting.

To address these challenges, initiatives like the collaboration between KPMG Singapore and the Association of Chartered Certified Accountants (ACCA) have been launched. Their pioneering ESG programme aims to equip both accountants and non-accountants with the necessary skills to navigate the evolving landscape of sustainability reporting. The programme offers foundational and advanced tracks, focusing on areas such as climate risk, reporting, and measurements.

Furthermore, the Singapore Economic Development Board and Enterprise Singapore have launched the Sustainability Reporting Grant (SRG) to provide funding support for Singapore-incorporated companies to produce their first ISSB-aligned sustainability report. The grant defrays up to 30% of qualifying costs, capped at S$150,000, and is applicable to companies with annual revenue of at least S$100 million.

Expanding the Horizon: Biodiversity and Human Capital

Beyond climate-related disclosures, the ISSB is expanding its focus to encompass other critical sustainability topics, including biodiversity and human capital. As part of its 2024–2026 work plan, the ISSB is conducting research to assess the risks and opportunities associated with biodiversity, ecosystems, and ecosystem services (BEES). This initiative aims to determine the necessity and feasibility of developing disclosure standards in these areas.

In parallel, the ISSB is exploring sustainability-related risks and opportunities associated with human capital. This encompasses aspects such as workforce composition, diversity and inclusion, training and development, health and safety, and compensation. The research will inform potential standard-setting activities to enhance transparency and accountability in human capital management.

These initiatives align with the ISSB’s commitment to providing comprehensive sustainability disclosure standards that address a broad spectrum of environmental and social issues, thereby enabling investors to make informed decisions.

Conclusion

Singapore’s proactive approach to integrating global accounting and auditing standards into its sustainability framework demonstrates its commitment to addressing climate change. By aligning with ISSB standards, mandating climate-related disclosures, and investing in capacity-building initiatives, Singapore is setting a precedent for other nations. As the global community continues to grapple with the impacts of climate change, such concerted efforts in financial reporting and corporate governance are crucial for driving meaningful progress towards a sustainable future.