SINGAPORE: New ESG Disclosure Requirements Implemented 2023

What businesses operating in Singapore should know

The Monetary Authority of Singapore (MAS), the nation’s central bank, has introduced disclosure and reporting requirements for environmental, social and governance (ESG) funds. In its Circular No. CFC 02/2022, released on 28 July 2022, the central bank announced new guidelines which will enter into force on 1 January 2023.

Under the rules, ESG funds will be required to disclose information on an ongoing basis, and investors will receive yearly updates on the progress of the ESG goals that the funds have specifically set. ESG must provide information such as their investment focus; strategies; criteria and metrics used in selecting investments; asset allocation; and the risks and limitations associated with their strategies. Funds must also allocate at least two‑thirds of net assets for sustainability investments as per their stated strategies. Funds must also ensure that the name they adopt is not misleading, and if they use ESG‑related terms such as “sustainable”, this should be substantially reflected in their portfolio.

ESG (Environmental, Social, and Governance) practices and sustainability reporting have become increasingly important in Singapore in recent years. The Singapore government has been promoting sustainability practices and encouraging businesses to adopt ESG reporting as part of their business strategy.

What is ESG?

ESG stands for Environmental, Social, and Governance, and it refers to the three central factors that measure the sustainability and ethical impact of a company. ESG criteria are used by investors to evaluate the long-term performance of a company beyond just financial metrics. It is based on the belief that companies that are mindful of environmental and social issues and have strong governance practices are likely to outperform their peers in the long run.

What is Sustainability Reporting?

Sustainability reporting is the practice of measuring, disclosing, and being accountable for a company’s social, environmental, and economic impacts. This is usually done through an annual sustainability report, which is a document that outlines a company’s sustainability performance over a particular period. Sustainability reporting is a critical tool for companies to measure, track, and communicate their sustainability practices and achievements to their stakeholders. Understanding ESG and sustainability reporting is essential for several reasons. Firstly, it enables companies to identify and measure the impact of their actions on the environment, society, and governance. This helps companies to develop sustainable strategies and practices that can help to mitigate risks and create long-term value for the business. By tracking their ESG performance, companies can also identify areas where they need to improve and take corrective actions.

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Legislation and Regulation in Singapore

In 2018, the Monetary Authority of Singapore (MAS) introduced a set of guidelines for financial institutions to incorporate ESG factors into their investment decision-making process. This move aimed to encourage the financial sector to support sustainable development and provide financing for environmentally and socially responsible projects.

The Singapore Exchange (SGX) has also been promoting sustainability reporting among listed companies. In 2016, SGX introduced a mandatory sustainability reporting requirement for all listed companies. The requirement aims to increase transparency and accountability on sustainability issues, and it aligns with international reporting standards such as the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB). In addition, Singapore has established several initiatives to support the growth of the green economy. The government launched the Green Finance Action Plan in 2019, which aims to develop Singapore as a leading green finance hub in Asia. The plan includes initiatives such as green bonds, sustainability-linked loans, and green insurance products.

The government has also established the Singapore Green Plan 2030, which outlines the country’s sustainability goals over the next decade. The plan includes targets to increase the adoption of renewable energy, reduce carbon emissions, improve waste management, and enhance biodiversity.

ESG for Investors

Understanding ESG and sustainability reporting is important for investors. Investors are increasingly interested in investing in companies that have strong ESG practices. They believe that companies that prioritize sustainability are likely to be more resilient in the long run and generate better returns. By understanding a company’s ESG performance, investors can make more informed investment decisions that align with their values.

ESG for Stakeholders

understanding ESG and sustainability reporting is important for stakeholders. Stakeholders, including employees, customers, and the wider community, want to work with and support companies that prioritize sustainability. By communicating their sustainability practices and achievements through sustainability reports, companies can build trust and improve their reputation with their stakeholders.

ESG for Society and the world

understanding ESG and sustainability reporting is essential for society and the planet. Climate change, environmental degradation, and social inequality are some of the most significant challenges facing humanity today. Companies that prioritize sustainability have an important role to play in addressing these challenges. By understanding their impact on the environment and society, companies can develop sustainable practices that help to create a better future for all. Embark on a Master in Business Administration which equips you with Sustainable Business Strategy Skills. You’ll discover how to organise and apply business sustainability.

Conclusion:

Understanding ESG and sustainability reporting is crucial for companies, investors, stakeholders, and society as a whole. By prioritizing sustainability and communicating their sustainability practices and achievements through sustainability reports, companies can create long-term value, build trust with their stakeholders, and contribute to a better future for all.

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