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Jan 10, 2016

Singapore Exchange to adopt ‘comply or explain’ ESG reporting

New rules to replace voluntary reporting regime in place since 2011

Singapore Exchange (SGX) will introduce sustainability reporting rules on a ‘comply or explain’ basis to replace the voluntary reporting regime that has been in place since 2011 in an effort to encourage more listed companies to report ESG issues.

The exchange is seeking public comment by February 5 on the new rules, which will ask companies to describe in detail how they manage material ESG risks starting with the financial year following December 31, 2017. Those who fail to do so will be required to explain why they are not reporting on ESG issues.

‘Sustainability reporting builds on transparency and governance, for which Singapore is internationally recognized,’ says SGX chief executive Loh Boon Chye in a press release. ‘It addresses investor demand for quality returns and gives companies the opportunity to differentiate themselves.’

Sustainability reporting will consist of five primary components:

  • Identification of material ESG factors
  • Outlines of policies, practices and performance in key ESG areas
  • Targets for the upcoming year
  • Details of the company’s chosen reporting framework 
  • A statement from the board confirming compliance with the primary components.

The new reporting regime will give companies ‘the latitude of reporting in the way that best suits their industry and circumstances,’ the exchange says in the press release.

SGX adds that it is considering whether diversity and corruption should be included as primary components of sustainability reports. It is also seeking public comment on the roles and responsibilities of the board in relation to sustainability reporting.