Philippines warns firms must ‘comply or explain’ on ESG by 2019
Publicly listed companies in the Philippines will soon be made to report their ESG performance or explain to the national regulator why they cannot show evidence of compliance.
The new ‘comply or explain’ rule will come into effect through the Securities and Exchange Commission (Philippines) by the end of 2018, demanding greater understanding from IROs of their firm’s governance standards.
‘IROs must be more familiar with their company’s most vital ESG issues and should be fully aware of all sustainability initiatives and performance metrics across the organization,’ says Rosario Carmela Gonzalez-Austria, the regulator’s assistant director of corporate governance and finance. ‘They also need to prepare for hard questions from their shareholders as well as their stakeholders, and to demonstrate a heightened commitment to ESG performance.’
Only 11 percent of companies in the Philippines currently report their sustainability progress, which mostly comprise the biggest public companies already used to filing annual reports. The new rule is expected to give corporates limits within which to coherently show their positive and negative impacts over time, and to set clear targets based on any shortfalls or contradictions.
According to a statement from the commission, sustainability is still an emerging practice in the Philippines and other economies where most people earn a low to middle-tier income. ‘Companies should be given ample time to substantially and accurately disclose information in the material aspects encompassed by the guidelines,’ it notes.
The statement stresses that the regulator’s sustainability reporting guidelines allow company boards ‘some flexibility’ to create their own ESG policies and that the stringency of compliance standards across all provisions will depend on the size and market capitalization of each firm.
‘Larger companies and financial institutions would generally be expected to follow most of the provisions. Smaller companies may decide the costs of some of the provisions outweigh the benefits, or are less relevant in their case,’ the commission concludes.