Singapore
Contributing law firm: Allen & Gledhill LLP
Contact: Elsa Chen, Partner (Chief Economist)
ESG in APAC - Singapore by Allen & Gledhill LLP
Please click on the podcast above for a snapshot of the three key themes of ESG reporting, transition planning and greenwashing risks in respect of Singapore. Scroll down for further information on each key theme.
A. ESG Reporting
1. Are there legal or regulatory requirements for companies to make ESG disclosures in your jurisdiction?
Yes.
2. What are the key legislative and regulatory sources for ESG disclosure requirements and to whom do they apply?
Mandatory ESG disclosure requirements apply to listed companies, large non-listed companies, funds with an ESG focus, and financial institutions in Singapore:
(a) Issuers listed on the Singapore Exchange (SGX). SGX-listed issuers are required to prepare an annual sustainability report containing the following primary components on a “comply or explain” basis: (i) material environmental, social and governance factors, (ii) climate-related disclosures (which are mandatory for certain issuers; please see further details in section A.3); (iii) setting out sustainability policies, practices, performance and targets in relation to material ESG factors; (iv) sustainability reporting framework; and (v) a board statement.
Issuers are also required to set a board diversity policy that addresses gender, skill and experience, as well as other relevant aspects of diversity. Issuers must describe the board diversity policy and details relating to the diversity targets, plans, timelines and progress in their annual reports.[1]
Aside from mandatory disclosures, SGX further recommends a list of 27 Core ESG Metrics for issuers to use as a starting point for sustainability reporting. They include matrices such as GHG emissions, occupational health and safety, age-based diversity, and alignment with frameworks.[2]
Pursuant to recommendations by the Sustainability Reporting Advisory Committee (SRAC), which was formed by the Accounting and Corporate Regulatory Authority (ACRA) and Singapore Exchange Regulation (SGX RegCo)[3]:
(i) From FY2025 onwards, all listed issuers will be required to make annual ISSB-aligned climate disclosures.
(ii) Large non-listed companies (NLCos), i.e. companies with an annual revenue of at least S$1 billion and total assets of at least S$500 million, are also required to make annual ISSB-aligned climate disclosures from FY2027 onwards.
(c) Financial institutions (FIs). Under MAS’ Guidelines on Environmental Risk Management (Guidelines on Environmental Risk Management) published in 2020, FIs should make regular and meaningful disclosure of their environmental risks, including with reference to international reporting frameworks, such as the TCFD framework, so as to enhance market discipline by investors. FIs are to implement the Guidelines in a manner commensurate with the size and nature of its activities as well as its risk profile.
The Guidelines also sets out MAS’ supervisory expectations for FIs, including banks, insurers and asset managers, in their governance, risk management and disclosure of environmental risk. Boards and senior management of FIs are expected to incorporate environmental considerations into their strategies, business plans, and product offerings, and maintain effective oversight of the management of environmental risk. FIs should also put in place policies and processes to assess, monitor, and manage environmental risk.
3. Are the requirements mandatory or do they apply on a comply-or-explain basis?
(a) Climate-related disclosures. Climate reporting is presently required on a “comply or explain” basis for all SGX-listed issuers, and is mandatory from FY2024 for issuers in the (i) financial industry; (ii) agriculture, food and forest products industry; (iii) energy industry; (iv) materials and buildings industry; and (v) transportation industry. Climate reporting will be mandatory for all listed issuers by FY2025 and for large NLCos by FY2027.[4]
(b) Sustainability reporting for issuers listed on SGX. SGX RegCo has proposed to enhance the requirement for issuers to describe the issuer’s sustainability practices with reference to six primary components from a “comply or explain” basis to a mandatory basis in the Sustainability Reporting: Enhancing Consistency and Comparability consultation paper (SGX Consultation Paper) dated 7 March 2024.
(c) Retail ESG funds. Disclosures under the SF(CIS)R, read together with the Circular, are mandatory for a fund that represents itself as ESG-focused and includes ESG or green related terms in its name. While the CIS Code is a non-binding code, non-compliance could be considered in determining whether to revoke or suspend the authorisation or recognition of the scheme or refusing to recognise a new scheme offered by the same offeror under sections 286 and 287 of the Securities and Futures Act 2001.
(d) FIs. The Guidelines on Environmental Risk Management set out MAS’ supervisory expectations for banks, insurers and asset managers in their governance, risk management, and disclosure of environmental risk. They are illustrative rather than prescriptive, as they are intended to promote certain best practices to be taken into consideration by FIs as part of their low carbon transition. How well an institution observes the guidelines and assesses, monitors, mitigates and discloses its risk exposures will factor into MAS’ overall risk assessment of banks and insurers.
(e) Sector-specific entities. On a sector-specific basis, there are mandatory disclosure requirements relating to energy consumption, production and greenhouse gas emissions, as well as the use of packaging, which are mandatory for companies that meet the prescribed thresholds.
4. Which aspects of ESG do the requirements focus upon?
The requirements are primarily focused on climate and the environment, but the requirements by SGX on listed issuers and MAS’ requirements on retail ESG funds also include other ESG factors.
5. Are the disclosure requirements based on international standards? If so, which one(s)?
(a) Transition from TCFD to ISSB standards. At present, SGX-listed issuers are required to report climate-related disclosures in accordance with the recommendations of the TCFD.
SGX RegCo announced in the SGX Consultation Paper that it will incorporate the ISSB Standards for climate-related disclosures into the SGX Listing Rules. SGX-listed issuers will hence be required (from FY2025) to progress from reporting in accordance with the recommendations of the TCFD to reporting in accordance with the ISSB Standards to the extent practicable. It is proposed that issuers also apply the requirements in IFRS S1 insofar as they relate to the disclosure of information on climate-related risks and opportunities.
(b) FIs. MAS further intends to set out a roadmap for mandatory disclosure requirements by financial institutions based on the ISSB Standards.
(c) ESG metrics for reporting. SGX also recommends a list of 27 core ESG metrics for issuers to use as a starting point for sustainability reporting, with each metric mapped against globally accepted reporting frameworks such as the GRI; SASB; the TCFD recommendations; and the World Economic Forum’s recommended set of metrics and disclosures.
6. How do the disclosure requirements approach materiality (e.g. single or double materiality)?
The disclosure requirements applicable to SGX-listed companies adopt a single materiality approach in line with the TCFD recommendations. However, issuers may choose to adopt an additional standard of materiality, including a double materiality approach, if they consider that it serves their stakeholders’ needs.
[5] This position is likely to remain the same following the transition to the ISSB Standards.
Similarly, the requirements applicable to financial institutions follow a single materiality approach in line with ISSB Standards.
7. Are there requirements for the disclosure of GHG emissions? If so, please specify the scope (e.g. Scope 1, Scope 2 and/or Scope 3), to whom they apply and whether there are requirements on the measurement methodology.
There are currently no mandatory requirements for the disclosure of GHG emissions. However, under the SRAC Climate Reporting Roadmap:
(a) Scope 1 and 2 GHG emissions. SGX-listed issuers and large NLCos must disclose both Scope 1 and Scope 2 GHG emissions under ISSB-aligned standards from FY2025 and FY2027 onwards, respectively. Some exemptions in respect of ISSB-aligned disclosures apply to NLCos whose parent company already makes climate disclosures. Around 2027, ACRA will review the need to mandate Scope 1 and 2 GHG emissions disclosures for smaller NLCos.
(b) Scope 3 GHG emissions. It is currently not mandatory for companies to report Scope 3 GHG emissions in Singapore.
However, under the SRAC Climate Reporting Roadmap, SGX-listed issuers and in-scope large NLCos will be required to report Scope 3 GHG emissions from FY2026 and at least FY2029 onwards, respectively.
The required measurement methodology is in line with IFRS S2.
8. Are there requirements to obtain independent assurance of any ESG disclosures? If so, what is the scope of such requirements?
There are currently no external/ third-party assurance requirements for ESG reporting in Singapore. However, there are some internal assurance requirements by SGX for issuers.
SGX and ACRA have accepted the SRAC Climate Reporting Roadmap recommendation to require SGX-listed issuers and large NLCos to conduct external limited assurance on their Scope 1 and 2 GHG emissions. However, SGX does not propose to mandate external assurance until details on assurance standards and registration criteria for climate auditors are finalised.
9. For companies not subject to mandatory or comply-or-explain ESG reporting, are voluntary ESG disclosures customary?
In general, voluntary ESG disclosures by non-publicly listed companies are still in a nascent stage in Singapore.
Where they do make voluntary disclosures, non-publicly listed companies tend to refer to sustainability reports published by listed companies.
10. Has your jurisdiction issued or adopted a taxonomy on sustainable activities? Is it mandatory and what is its scope of application?
In 2023, the Green Finance Industry Taskforce (GFIT), convened by MAS, published the Singapore-Asia Taxonomy for Sustainable Finance (Taxonomy), which guides financial institutions in Singapore to identify and transition towards green activities across eight focus sectors. It has introduced a “traffic light system” to classify the degree of environmental damage that certain activities pose, as well as a “measures-based approach” that seeks to encourage capital investments into decarbonisation measures or processes to reduce emissions intensity of activities.
The MAS has stated that investing in Taxonomy-eligible activities is not mandatory, nor is the Taxonomy an exhaustive list. It has indicated that the purpose of the taxonomy is to provide guidelines to enable transparent and consistent disclosures by corporates of their own economic activities that accommodates the varying characteristics of each FI, as opposed to a binding set of criteria guiding ESG disclosure by FIs.[6]
11. Are there plans to adopt or incorporate the ISSB’s IFRS S1 and/or S2 standards? If so, please indicate the extent of alignment, to what extent the standards will be mandatory, to whom they will apply and the timeline.
Yes, both IFRS S1 and S2 will be adopted. As of 28 February 2024, SGX RegCo has affirmed that it will incorporate IFRS S1 and IFRS S2 into the SGX Listing Rules. Issuers may also make reference to other reports published by the same entity, in alignment with the ISSB Standards. The section on balanced reporting in the Sustainability Reporting Guide, as set out in Practice Note 7.6 of the Mainboard Rules and Practice Note 7F of the Catalist Rules, will be aligned with ISSB Standards. The proposed amendments to the reporting regime are undergoing consultation and is expected to be finalised before the end of the year.
SGX RegCo will not mandate the use of ISSB Standards for sustainability-related disclosures beyond climate-related disclosures at this stage. SGX proposes to review the application of the ISSB Standards for disclosure of sustainability-related information beyond climate-related disclosures (e.g. biodiversity, human capital, etc.) a few years later.
MAS intends to set out a roadmap for mandatory disclosure requirements by FIs based on both IFRS S1 and S2 standards.
12. Other upcoming developments / direction of travel
(a) Project Greenprint and Project Savannah. MAS is actively working with regulators and organisations such as the Association of Banks in Singapore, ACRA and Enterprise Singapore to standardise and streamline sustainability data to support relevant stakeholders in the industry for mobilising capital to sustainable projects, monitoring commitments and measuring impact.
[7] MAS also announced an initiative named Project Savannah on 22 June 2023, to generate ESG data credentials for micro, small and medium-sized enterprises, and simplify the ESG reporting process.
(b) Sustainable finance taxonomy. Following four taxonomy consultation papers, GFIT launched the Taxonomy for FIs in December 2023. The taxonomy’s applicability and scope are still in the works.
(c) Green Skills Committee. In February 2023, the Ministry of Trade and Industry, in partnership with SkillsFuture Singapore, set up a Green Skills Committee to build the training framework and programmes for sustainability reporting and assurance. One of the programmes, the Enterprise Sustainability Programme by Enterprise Singapore, supports small and medium enterprises (SMEs) to build their sustainability capabilities, and provide workshops and a playbook for sustainability reporting for SMEs.[8]
(d) Code of Conduct for ESG rating agencies. On 6 December 2023, MAS issued the finalised Singapore Code of Conduct for ESG Rating and Data Product Providers, and an accompanying checklist for ESG rating and data product providers to self-attest their compliance to the Code of Conduct.
[9] This Code of Conduct aims to establish baseline industry standards for transparency in methodologies and data sources, governance, and management of conflicts of interest that may compromise the reliability and independence of ESG ratings and data products.
B. Transition planning
1. Has your jurisdiction set decarbonisation targets and strategies?
Yes. Singapore has committed to achieving net zero emissions by 2050. Singapore has also committed to reduce emissions to around 60 million tonnes of carbon dioxide equivalent (MtCO2e) in 2030 after peaking emissions earlier as part of its revised 2030 Nationally Determined Contribution.[10]
To facilitate the attainment of these goals, Singapore unveiled the 2030 Green Plan, where Singapore plans to reduce emissions by:
(a) Transforming its industries, economies and societies towards adopting more renewable energy, greater energy efficiency and reducing energy consumption.
(b) Adopting advanced low-carbon technologies, and use of low-carbon fuels.
(c) Implementing effective international collaboration, relating to international climate action, regional power grids, and market-based mechanisms.
The Singapore Government is concurrently developing Singapore’s 2035 Nationally Determined Contribution, including plans to consult stakeholders.
[11]
2. Has the government or any regulator in your jurisdiction launched compliance and/or voluntary carbon trading schemes or carbon taxes? If so, please give details. If not, are there plans to do so?
Singapore has been engaging likeminded countries in carbon trading on a bilateral basis under Article 6 of the Paris Agreement. This is underpinned by legally binding Implementation Agreements, which will require carbon credit developers to make a monetary contribution equivalent to 5% share of proceeds towards the host countries’ adaptation actions and/or UNFCCC Adaptation Fund.
Singapore has a carbon tax. As of 2024, the carbon tax rate is at S$25 per tonne, with a view to be raised to S$45 per tonne in 2026 and 2027, and eventually S$50 to S$80 per tonne by 2030. Additionally, from 2024 onwards, eligible taxable facilities can now use high quality International Carbon Credits to offset up to 5% of their taxable emissions.
The National Climate Change Secretariat Singapore has identified Singapore as a potentially attractive carbon credits trading destination for international sectoral carbon trading schemes, such as the Carbon Offsetting and Reduction Scheme for International Aviation. The Secretariat is hence studying opportunities arising from Singapore’s development as a carbon services and trading hub, encouraging incumbent firms and entrants alike to use Singapore as a regional gateway for carbon services.
3. Are there mandatory requirements for companies to have in place and/or disclose climate-related transition plans? If so, please give details (including whether there is any standard or guidance on transition plans and/or requirement to consider the social impact of the plan). If not, are there plans for such requirements?
It is currently not mandatory for companies to have a transition plan. The SGX Listing Rules currently require SGX-listed companies to make climate-related disclosures in line with TCFD recommendations, and subsequently based on the ISSB Standards (please see response to section A.2 above).
On 8 September 2023, SGX RegCo affirmed that the disclosure of transition plans by issuers is important to fulfil the growing interest from investors and other stakeholders on how the issuer intends to meet its climate ambitions. SGX RegCo has provided guidance on its expectations for credible climate transition plans. However, this has not been made mandatory.
FIs can voluntarily put in place transition plans. In 2023, MAS issued a set of consultation papers proposing guidelines on transition planning for FIs (Proposed Transition Planning Guidelines). The Proposed Transition Planning guidelines is intended to provide further guidance on additional granularity in relation to the transition planning processes of FIs. These consultation papers focus on FIs’ internal strategic planning and risk management processes to prepare for risks and potential changes in business models associated with the transition.
4. Are there mandatory requirements to set, meet and/or disclose climate-related targets? If so, please give details. If not, are there plans for such requirements?
Please see section B.3. There is no mandatory requirement to set climate-related targets. Nevertheless, the ISSB Standards, and TCFD Recommendations, include disclosing targets used by the organisation to manage climate-related risks and opportunities and performance against such targets.
5. Other upcoming developments / direction of travel
(a) Green Plan 2030.[12] Pursuant to the Singapore Green Plan 2030 and Singapore’s long-term low emissions development strategy, the Singapore Government will continue to implement policies to facilitate the reduction of GHG emissions and the transition to net-zero.
One such notable policy is the policy on carbon tax, which will be implemented through a progressive framework as outlined in section B.2 above.
(b) Guidelines on transition planning for FIs. Given the urgency to fulfil net zero commitments amidst the worsening effects of climate change, Singapore has placed greater emphasis on adapting business models to rising temperatures. MAS has expressed that FIs have both the means and motive to do so. It released the Proposed Transition Planning Guidelines in 2023 to communicate its supervisory expectations for FIs to allocate appropriate resources and commence adaptive action as soon as possible.
(c) Transition Credits. In September 2023, MAS and McKinsey & Company jointly published a working paper setting out how high-integrity carbon credits (Transition Credits) may be utilised as a complementary financing instrument to accelerate and scale the early retirement of coal-fired power plants. MAS has since announced two pilot projects to facilitate the retirement of coal plants.
C. Greenwashing risks
1. Are there any recent examples of legal proceedings, regulatory actions or investigations against or into greenwashing in your jurisdiction?
In December 2023, the Advertising Standards Authority of Singapore (ASAS) made the nation’s first ruling against a company for making misleading environmental claims about a product. The advertisement in question involved an electronics retailer advertising its air-conditioner as a “best tip” to “save Earth”, depicting an influencer setting the air-conditioner to 23 degrees Celsius to do so.
ASAS requested that the retailer remove the advertisement as it breached the Singapore Code of Advertising Practice (SCAP) guidelines. The SCAP guidelines require advertisements not to mislead by “inaccuracy, ambiguity, exaggeration or omission”, and not to misrepresent any matter likely to influence consumers’ attitudes to the product. The retailer maintained that it did not violate said guidelines, but nonetheless complied with the request in furtherance of its “cooperative stance towards ASAS”. Although the SCAP guidelines are not legally binding, this ruling signals a move towards greater greenwashing accountability for companies in Singapore.
On 15 February 2023, Market Forces, a climate activist group in Australia, filed a complaint to the SGX against a power generator for not fully disclosing risks related to its US$300 million bond issue on SGX in 2022, notably of:
(a) The material financial risk associated with its exposure to the Liquified Natural Gas industry; and
(b) Ongoing litigation which could have a material effect on its future financial prospects.
In March 2022, the Competition and Consumer Commission of Singapore (CCCS) awarded a grant to researchers from the Centre for Governance and Sustainability at the National University of Singapore Business School to look into greenwashing on e-commerce websites in Singapore. The research survey indicated that there may be a need to update and clarify existing laws and regulations to protect consumers.
Following the publication of findings from the CCCS-funded study, in November 2023, the CCCS advised suppliers on the making of environmental claims on e-commerce websites which found the use of vague environmental claims and confusing technical jargon on such websites. Please see the response in section C.2 below.
The CCCS is developing a set of guidelines to provide greater clarity to suppliers on the environmental claims that could amount to unfair practices under the Consumer Protection (Fair Trading) Act and will seek public feedback on the guidelines in due course.
2. Are there any laws or regulations specifically dealing with greenwashing?
There is no specific law that is aimed at greenwashing in Singapore, but there are various laws and regulations that can be applied to address greenwashing:
(a) Misrepresentation. Companies engaged in greenwashing may be liable for fraudulent or negligent misrepresentation and be liable for damages under section 2(1) of the Misrepresentation Act 1967 should civil proceedings be commenced against them.
(b) Consumer protection. Greenwashing in respect of consumer transactions can contravene section 4 of the Consumer Protection (Fair Trading) Act 2003 (CPFTA) as an “unfair practice”. Consumers have the right to obtain redress against the company for engaging in an unfair practice through the Consumers Association of Singapore and may be able to claim damages from losses due to the greenwashing or to obtain an injunction from the court to restrain the business from continuing to engage in said unfair practice.
(c) Securities laws and regulations. Amongst other provisions, section 199 of the Securities and Futures Act 2001 provides that persons must not make statements that are false or misleading and that are likely to induce other persons to subscribe for, induce the sale or purchase of, or have the effect of raising, lowering, maintaining or stabilising the market price of securities without care as to the truth of the statement, or with actual or constructive knowledge that the statements are false or misleading.
(d) Directors’ duties. Greenwashing can expose directors to a breach of directors’ duties under common law or the Companies Act 1967. Under section 157 of the Companies Act 1967, directors are under a duty to act honestly and use reasonable diligence in the discharge of their duties, which may be breached if the company is found to have engaged in greenwashing and in breach of relevant laws.
(e) Advertising standards. the abovementioned Singapore Code of Advertising Practice requires all advertisements to be legal, decent, honest, and truthful. Although this is not legally enforceable, it may be used by the ASAS against unsubstantiated environmental product claims.
On 16 November 2023, the CCCS announced that it is currently developing a set of guidelines to help companies make fair and accurate claims about the “green” credentials of their products. In the meantime, it has expressed that the onus is on businesses to be transparent and abstain from misleading consumers using technical jargon and vague claims.
The CCCS has created a set of guidelines to raise awareness among consumers of greenwashing and other false environmental claims when buying products.
3. What are the likely grounds on which such proceedings, actions or investigations can be instigated?
Please see the response in section C.2 above.
There are also risks of regulatory enforcement pursuant to, for example, codes/ guidance issued by financial regulators on the marketing of financial products and SGX Rulebooks.
Separately, the CCCS has released a Guidance Note on Business Collaborations Pursuing Environmental Sustainability Objectives. This Guidance Note clarifies that certain agreements pursuing collaboration on environmental sustainability objectives may be found anti-competitive and hence prohibited under the Competition Act, such as those involving market-sharing or imposing output limitations. The CCCS has adopted a streamlined two-phase approach to assess and identify such agreements.
4. Other upcoming developments / direction of travel
Singapore Minister of State for Trade and Industry, Alvin Tan, said in Parliament on 21 March 2023 that Singapore is studying developments on greenwashing in other jurisdictions “to assess if any specific guidance or regulations would be useful in the Singapore context”.
This is even while the current scope of the CPFTA is “sufficiently broad” to address greenwashing claims by a supplier in a business-to-consumer transaction, and there are existing guidelines under the Singapore Code of Advertising Practice to ensure that advertisers clearly explain, adequately substantiate and qualify any environmental claim where necessary.
The risk of greenwashing litigation against companies (in particular, listed companies) is expected to grow as reporting requirements become more robust and various stakeholders become more proactive in combatting potential greenwashing, including through litigation.
Please see the response in section C.1 on the development of guidelines by the CCCS to help companies make fair and accurate claims about the “green” credentials of their products.
This material is provided for general information only. It does not constitute legal or other professional advice.
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