SGX to mandate ‘comply or explain’ approach to Sustainability Reporting in the near future

17 October 2014

Reported from the Singapore Compact CSR Summit 2014 by Gillian Lim, Paia Consulting

The Singapore Exchange (SGX) announced that it will be enforcing a “comply or explain” approach to Sustainability Reporting in the near future, and hinted that may shift to fining companies for non-compliance further down the line.

The announcement came from Mr Magnus Bocker, Chief Executive Officer of SGX, during his keynote speech at the Singapore Compact CSR Summit on 17 October 2014.

SGX released voluntary sustainability reporting guidelines in 2011 to encourage firms to share relevant environmental and social information with investors. However, take up has been slow with feedback that many companies are waiting for the bourse to make it a rule.

Alluding to the improvements made to Corporate Governance guidelines over the last few years and how they have made SGX a better exchange, Bocker stated that he wishes to approach sustainability reporting in a similar manner. He also mentioned that new tools will be made available to SGX in coming years, including the ability to fine companies for non-compliance. While fining for non-compliance of sustainability reporting may not happen for several years, Bocker pointed out that these new tools are nevertheless expected to improve regulation over time.

He highlighted regional initiatives in Malaysia, India and Taiwan to promote sustainability reporting, practices and responsible investment. Globally, the world is getting increasingly involved in sustainability, including the World Federation of Exchanges, which has set up a sub-committee to look at ESG issues.

Bocker stressed the importance of seeing sustainability reporting as an opportunity to create a business advantage. Reporting helps superior companies show their quality and their investors avoid surprises. He indicated that many banks already give “green” companies lower loan rates and that overseas investors, including pension funds, coming to Singapore have already been asking about sustainability reporting.

Reporting metrics allow for improved understanding of the company and for benchmarking exercises, thereby fuelling competition. “Fear of poor numbers can’t be a reason why we don’t do reporting,” said Bocker. Greater transparency leads to increased profitability for Singapore, which has a strong reputation in governance and transparency.

SGX will be holding a one year consultation period with companies and investors, following which they will be looking to make reporting mandatory.

Paia Consulting is a leading sustainability consultancy established since 2002. We helped produce Singapore’s first GRI report and many award-winning reports. Beyond reporting, many of the companies leading sustainability locally are our clients. Drop us a note at  info@paiaconsulting.com to discuss how we can support your sustainability journey