SGX to move to ‘comply or explain’ basis

On 19 Mar 2013, Singapore Exchange (SGX) announced at RI Asia 2013, the environmental, social and governance (ESG) summit that SGX will move to a “comply or explain” basis for reporting standards. 

SGX to get stricter on sustainability
Bourse will move to a ‘comply or explain’ basis for reporting such standards

20 March 2013
Business Times Singapore (c) 2013 Singapore Press Holdings Limited

THE Singapore Exchange (SGX) is pushing for more stringent sustainability standards among listed companies here, and will move to a “comply or explain” basis for reporting such standards.

Although no timeline was given, SGX chief executive Magnus Bocker said yesterday that this move had come about as more investors were looking for non-financial data.

This means listed companies will have to report on issues like how they affect the environment and the communities they operate in, or explain deviations from the standards.

“With the world moving forward and embracing sustainability as a core foundation of successful business and long-term performance, we are reviewing our policies and will push forward to greater disclosure and practice,” said Mr Bocker in a keynote address at the environmental, social and governance (ESG) summit, RI Asia 2013, yesterday.

He said SGX will introduce more tools to help listed companies report on sustainability. In June 2011, the bourse released guidelines to help firms prepare such reports.

SGX will also help retail investors understand the value of sustainability practices in their companies, by introducing an online investor’s guide to reading sustainability reports.

It is also reviewing non-profit organisation Global Reporting Initiative’s fourth-generation sustainability guidelines, due to be out in May, Mr Bocker said. In addition, SGX will explore the possibility of setting up a Singapore sustainability index.

SGX currently adopts a “comply or explain” basis for the Code of Corporate Governance.

Meanwhile, sustainability is not big in Singapore or the rest of Asia. Out of the estimated US$13 trillion worth of professionally managed assets that incorporate such measures in investment selection and management, Europe accounts for 65 per cent while Asia accounts for a mere 0.6 per cent – US$74 billion.

Sustainable investing has an impact on Asian markets, however. Last year, Norway’s US$710 billion sovereign wealth fund pulled out of 23 Asian palm oil companies after accusing them of causing deforestation. The companies included Singapore-listed Wilmar International and Golden Agri-Resources.

Mr Bocker also noted that Asian exchanges are introducing more ESG guidelines. The Securities and Exchange Board of India (SEBI) mandated ESG disclosure for India’s top 100 listed companies last August. The Hong Kong Stock Exchange has said it will move to a “comply or explain” approach for ESG reporting by 2015.

In Singapore, an SGX-KPMG study found that sustainability-related disclosure did not improve in any significant way from 2010 to 2011, Mr Bocker said. Just 13 out of 100 companies reviewed used internationally recognised standards or guidelines to report the sustainability-related information disclosed.

But as the world’s population increases and becomes more urbanised, issues such as population growth, material resource scarcity, wealth, urbanisation, energy and fuel will affect every business.

Mr Bocker said SGX will maintain a well-functioning and competitive platform that can attract sustainable companies to the Singapore market.