Climate Reporting Study Reveals Corporate Progress and Gaps

by | Jul 12, 2024 | Accounting, Income Tax, Tech News

A joint study by the Accounting and Corporate Regulatory Authority (ACRA) and the National University of Singapore’s Sustainable and Green Finance Institute (SGFIN) indicates strong momentum in climate reporting among large listed companies, while identifying critical gaps ahead of Singapore’s phased mandatory disclosure regime.

Key Regulatory Timeline

Singapore will implement mandatory climate reporting aligned with the International Sustainability Standards Board (ISSB):

  • FY2025: Listed issuers must comply.
  • FY2027: Larger non-listed companies commence (with exemptions).
    Companies already aligned with the Task Force on Climate-related Financial Disclosures (TCFD) framework are best positioned for the transition.

Study Methodology & Scope

The analysis assessed 51 large listed issuers (78% from carbon-intensive sectors) against TCFD’s four pillars for FY2022.

Findings by TCFD Pillar

  1. Governance (94% compliance):
    • Near-universal board oversight of climate risks/opportunities.
    • Gap: Only 75% detail board engagement processes; insufficient disclosure of board’s role in shaping climate performance targets.
  2. Strategy:
    • 88% disclosed climate-related risks (physical/transitional), but only 61% reported opportunities.
    • 75% conducted scenario analysis, yet most omitted critical context: scenario justifications, assumptions, and strategy resilience assessments.
    • Critical Shortfall: Only 16% integrated climate risks into financial planning.
  3. Risk Management:
    • 71% comprehensively disclosed risk identification processes.
    • Material Deficiencies:
      • 24% disclosed risk significance vs. other risks.
      • 10% quantified risk magnitude.
  4. Metrics & Targets:
    • Strengths:
      • Scope 1 & 2 GHG emissions disclosures at 96% and 100%.
      • Scope 3 emissions reporting reached 59%.
      • 80% set emission reduction targets/timeframes.
    • Weaknesses:
      • Limited interim milestones for tracking progress.
      • <10% link executive compensation to climate performance.
      • Opportunity metrics remain underreported.

Recommendations for Companies

ACRA-SGFIN advises firms to:

  1. Prioritize progress over perfection in disclosures.
  2. Integrate climate risks/opportunities into financial statements and strategic planning.
  3. Adopt forward-looking resilience assessments for business models.
  4. Enhance quantification of risks and alignment of executive incentives.

The study provides a benchmark for TCFD-aligned reporting, highlighting sector readiness as Singapore accelerates its sustainable finance agenda. Companies lagging in scenario analysis, financial integration, and Scope 3 emissions must urgently bridge gaps to meet ISSB requirements.

Source: ACRA, 8 July 2024.