Overview of Environment and Social Governance (ESG) and Sustainable Financing

What ESG-related laws and regulations are financial institutions subject to in Singapore now and in future?

• According to MAS (Pages),
  last revised on 28 July 2022

  Mandatory Disclosures for Listed Companies

  • All SGX-listed entities to provide climate reporting on a ‘comply or explain’ basis for financial years starting on or after 1 Jan 2022 (Issued on 15 December 2021)
    • Learn more information about SGX Sustainability Reporting 
  • Issuers in industries identified by the TCFD as most affected by climate change will be progressively subject to mandatory climate reporting from financial year 2023.

  Mandatory Disclosures for Financial Institutions
  MAS will consult on mandatory disclosure requirements, referencing the ISSB standards. 
  

  Disclosure and Reporting Guidelines for Retail ESG Funds

   

  Disclosure and Reporting Guidelines for Retail ESG Funds
  

  MAS introduced disclosure and reporting guidelines for retail ESG funds to mitigate greenwashing risks. From 1 January 2023, Retail ESG funds would be required to provide clear disclosures on their ESG investment objective and approach, relevant ESG criteria and metrics, as well as regular updates on how their ESG objective have been met.
  Learn more information about Disclosure and Reporting Guidelines for Retail ESG Funds 

   

  According to MAS (Speeches),
  last revised on 28 July 2022

  SGX and MAS are stepping up efforts to strengthen the comparability and reliability of sustainability-related disclosures – for listed companies, major financial institutions, and retail ESG funds.

  Listed companies will be required to disclose their climate-related risks, based on TCFD recommendations, from 2023 onwards.

  • Listed entities from the financial services, energy, agriculture, food and forest products industries will be scoped in first.
  • By 2025, more than 60% of SGX-listed entities by number and 78% by total market capitalisation will be covered.
  • These steps will be important in preparing issuers for eventually reporting against the ISSB standard which is expected to be finalised by the end of this year.

  Mandatory climate-related disclosures for major financial institutions will kick in later but reference the ISSB standard. 

  • Currently, MAS expects all financial institutions to make climate-related disclosures from this June onwards, in accordance with international reporting frameworks such as the TCFD recommendations.
  •  For mandatory reporting, rather than adopt the TCFD recommendations and then move to the ISSB standard, MAS has judged that a seamless move to the ISSB standard would be more efficient.
  • We will consult on the disclosure requirements for financial institutions as soon as the ISSB standard is finalised.

  Today, MAS is putting out disclosure and reporting guidelines for retail ESG funds.

  • Funds that are sold to retail investors in Singapore under the ESG label will now have to provide relevant information to better substantiate the label.
  • Some of the required information includes:
    • details on the ESG fund’s investment strategy;
    • criteria and metrics used to select investments; and
    • risks and limitations associated with the fund’s strategy.

  • MAS will require the disclosures to be made on an ongoing basis. Investors will receive annual updates on how well the fund has achieved its ESG focus.
  • The new guidelines, to take effect from January 2023, will help to reduce greenwashing risks and enable retail investors to better understand the ESG funds they invest in.