Listen to this story:

• Singapore requires listed issuers to make climate-related disclosures from FY2025.
• Firms proactive in climate initiatives report higher-than-expected financial value.
• Align ESG and financial reporting, enhance data quality, and drive decarbonization.

Driving Climate Strategy: A Board’s Role

Boards must take decisive actions to realize long-term value from climate strategies and boost stakeholder confidence.

Climate Disclosures in Singapore

Singapore mandates all listed issuers to make climate-related disclosures from FY2025, with large non-listed companies following in FY2027. These must align with International Sustainability Standards Board (ISSB) standards.

“Singapore’s revised initiatives under the Green Plan highlight our commitment to sustainability and advanced climate reporting,” said a government official.

Key points include:

1. External Assurance: Must be conducted by ACRA-registered audit firms or accredited certification firms.
2. Assurance Standards: Based on Singapore’s equivalent of the International Standard on Sustainability Assurance 5000 and SS ISO 14064-3:2021.
3. Exemptions for Non-Listed Companies: Possible if parent companies report using ISSB-aligned or other international standards.

Boosting Financial Value Through Climate Action

According to the 2023 EY Sustainable Value Study, proactive climate action leads to 1.8 times higher financial value than less active firms. ESG-focused companies often outperform their peers in financial metrics.

“Firms addressing climate change see significant financial returns,” noted the EY report.

Challenges in ESG Implementation

Navigating the sustainability landscape involves complex decisions and intangible trade-offs. Aligning ESG activities with financial performance remains challenging due to the difficulty in quantifying nonfinancial benefits.

“Demonstrating the financial impact of ESG initiatives is intricate but crucial for strategic investment decisions,” said an industry expert.

Key Board Actions for Effective Climate Strategy

1. Align ESG and Financial Reporting:
   • Boards must ensure alignment between IFRS S1/S2 and financial reporting.
   • Only 26% of companies report the quantitative impact of climate risks in financial statements.
   • Appointing a Chief Sustainability Officer (CSO) can bridge the gap between sustainability and financial results.
2. Enhance Data Quality:
   • Implement standardized procedures for ESG data collection, validation, and storage.
   • Automated systems for real-time data capture reduce errors and improve performance tracking.
   • External verification boosts confidence in climate reporting.
3. Drive Decarbonization Strategies:
   • Develop comprehensive strategies aligning with global standards and national commitments.
   • Set science-based emissions reduction targets and integrate them into the corporate strategy.
   • Regularly communicate progress to maintain investor confidence.

Related Article: EY Study Reveals Consumer Hesitancy in Investing Time and Money into Sustainable Energy

“High-quality ESG data is vital for transitioning to lower-carbon operations and creating long-term value,” emphasized a corporate sustainability leader.

Boards play a pivotal role in ensuring companies not only meet reporting requirements but also leverage ESG insights for sustainable growth and competitive advantage.