According to the third edition of Transparency in focus: State of Climate Reporting in Singapore, of the 359 companies that published sustainability reports for financial year (FY) ended 31 December 2024, 98% or 351 contained disclosures that met at least one of the Task Force on Climate-related Financial Disclosures (TCFD) recommendations.

The TCFD recommendations have been in place since FY 2022 and provide the basis for reporting under the ISSB standards, which will take place for FY 2025. The ISSB standards build on the four core themes of the TCFD recommendations – namely governance, strategy, risk management and metrics and targets – but demands more detailed information.

However, despite the phased approach, only 32% have made disclosures against all 11 recommendations by the TCFD. Notably, most (60%) of the large-cap issuers made disclosures against all 11 TCFD recommendations, while only 35% of mid-cap and 25% of small-cap companies did so¹.

The study by Ernst & Young LLP (EY) and supported by global accountancy body, CPA Australia, aims to provide insights into the current state of climate reporting in Singapore.

Ken Ong (王明利), Partner, Assurance at Ernst & Young LLP says: “The mandatory requirement for listed companies to make ISSB-aligned climate-related disclosures comes into effect for FY 2025 reports. This means that companies with financial year ending 31 December now have less than six months to make the transition. Given that the ISSB requirements are built on the existing TCFD framework, companies that disclose fully against the TCFD recommendations will find it easier to make the transition, and those that have yet to do so will face challenges.”

No clear commitment toward net zero transition

The study found that, in the FY 2024 reports, only a third (36%) of issuers have set net-zero targets. Interestingly, a-third (32%) of them have not embarked on disclosures of their transition plan and only 9% shared information about their capital deployed to address climate-related risks and opportunities, which highlights potential inconsistencies with their climate commitments.

A transition plan is a time-bound action plan that outlines how an issuer will adapt its existing business model, operations and resources in response to climate-related transition and risks identified. It also suggests that the company has clarity around the levers and actions needed to achieve its decarbonization goals as well as a level of preparedness to address any disruptions or opportunities driven by climate change.

Additionally, the study found that only 17% of issuers have linked sustainability-related performance to remuneration. Of those that disclosed sustainability-linked remuneration, about two-third (62%) are companies of large market capitalization. The linking of sustainability-linked remuneration suggests accountability from the business to help ensure proper management of their exposure to climate-related risks and associated impact on the broader society and economy.

Nhan Quang (仁广), Partner, Climate Change and Sustainability Services at Ernst & Young LLP says: “Companies with a transition plan are more likely to exhibit better business resilience toward climate events, as they would have assessed the related impacts and developed the necessary response. But more than just broad information, the transition plan should also include actionable steps where performance can be monitored. Additionally, having sustainability-linked remuneration suggests accountability from the business to help ensure proper management of their exposure to climate-related risks and associated impact on broad society and economy, highlighting their commitment to the sustainability goals.”

Growing appreciation for external assurance for sustainability reports

More issuers are seeking external assurance and internal reviews for their sustainability report in FY 2024. The study found that 96% of issuers have sought internal reviews on their sustainability reporting process, up from 85% that did so in the previous year. As well, 13% of issuers have voluntarily sought external assurance for their reports, up from 11% in the previous year.

Ong says: “In Singapore, the implementation of external assurance of GHG emissions for listed companies is still being reviewed currently. However, companies must note that a key consideration of the ISSB standards is to help users of sustainability reports better understand the connection between the sustainability information and financials of the company. Hence, having external assurance of the sustainability report can help to contribute to increased trust and confidence among investors.”

Themin Suwardy (郑明), Associate Professor of Accounting (Practice) at Singapore Management University, and Chairperson of the Membership Committee in CPA Australia, adds:

“Transitioning to ISSB-aligned sustainability reporting is more than a compliance exercise – it demands a fundamental mindset and capability shift. Organizations must move beyond viewing climate reporting as the sole responsibility of sustainability teams. This requires investing in upskilling staff across all functions to ensure that climate-related information is integrated into strategic decision-making processes. Strengthening internal capabilities will better position organizations to deliver high-quality and useful disclosures that align with global requirements.”

The study highlights three actions that companies should take to accelerate their transition to reporting under ISSB standards:

• Understand the true exposure of climate-related impact to the business: Having access to both quantitative and qualitative information is critical in understanding the extent of the impact of climate-related risks and opportunities on enterprise value as well as the wider environment and society, thereby enabling the organization to make informed strategic decisions. Yet, companies are passive about climate-related issues and few have embarked on a quantitative-based analysis of climate-related risks and opportunities.

• Develop a robust transition plan: For this, companies need to gather information that provides a comprehensive view of their environmental footprint, together with climate-related risks and opportunities. Effective resource planning and allocation are also critical for a viable transition to a low- to no-carbon economy.

• Equip members across different functions with sustainability knowledge: The responsibility for sustainability extends across various functions within the organization. For instance, with the introduction of ISSB standards, it emphasizes the connectedness of sustainability-related financial disclosures, which requires the finance function to support in preparing information for climate reporting purposes.