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Singapore has positioned itself as a regional leader in sustainability reporting by implementing mandatory climate-related disclosures beginning in 2025. This groundbreaking initiative aligns with the International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards issued by the International Sustainability Standards Board (ISSB), marking Singapore as the first Asian jurisdiction to mandate such comprehensive climate reporting.

Beyond compliance, these reporting requirements offer strategic advantages. Companies providing comprehensive climate disclosures gain improved access to sustainable financing, better stakeholder relationships, and enhanced reputation among environmentally conscious consumers and investors. The standardized framework also facilitates more accurate benchmarking against industry peers and international competitors.

IFRS S1 establishes the general requirements for disclosure of sustainability-related financial information. This standard requires companies to provide information about sustainability-related risks and opportunities that could reasonably be expected to affect their cash flows, access to finance, or cost of capital over the short, medium, and long term.

The standard emphasizes the connectivity between sustainability information and financial statements, ensuring that disclosures are decision-useful for investors and capital market participants. Under IFRS S1, companies must organize their disclosures around four core content areas: governance, strategy, risk management, and metrics and targets.

This structure ensures comprehensive coverage of how sustainability factors influence business operations and financial performance. Companies must also identify material sustainability-related risks and opportunities using industry-specific guidance and consider various sources of information, including SASB standards and other internationally recognized frameworks.

IFRS S2 builds upon S1's foundation by providing detailed requirements for climate-related disclosures. This standard fully incorporates TCFD recommendations while adding enhanced requirements such as industry-based metrics, detailed carbon credit usage disclosure, and financed emissions reporting for financial institutions. Companies must disclose their governance arrangements for monitoring climate-related risks and opportunities, including board oversight and management's role in assessment and management processes.

Companies should consider following Singapore reporting even if they are technically out of scope for several compelling strategic and business reasons:

‍Supply Chain Pressure and Expectations: Whether your organization falls the reporting mandatory scope or is voluntarily reporting to align with stakeholders who must report and have heightened expectations for the supply chain – these new standards may still impact you. Even companies who don't meet the threshold themselves will need to know a certain amount of information because they will sit within the supply chain of an organization affected by the rules. This creates a cascading effect where larger companies will increasingly demand sustainability data from their suppliers and partners.

‍Future-Proofing and Market Position: Even companies who do not fall under the mandated scope, they should look to embark on emission accounting if they have not already. There will be increased demand for value chain emission data, spilling over to smaller companies, who in turn must disclose their own emissions data. Early adoption positions companies advantageously as the reporting framework expands to cover more entities in subsequent phases.

‍Investor and Stakeholder Confidence: This is an important first step for Hong Kong to introduce standardized reporting requirements in Hong Kong, providing investors with consistent and transparent information for their investment decisions. Voluntary compliance demonstrates proactive governance and transparency, which increasingly influences investment decisions, customer preferences, and business partnerships.

Dingapore standards defines materiality following the same approach as the international IFRS S1 and S2 standards, which it is aligned with.

All disclosures required by IFRS S1 and IFRS S2 are subject to an assessment of materiality. The International Accounting Standards Board's (IASB) definition of material information and primary users is consistent with the Conceptual Framework for Financial Reporting (Conceptual Framework). IFRS S1 uses definitions and requirements that are consistent with the IASB's Conceptual Framework, IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

‍Financial Materiality Focus: IFRS S1 and S2 are focused on financially material environmental, social, and governance (ESG) risks and opportunities that affect the overall bottom line. This represents a "single materiality" approach focused on financial impacts to the entity, as opposed to the "double materiality" concept used in some other frameworks like the European CSRD.

‍Specific Definition: Singapore requires entities to disclose information about sustainability-related risks and opportunities that could reasonably be expected to affect the entity's cash flows, its access to finance or cost of capital over the short, medium or long term. Information is considered material if omitting or misrepresenting it can impact investors' decision-making.

‍Assessment Requirements: Assessment and disclosure of material climate-related risks and opportunities affecting entities business model and value chain including the effect on financial position, financial performance and cash flows. Financial materiality needs to be determined. These insights are sought by the investment community: Determining how business' sustainability actions could introduce climate-related risks or opportunities capable of affecting financial performance is crucial for transparent reporting.

‍Practical Application: Companies must conduct a materiality assessment to determine which climate-related risks and opportunities are most relevant to their business, engaging with stakeholders, analyzing industry trends, and assessing the potential financial impact of these climate-related risks. This assessment is fundamental to determining what information must be disclosed under Singapore standards, ensuring that companies focus their reporting on sustainability matters that have genuine financial relevance to investors and other capital providers.

The materiality definition under Singapore rpeorting framework is therefore investor-focused and financially-oriented, requiring companies to identify and disclose sustainability-related information that could reasonably be expected to influence economic decisions about providing resources to the entity.

IFRS S1 and IFRS S2 include reporting requirements across four content areas: governance; strategy; risk management; and metrics and targets. These core content areas are consistent with the TCFD's recommendations. IFRS S2 focuses specifically on climate-related disclosures and covers governance of climate issues, strategy alignment with climate risks and opportunities, scenario analysis, metrics (including Scope 1, 2, and 3 emissions), and progress toward climate-related targets.

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