From TCFD to ISSB: Singapore's evolution in climate disclosure requirements

Singapore's sustainability reporting landscape has undergone significant evolution, transitioning from the Task Force on Climate-related Financial Disclosures (TCFD) framework to the more comprehensive International Sustainability Standards Board (ISSB) standards. This transition represents both continuity and enhancement in climate disclosure requirements, providing companies with a clear pathway for upgrading their reporting practices.

The TCFD foundation in Singapore

Since 2022, listed companies in Singapore have been required to make climate-related disclosures based on TCFD recommendations. The TCFD framework established four core disclosure areas: governance, strategy, risk management and metrics and targets. This framework helped Singapore companies develop initial capabilities in climate reporting and provided a foundation for understanding climate-related risks and opportunities.

Under the TCFD framework, companies reported on climate governance structures, strategic planning processes that consider climate factors, risk management approaches for climate-related risks and metrics used to assess and manage these risks. The "comply or explain" approach allowed companies flexibility while building reporting capabilities and stakeholder expectations for climate transparency.

How the ISSB enhancement builds on TCFD foundations

The IFRS S2 standard fully incorporates TCFD recommendations while adding significant enhancements that create more comprehensive and comparable disclosures. Companies that have been reporting under TCFD will find familiar structure in the ISSB standards, but with additional specificity and requirements that enhance the quality and consistency of disclosures.

Key enhancements in IFRS S2 include mandatory greenhouse gas emissions reporting, industry-specific metrics derived from SASB standards, detailed requirements for transition planning and enhanced disclosure requirements for climate-related targets and commitments. The standard also requires more specific information about how climate considerations are integrated into business strategy and financial planning.

Enhanced emissions reporting requirements

While TCFD recommended emissions disclosure, IFRS S2 makes it mandatory with specific measurement requirements. Companies must report absolute gross greenhouse gas emissions for Scope 1 and Scope 2, calculated using the GHG Protocol Corporate Standard. This represents a significant step up from TCFD's more flexible approach to emissions reporting.

The ISSB standard also introduces requirements for Scope 3 emissions disclosure, carbon credits usage and internal carbon pricing information. These enhanced requirements provide investors with more detailed and comparable information about companies' climate impacts and management strategies.

Industry-specific metrics and disclosure topics

A major advancement in IFRS S2 is the incorporation of industry-based metrics from SASB standards. This means companies must consider and disclose metrics that are specifically relevant to their industry's climate-related risks and opportunities. For example, financial services companies must disclose financed emissions, while energy companies must report on energy production and distribution metrics.

This industry-specific approach ensures that disclosures are material and relevant to stakeholder decision-making while maintaining comparability within industry sectors. Companies transitioning from TCFD should conduct gap analyses to identify which industry-specific metrics apply to their operations.

Transition planning and target setting

IFRS S2 places greater emphasis on transition planning and target disclosure than TCFD. Companies must provide detailed information about their transition plans, including specific actions, timelines and resource allocation for achieving climate targets. This includes disclosure of science-based targets, net-zero commitments and interim milestones.

The standard requires companies to explain how their targets align with latest climate science and international agreements, providing investors with clearer insights into companies' climate strategies and their credibility. Companies must also disclose progress against targets and any revisions to previous commitments.

Financial statement integration

A key enhancement in the ISSB standards is the requirement for closer integration between sustainability disclosures and financial statements. Companies must ensure consistency in assumptions, estimates and outcomes between climate disclosures and financial reporting. This integration helps investors understand the financial implications of climate-related risks and opportunities.

Assurance and verification requirements

While TCFD disclosures generally did not require external assurance, Singapore's implementation of ISSB standards includes provisions for mandatory assurance on greenhouse gas emissions. Although not immediately required, companies should prepare for future assurance requirements by implementing strong internal controls and documentation processes.

Practical transition steps for companies

Companies currently reporting under TCFD should begin their transition by conducting comprehensive gap analyses comparing current disclosures with IFRS S2 requirements. This includes evaluating data collection systems, measurement methodologies and disclosure content. Companies should prioritise building emissions measurement capabilities and establishing systems for tracking industry-specific metrics.

Training programs for internal teams, engagement with external advisors and investment in data management systems will be crucial for successful transition. Companies should also consider early voluntary adoption of enhanced ISSB requirements to demonstrate leadership and prepare for mandatory compliance.

Leveraging existing TCFD investments

Companies that have invested in TCFD reporting capabilities should recognise that these investments provide a strong foundation for ISSB compliance. Existing governance structures, risk management processes and stakeholder engagement practices can be enhanced rather than replaced. The key is building upon existing capabilities while adding the enhanced measurement, disclosure and integration requirements of the ISSB standards.

The transition from TCFD to ISSB represents an evolution rather than a revolution in climate disclosure, providing companies with a clear pathway for enhancing their sustainability reporting while building on existing foundations and capabilities.