Environmental, Social & Governance (ESG) regulatory advice and consultancy

What is ESG?

ESG stands for environmental, social and governance.

Increasing investor, consumer and stakeholder concerns about climate change, sustainability, corporate governance, social justice and human rights have driven ESG consciousness. There have thus been international and national shifts and regulations to require businesses to proactively and transparently address ESG issues.

Why is ESG important to businesses?

Businesses need to address ESG issues well in order to succeed by doing right and going far.

No longer is profit-maximisation for shareholders the prevailing view of the raison d’etre of businesses. Instead, firms have multiple stakeholders crucial to their success. Businesses operate contextually in particular environments and communities.

Long-term success is achieving triple bottom-line: profit, people and planet.

Further, businesses will increasingly be scrutinised based on ESG metrics. The global and national regulatory frameworks are shifting towards mandatory disclosure and reporting on ESG metrics.

For example, in Germany, the Supply Chain Act passed in June 2021 requires large companies there to establish due diligence procedures to monitor human rights and environmental issues within global supply chains. In the United Kingdom, an Environment Bill was introduced in 2021 to prohibit illegal deforestation and require large companies to conduct due diligence and reporting on supply chains. In France, a ‘duty of vigilance’ law passed in 2017 requires companies to conduct due diligence and develop vigilance plans to adequately identify and address risks concerning human rights, health and safety and the environment. In the United States, Congressed introduced bills for business supply chain transparency on human rights issues and in particular trafficking in person and modern slavery.

The International Financial Reporting Standards (“IFRS”) Foundation announced in November 2021 the publication of prototype climate and general disclosure requirements. A new International Sustainability Standards Board will also develop a set of sustainable disclosure standards.

Singapore regulations and obligations are considered below.

Another direct implication is that going forward, businesses (including startups, SMEs and larger corporations) will likely be assessed on ESG risks before they may receive funding, financing, investments, credit facilities, and insurance coverage. (See discussion on ESG regulations and obligations in Singapore further below.)

What are ESG issues?

ESG issues traverse multiple areas of businesses in various sectors. There is presently no global universal standard framework or matrix of ESG issues.

The Singapore Exchange (“SGX”) announced after consultation that it will be adopting 27 ESG metrics based on certain globally accepted sustainability reporting frameworks from the Global Reporting Initiative (“GRI”), the Sustainability Accounting Standards Board (“SASB”), the Taskforce on Climate-Related Financial Disclosures (“TCFD”), and the World Economic Forum (“WEF”).

The 27 core ESG metrics can be found in SGX’s response to the consultation paper. A summary and brief description of each metric is set out below.


Metric Description
1. Greenhouse Gas Emissions (“GHG”) Metric tons of carbon dioxide (CO2) equivalent of relevant GHG emissions in line with international recognised methodologies e.g. GHG Protocol.
2. Energy consumption Total energy consumption and energy consumption intensity ratios per unit of organisation specific metrics (e.g. revenue, units of production, floor space, number of employees, number of passengers).
3. Water consumption Total water consumption across all operations and water intensity ratios in water consumed per unit of organisation specific metrics (e.g. revenue, units of production, floor space, number of employees, number of passengers).
4. Waste generation Total weight of waste generated in metric tons within the organisation. Include relevant information of waste composition (e.g. hazardous/non-hazardous, recycled/non-recycled).
5. Gender diversity Percentage of existing employees, new employee hires, and employee turnover by gender.
6. Age-based diversity Percentage of existing employees, new employee hires, and employee turnover by age groups: under 30 years old, 30-50, over 50 years old.
7. Employment Total number and rate of employee turnover and total number of employees.
8. Development & training Average training hours per employee and per employee by gender.
9. Occupational health & safety §  Number of fatalities as a result of work-related injury (including employees and workers who are not employees but are controlled by the organisation).

§  Number of high-consequence work-related injuries (from which worker cannot recover fully to pre-injury health status within 6 months) excluding fatalities.

§  Number of recordable work-related injuries.

§  Number of recordable work-related illnesses or health conditions arising from exposure to hazards at work.

10. Board composition §  Number of independent board directors as percentage of all directors.

§  Number of female board directors as percentage.

11. Management diversity Number of female senior management as percentage.
12. Ethical behaviour Anti-corruption standards.

Number and percentage of employees who received anti-corruption training.

13. Certifications Sustainability or ESG-related certification (e.g. ISO 45000 famly, BCA Green Building, LEED, Energy Star).
14. Alignment with frameworks Globally recognised frameworks and disclosure practices.
15. Assurance Disclose whether sustainability report has undertaken (a) external independent assurance, (b) internal assurance, or (c) no assurance.


What are the ESG regulations or obligations in Singapore?

SGX-listed entities

Since 2016, SGX-listed issuers must provide sustainability reports on a comply or explain basis.

Announced on 15 December 2021, all SGX-listed issuers must provide climate reporting on a ‘comply or explain’ basis in their sustainability reports from the financial year (FY) commencing 2022.

Climate reporting will subsequently be mandatory for issuers in (i) financial (banking and investment services, collective investments, insurance), (ii) agriculture, food and forest products (applied resources, food & beverages), and (iii) energy industries (fossil fuels, utilities) from FY 2023.

And then mandatory for issuers in (iv) materials and buildings (chemicals, mineral resources, industrial & commercial services, real estate), and (v) transportation industries (automobiles & auto parts, transport) from FY 2024.

Starting 1 January 2022:

  • all issuers must subject sustainability reporting processes to internal review;
  • directors must undergo one-training on sustainability
  • sustainability reports to be issued together with annual reports unless issuers have external assurance conducted;
  • issuers to set a board diversity policy that addresses gender, skill and experience, and other relevant aspects of diversity. Issuers must also describe the board diversity policy and details such as diversity targets, plans, timelines and progress in their annual reports.

SGX declared that its issuers may voluntarily disclose matters in respect of the 27 core ESG metrics. It will be developing an ESG data portal for issuers to input ESG metrics, material ESG factors, commentaries and explanations for reported metrics and discussions on strategies, processes, Board statements and targets relating to ESG matters. In the longer term, the ESG data portal will be extended to non-SGX listed companies.

MAS-regulated Financial Institutions

The Monetary Authority of Singapore (“MAS”) issued in December 2020 three Guidelines on Environmental Risk Management for Financial Institutions (“FIs”). The FIs include banks (banks, merchant banks and finance companies), insurers and asset managers (including fund managers and REIT managers).

Generally, Boards and senior management of FIs are to develop and implement environmental risk management frameworks and policies.

Environmental risk considerations include greenhouse gas emissions, vulnerability to extreme weather events, linkages to unsustainable energy practices, deforestation and pollution.

FIs are to annually disclose their approach to managing environmental risks to stakeholders, including quantitative metrics having regard to international reporting frameworks such as the TCFD recommended framework.

Banks should assess each customer’s environmental risk as part of its assessment process for credit facilities or capital market transactions for sectors with higher environmental risk. Banks should engage customers that pose higher environmental risk to improve their risk profile and transit towards sustainable business practices. Banks may consider using financing conditions or covenants to require a customer with higher environmental risk to take steps to manage such risks, e.g. developing sustainable transition strategy and adhering to applicable certification standards. Banks ma also work with customers to establish specific environmental performance targets e.g. carbon emission reduction, improvement in energy efficiency, etc.

Insurers should engage customers that pose higher environmental risk to improve their risk profile and transit towards sustainable business practices. Underwriters should check potential impact of proposed transactions on the environment. Insurers are to implement processes and systems to monitor, assess and manage potential and actual impact of environmental risks on their portfolio investee companies. they should also indicate environmental risks inherent in their investment portfolios. Insurers should also engage with companies individually and asset managers to shape the corporate behaviour of investee companies through engagement, proxy voting and sector collaboration to transit towards more sustainable business practices.

Asset managers should incorporate environmental risk considerations in research and portfolio construction processes. They should include measurement and management of environmental risk factors present in a portfolio on an aggregate basis, e.g. total GHG emissions. Asset managers should also shape the corporate behaviour of investee companies through engagement, proxy voting and sector collaboration to transit towards more sustainable business practices.

Financial Reporting

Singapore Companies who are required to prepare financial statements should take heed to developments in reporting standards. As mentioned above, the International Financial Reporting Standards (“IFRS”) Foundation announced in November 2021 prototype climate and general disclosure requirements. A new International Sustainability Standards Board will also develop a set of sustainable disclosure standards. Singapore’s accounting standards, the Singapore Financial Reporting Standards, are based on the IFRS.

The IFRS Foundation has stated that when applying IFRS Standards, climate-related matters which are material in effect in the context of the financial statements as a whole must be considered. Non-exhaustive examples include climate-related matters creating uncertainties that affect assumptions used to develop estimates; climate-related matters causing inventories to become obsolete or their prices to decline or costs of completion to increase; estimate of future taxable profits in respect of tax credits; expenditure to change or adapt business activities and operations; depreciation or amortisation and estimated residual value and useful lives of assets; impairment of assets due to lower demand for products that have greenhouse gas emissions; levies by government for failure to meet climate-related targets; regulatory requirements to remediate environmental damage.

Consumer Protection

Under the Consumer Protection (Fair Trading) Act (“CPFTA”), any business that does or say anything or makes an omission that would result in a consumer being reasonably deceived or misled, or makes a false claim, is deemed to have committed an ‘unfair practice’.

A consumer who has entered into a consumer transaction involving an unfair practice may sue the supplier. Regulatory action may also be taken by the relevant enforcement authority, the Competition and Consumer Commission of Singapore (CCCS).

Accuracy of ESG-related claims or statements, or the deliberate disclosure if material, is therefore paramount.

Waste and Packaging

Through the Resource Sustainability Act, the Ministry of the Environment and Water Resources (MEWR) with the National Environment Agency (NEA) regulate e-waste, food waste and packaging waste.

Producers of regulated electrical and electronic products are made responsible for the collection and proper treatment of their e-waste. Such e-waste must be channelled to licensed e-waste recyclers.

The Producer Responsibility Scheme (PRS) ensures collection of e-waste for consumer products. Retailers of regulated consumer products will be required to provide free one-for-one take back services during delivery. Producers of non-consumer products are required to provide free take-back of all their end-of-life equipment from clients upon request.

Mandatory packaging reporting is implemented. Producers of packaged products (including brand owners, manufacturers and importers) as well as retailers and supermarkets must submit packaging data and 3R (reduce, reuse, recycle) plans to NEA. These apply for a start to businesses with an annual turnover of more than $10 million.

From 2024, MEWR/NEA will mandate owners and operators of commercial and industrial premises to segregate food waste for treatment. These include large hotels and malls and large industrial developments housing food manufacturers or food caterers.

Developers of new commercial and industrial developments (since 2021) have to allocate and set aside space for on-site food waste treatment systems in design plan. These operators must implement on-site treatment of food waste from 2024. Food waste treatment will result in conversion of waste to products such as animal feed, compost, non-potable water or biogas.


The Tripartite Alliance for Fair & Progressive Employment Practices (“TAFEP”) have guidelines on fair employment practices to ensure fair and diverse employment practices. TAFEP is able to conduct investigations into complaints regarding breaches of the guidelines. We have assisted clients in such investigations. Presently, TAFEP investigations may result in some form of regulatory or executive action. The Singapore Government has stated that it plans to enshrine the TAFEP guidelines into legislation.

Workplace Safety and Health

The Workplace Safety and Health Act (“WSHA”) regulates all employers to ensure the safety, health and welfare of persons in a workplace. Various types of duties are imposed on employers, principals, employers, persons at work, manufacturers, suppliers, installers, etc. WSH arrangement are required to be put in place for certain types of activities and appropriate risk identification and risk management processes are required.

Carbon Pricing Act (“CPA”)

The CPA implements a carbon tax on greenhouse gas emissions. This is intended to incentivise emission reductions. Industrial facilities that emit direct GHG emissions above a threshold amount must register as a reportable facility and submit an emissions report. Above a certain threshold, they become a taxable facility and must submit a monitoring plan additionally and pay carbon tax for reckonable GHG emissions. Measurement, reporting and verification requirements are specified in the regulations. Companies may use carbon credits to offset taxable emissions. Starting from 2024, these include high-quality international carbon credits.

What should businesses do about ESG?

Companies should proactively identify and manage ESG-related risks and harness opportunities. These include:

  • conducting ESG risk gap analysis
  • developing ESG-related policies, action plans and targets
  • developing ESG-related organisational capacities at all levels including the Board, senior management, ESG committees, employees, suppliers and other stakeholders
  • incorporating ESG factors into contracts with third parties, due diligence practices and procurement practices
  • conducting ESG training for personnel
  • benchmarking ESG strategy, risk management, best practices and standards against industry peers
  • assessing ESG-related litigation and regulatory risks

How can we help?

As legal and risk management professionals, we at Covenant Chambers LLC can provide consultancy, advice and assistance to clients in the development and implementation of the above strategies with a multi-disciplinary approach. These include:

  • advice on corporate governance and regulatory compliance
  • advice on ESG-related disclosures
  • assisting in public policy advocacy and consultations
  • conducting ESG-related due diligence
  • assisting with reputation risk management and advisory
  • reviewing or drafting contracts to ensure ESG-standards compliance

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