Discover engaging green finance events this December 2024. Browse the calendar and register for events that align with your interests through the links below:
Alexandra Tracy, Green Finance Advisor of Friends of the Earth (HK)
I was in Singapore last week for RI Asia, which was a great event. But it clearly reminded me how so many of us
in that city and in Hong Kong always like to benchmark ourselves against each
other. No one more so than the
regulators: when I was on the Listing Committee at HKEx, for example, we always
had half an eye on what was going on at SGX.
As the field of sustainability disclosure regulation is changing
rapidly, with new standard setting bodies, new acronyms and new rules which will
affect thousands of companies across the world, it’s a good moment to look at where
the two cities have got to in the process and how they stack up against each
other.
ISSB: One Standard to Guide the
Many
At COP 26 in 2021, many people heaved a sigh of relief at the
announcement of the formation of the International Sustainability Standards
Board (ISSB), which would end the “alphabet soup” of voluntary disclosure
initiatives and put in their place a robust global reporting framework. Building on the work of many of the existing
initiatives, especially the Task
Force on Climate Related Financial Disclosures,
the ISSB began developing a set of high quality, consistent standards for
sustainability disclosure.
By mid-2023, the ISSB had published its first two standards: IFRS
S1 for general sustainability concerns, and IFRS S2 on climate issues. These guidelines are intended to provide a
comprehensive global baseline of sustainability disclosure standards, but
national policy makers can decide how to enact them or combine them with
jurisdiction specific requirements.
Hong Kong Leading on ISSB Alignment
HKEx has been one of the earliest adopters of the
ISSB’s reporting principles. In April, the exchange published consultation conclusions on enhanced
requirements for climate related disclosures under its ESG reporting framework,
which will be renamed the ESG Reporting Code. The new rules will be implemented in phases
from January 2025. In addition to
mandatory disclosure of scope 1 and scope 2 greenhouse gas emissions, Main
Board listed companies must provide information, on a comply or explain basis,
about climate related risks and opportunities, governance, strategy, risk
management and metrics and targets. Main
Board listed companies must also disclose scope 3 greenhouse gas emissions on a
comply or explain basis. This requirement will become
mandatory for large cap companies from January 2026. GEM
listed companies are expected to make voluntary disclosures.
Singapore to
Extend Reporting Mandate to Unlisted Companies
SGX published consultation conclusions in September this year on
its sustainability reporting regime, including the addition of the ISSB’s
climate related requirements. Additional
disclosure requirements will be implemented in phases from full year 2025, when
all listed companies must provide information according to the ISSB’s climate related requirements, including disclosure
of scope 1 and scope 2 greenhouse gas
emissions, on a mandatory basis.
Companies will be able to report on the
other “primary components” in their sustainability reports on a comply or
explain basis for a further year. SGX will review companies’ readiness and
experience with the upgraded disclosure requirements before establishing an
implementation roadmap for reporting scope 3 greenhouse gas emissions.
In a first for Asia, Singapore is planning to introduce the
same mandatory climate related reporting
requirements for large non listed companies, defined as those with annual revenue of at least SGD1 billion and total
assets of at least SGD500 million for two financial years immediately preceding
the current financial year. From full year 2027, they will have to file annual climate disclosures with the Accounting and
Corporate Regulatory Authority of Singapore.
Mostafa Monira Firdouse, Green Finance Advisor. Friends of the Earth (HK)
The carbon market has had its
fair share of struggles over the years. For instance, when the EU Emissions
Trading Scheme kicked off in 2005,
it didn’t really deliver on cutting emissions as expected. On the contrary, by 2012, carbon prices crashed due to
oversupply, making many projects financially unviable. Fast forward to 2023, and reputation risks took center
stage when reports showed that over 90% of certain forestry credits didn’t
actually reduce emissions. This has led many companies to rethink their purchases.
None of the initiatives seems to have worked.
Why? What is missing in the mechanism?
Among the setbacks facing carbon markets, top identified challenges predominantly come from macro market situation. Price volatility, pricing mechanism, international/cross-border regulation and financial policy are a few major challenges.
However, climate change is real, and carbon emission does not maintain any boundary to disrupt billions of people, biodiversity loss, malnutrition, job loss and all sorts of uncertainty. Which eventually promotes financial, social and political crimes.
THE Missing Piece of Carbon Valuation Model – Carbon as Currency
Recommendations
Introduce carbon as currency.
Bring Financial Institutions as agent to play
central role, regulated by Central Banks.
Develop new trading products to ensure everyone
get equal opportunity and gain fare share.
Tie carbon currency as political benefit to ensure
circularity.
Beneficiaries:
Global leaders will be crowned to next
generations.
FIs can be profit making not only through social
trust, but guaranteed by nature. New financial & carbon product will breed
to provide funding for carbon offset projects that need support to grow.
Accounting system will finally be able to see
the light, be in better shape to ensure procurement, tax, profit & loss and
healthy balance sheet.
Financial benefit will go directly to the beneficiaries
– people & nature.
Soil nutrition can be restored and reduce biodiversity
loss, food insecurity and price volatility.
Do you think the above
suggestions are impossible to achieve? Provide your opinion in the comment
section.
Keep an eye on my next interesting
article, till then, ADIOS!
Discover
engaging green finance events this November 2024. Browse the calendar and
register for events that align with your interests through the links below:
