Making sense of the shifting ESG regulatory climate

LAST month, Singapore Exchange Regulation and the Accounting and Corporate Regulatory Authority decided to delay the introduction of elements of the climate reporting requirements they had announced in September 2024, most notably extending the timeline for small and medium-sized listed companies by up to five years.

While reporting requirements for the 30 largest companies on the exchange remain unchanged, external limited assurance for Scope 1 direct and Scope 2 indirect (energy purchases) emissions has been deferred by two years.

Singapore is not the first jurisdiction to revisit its climate reporting requirements.

A shift in currents

The European Union, often regarded as the gold standard for sustainability regulation, is also re-evaluating. Faced with mounting concerns about the regulatory burden on businesses, the European Commission has proposed an “Omnibus” package to ease and delay compliance. Smaller companies may be given until 2028 to comply, and some could be exempt altogether.

Even Canada, which had planned mandatory climate-related disclosures, announced a pause in June to reassess its approach amid global uncertainty.

In the US, President Donald Trump’s scepticism towards climate change and broader ESG (economic, social and governance) issues is reversing regulations. The “Big Beautiful Bill” passed in July abolished tax credits for renewables, electric vehicles and clean manufacturing production.

The US Securities and Exchange Commission (SEC), once a proponent of more climate disclosures, announced in March that it would no longer defend its 2024 climate disclosure rule to require listed companies to report on material climate-related risks and transition plans. The SEC also reversed a rule that had limited companies from excluding ESG-related shareholder resolutions, effectively making it easier for boards to sidestep such pressures.

Meanwhile, in Texas, a federal case backed by the US government is targeting global asset managers for allegedly violating antitrust laws by encouraging reductions in coal use to meet net-zero goals.

The message is clear: the political and regulatory momentum around ESG is slowing, and in some cases, even reversing.

Whither ESG?

So, with the global mood cooling, what should Singapore boards make of the developments?

Singapore’s delay in the rollout of standards set out by the International Sustainability Standards Board (ISSB) means that Malaysia and Australia will now be ahead in terms of reporting requirements.

The extensions reflect a sense that smaller and mid-sized companies especially need more time to prepare for compliance. The additional effort in reporting indirect Scope 3 emissions (all other indirect emissions in their supply chain) are seen as particularly challenging in the current uncertain trading climate when Singapore businesses are focused on retaining their place in the supply chain.

Notwithstanding the delay, more than 30 countries are planning to adopt the ISSB standards which are rapidly becoming the global benchmark. The two key standards from an ESG perspective are IFRS S1 on general sustainability-related financial disclosures and IFRS S2 on climate reporting specifically, including the need for companies to disclose credible climate transition plans.

Don’t lose sight

Amid the growing ESG backlash globally and extended climate reporting deadlines, Singapore boards may feel pressure to hit the pause button on their sustainability strategy. That would be a mistake.

Why? First, because the regulatory roadmap in Singapore is already defined. The pace of change may have altered but there is no change in the goals. For listed companies, requirements are locked in for Scope 1 and Scope 2 now. For large non-listed companies, timelines are set. A strategic retreat would risk falling behind both in compliance and credibility.

Second, even where regulation lags, investor expectations have not. Institutional investors, lenders and global partners continue to scrutinise companies’ climate risks, governance structures and transition readiness. Pausing ESG work on the part of the board sends a signal of weak oversight and short-termism, damaging trust and potentially impacting companies’ access to capital.

Third, climate transition planning is part of the governance framework. As climate-related risks intensify, boards need clear oversight of how their organisations are adapting. From physical disruptions caused by natural disasters and supply chain shocks to regulatory shifts, boards must ensure that strategies are in place to mitigate climate and nature risks.

So, how should boards respond?

1. Stay the course and signal consistency.
Boards should refine their internal processes, improve data quality and align with best-in-class standards. In a volatile landscape, boards that demonstrate clarity, continuity and competence in ESG leadership will stand out as credible partners.

2. Build board fluency in climate oversight.
Board directors should leverage workshops, training and networks within the ecosystem to strengthen board-level understanding of climate risks and opportunities.

3. Integrate ESG into core business strategy.
Rather than position ESG as a compliance exercise, boards must align sustainability goals with financial and operational priorities. Transition planning should take into account capital allocation, resources, risk management and stakeholder engagement.

Now is not the time to go quiet on ESG. It is time for boards to step up, lead confidently and ensure their organisations remain resilient, competitive and trusted in a rapidly changing world. The message is nuanced, all companies will have more time to prepare for certain elements of reporting but all companies must still prepare.

The writer is the Exco Chair of Climate Governance Singapore, an initiative of the Singapore Institute of Directors.