A regional comparison of ESG regulations: Singapore

  • 10 August 2023 10 August 2023
  • Asia Pacific

  • Climate change risk

Environmental, social and governance (ESG) standards are rapidly gaining prominence regionally and internationally, as regulators equip their jurisdictions with appropriate guidelines targeted at meeting ESG objectives and preventing an increase in undesirable practices such as greenwashing.

In Singapore, there have been a number of recent developments, with more to be anticipated in view of global trends and best practices.


From the financial year 2022, the Singapore Exchange (SGX) has mandated all issuers to include climate-related reporting in their sustainability reports, which is based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

Initially, the climate reporting will be on a “comply or explain” basis, which requires companies refusing to disclose their social and environmental impact and performance to give an explanation. However, climate-related reporting will become mandatory for issuers in specific industries from the financial years 2023 and 2024.

The SGX has introduced a phased approach to mandatory climate reporting by industry, based on the TCFD’s recommendations. Industries are prioritised based on those identified as having the highest climate-related risks, given the greater urgency for issuers in these specified sectors to conduct mandatory climate reporting.

For the financial year 2023, climate reporting is mandatory for issuers in the financial industry; the agriculture, food and forest products industry; and energy industry. For the financial year 2024, mandatory reporting will extend to the materials and buildings, and transportation industries.

In July last year, the Monetary Authority of Singapore (MAS) also published a circular on the Disclosure and Reporting Guidelines for Retail ESG Funds. It required fund managers to reveal the investment’s ESG focus and relevant criteria, methodologies or metrics, and the sustainable investing strategies of retail funds being sold with an ESG label, effective from January 2023. This addresses greenwashing, which involves deceptive activities by companies to convince customers that they are environmentally compliant.

The guidelines specify that the name of the ESG fund should not be misleading, and should reflect its sustainable focus in its investment portfolio or strategy. Funds must ensure that at least two-thirds of their net asset value are invested in accordance with their stated ESG investment strategy.

Separately, the Green Finance Industry Taskforce (GFIT), established by the MAS, has suggested a classification system or taxonomy for Singapore-based financial institutions aimed at identifying activities considered as green or transitioning towards green. The inclusion of transition activities allows for a gradual move towards greater sustainability, while considering starting positions and supporting inclusive economic and social development.

The GFIT released its third consultation paper in February 2023 to gather opinions on the specific thresholds and requirements for the classification of green and transitioning activities in five sectors: agriculture and forestry or land use; industrial; waste and water; information and communications technology; and carbon capture and sequestration.

Among other matters, the consultation sought feedback on its Do No Significant Harm criteria, which indicates that activities that contribute significantly to mitigating climate change should not be carried out in a way that negatively impacts the other four environmental objectives, namely climate change adaptation, protecting healthy ecosystems and biodiversity, promoting resource resilience and the circular economy, and pollution prevention and control.

On 28 June 2023, the GFIT released its fourth and final consultation on the thresholds and criteria for financing the early phase-out of coal-fired power plants under the Singapore-Asia Taxonomy. The criteria will be finalised and launched for use after the final round of consultation closes on 28 July 2023.

The MAS’ Environmental Risk Management Information Papers, released in May 2022, showcase the best practices followed by insurers, banks and asset managers in managing environmental risk, and highlight areas that require further work. The papers also identified various areas where financial institutions face challenges, including developing risk assessment methodologies, finding talent in sustainable finance, and establishing risk management practices when the financial institution relies on their parent company to set policies and procedures at a group level, especially if the financial institution’s headquarters are located outside Singapore.


In Singapore, the Consumer Protection (Fair Trading) Act (CPFTA) safeguards consumers from deceptive claims, including those associated with greenwashing. Additionally, the Advertising Standards Authority of Singapore (ASAS) has issued guidelines under the Singapore Code of Advertising Practice (SCAP) to ensure that advertisers accurately and sufficiently back up any claims. The ambit of protection under the CPFTA also extends to financial products and financial services regulated by the MAS, broadening the act’s applicability to various products purporting to meet ESG-related objectives.

The Misrepresentation Act states consumers can seek damages from merchants if they believe they entered into a business transaction as a result of a misrepresentation. However, the act only covers damages arising from contractual agreements, and cases of greenwashing are not limited to those that occur in the context of a contractual relationship.

Consumers who come across suppliers making claims that are misleading or considered greenwashing can seek assistance from the Consumer Association of Singapore. In severe cases, the supplier can be reported to the Competition and Consumer Commission of Singapore (CCCS), for further investigation.

As for the SCAP, the ASAS can issue sanctions in respect of advertisements found to have breached the SCAP.

In general, Singapore’s National Environment Agency (NEA) holds the primary responsibility for maintaining a clean and sustainable environment, and is responsible for promoting sustainability and resource efficiency. The NEA also oversees Singapore’s carbon tax regulation, the Carbon Pricing Act, which was issued in January 2019. The act’s accompanying regulations are being amended and details will be provided in due course, with all legislative amendments to take effect from January 2024.


In the UK, the Financial Conduct Authority (FCA) proposed new measures in October 2022 to crack down on greenwashing, which includes investment product sustainability labels and limitations on the use of terms like “ESG”, “green”, or “sustainable”. These measures are intended to protect consumers, establish trust in sustainable investment products, promote integrity, and establish trust in ESG-labelled products and the supporting ecosystem.

The FCA has produced qualifying criteria to ensure that companies can substantiate the claims they make to give consumers adequate information to make informed choices. The FCA also plans to introduce a general “anti-greenwashing” rule that would apply to all regulated firms, requiring their sustainability-related claims to be “clear, fair and not misleading”.

In Canada, greenwashing is illegal, and its Competition Bureau is responsible for investigating claims of greenwashing and ensuring that applicable laws are adhered to, such as the Competition Act, the Consumer Packaging and Labelling Act, and the Textile Labelling Act.

The penalties for greenwashing can be severe. For instance, in January 2022, beverage company Keurig Canada was fined CAD3 million (USD2.2 million) by the Commissioner of Competition for misleading claims on the recyclability of its coffee pod, K-Cups. Any employee who suspects a business of engaging in deceptive practices, including greenwashing, can report it to the Competition Bureau. Whistleblowers’ confidentiality and employment status are protected by the Competition Act and the Canadian Criminal Code.

In the EU, the Green Claims Directive was tabled by the European Commission in March 2023 to tackle greenwashing by regulating how companies justify their eco-friendly assertions. The directive, which is subject to approval from the European Parliament and Council, will set penalties for companies engaging in greenwashing. The draft directive prescribes that the maximum fine should be at least 4% of the business’ total annual turnover in the case of widespread infringements.

According to a pilot study by World Wide Fund for Nature Singapore, private banks in the island state must improve their risk management strategies and enhance their organisational culture, governance and incentives to improve their ESG integration efforts. The report states that although the banks have made sustainability pledges, there is a necessity to customise and integrate these effectively in the private banking scenario.

In June 2023, the Dutch asset manager Van Lanschot Kempen listed Singapore state-supported assets on its blacklist as the island nation failed an updated ESG test used to screen for environmental risks. Following this incident, the Singapore government has restated its commitment to combat climate change, as shown in its promise to reach net-zero emissions by 2050.

More needs to be done in this space and we expect further significant developments in regulations, sustainable practices and enforcement efforts in the near future.

*The article is first published in Asia Business Law Journal 


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