Only 22% of Singapore-listed companies make physical climate risk disclosures in detail: report

[SINGAPORE] Most Singapore-listed constituents (98 per cent) now mention physical climate risk in their annual reporting, but only 22 per cent disclose in detail how it affects their business, an MSCI report showed on Tuesday (Sep 15).

Large companies in Singapore and those that are listed here will need to disclose key indicators of how their business affects the climate, in line with global standards, by FY2030.

A newly drafted Singapore Sustainability Disclosure Standards proposed by the Accounting and Corporate Regulatory Authority was released in July for public feedback until Oct 25.

This comes after Straits Times Index constituents were mandated to report Scope 3 greenhouse-gas emissions for financial years beginning on or after Jan 1 this year.

For the paper, over 540 companies were surveyed in the Republic, among 11,868 companies in Asia-Pacific. A total of 25,346 companies worldwide were evaluated between 2023 and 2025.

In Hong Kong, another financial hub, 98 per cent of 1,300 companies surveyed mentioned such climate risk in their annual reporting, with 32 per cent providing detailed disclosure, data showed.

MSCI analysts said across global companies’ annual reporting, 81 per cent of them mentioned physical climate risk, but only 27 per cent provided “detailed disclosure”.

They wrote: “The 54 percentage point gap between generic and detailed disclosure suggests that many companies recognise physical climate risk, but have yet to identify how their own assets and operations are exposed and how those vulnerabilities could affect business performance.”

Higher exposure, lower preparedness

The survey also found that 900 MSCI ACWI Index constituents were in a “higher-exposure, lower-preparedness” (Help) category.

This figure made up 37 per cent of the global stock market benchmark, which tracks large and mid-cap equities across 23 developed markets and 24 emerging markets.

The Help category signalled how physical climate risk to a constituent was “potentially material”, but the company did not disclose evidence of measures to physically protect exposed assets.

Within the benchmark, 26 per cent of constituents in Singapore and 32 per cent of Hong Kong constituents fall under the category, as part of a total of 378 companies in Apac.

Present-day adaptation for these assets requires about US$5.6 billion in modelled investment, while avoiding US$58.2 billion in losses, the report wrote.

That said, all Help companies in Singapore have at least one modelled adaptation with a positive return while Hong Kong stood at 94 per cent of firms.

Overall, in Apac, 94 per cent of companies had at least one modelled adaptation with a positive return.

MSCI said that over 30 years, cumulative modelled avoided losses were projected to reach around US$2.1 trillion, compared with US$32.4 billion in adaptation costs.

Varying sector manifestation

MSCI’s research showed that energy, basic materials and utility companies were among the most likely to substantively recognise physical climate risk before experiencing a material shock.

On the flipside, companies in healthcare, consumer cyclical and communication services were more likely to experience a shock first.

This is because of how physical climate risk intersects in varying ways with different business models.

“For companies with fixed assets, weather-sensitive operations or natural-resource dependencies, the pathways from physical hazard to business impact may be relatively direct and familiar, making vulnerabilities easier to identify before losses occur,” MSCI said.

However, in other sectors, those dependencies may be more “indirect” or distributed across facilities, infrastructure, employees, suppliers and counterparties, and hence less visible in a conventional risk assessment.