Issue 158: Who says what's material for Singapore firms; catastrophe payouts pile up for insurers
Sustainability reporting
Reporting in a material world
Singapore-listed companies should seek more external perspectives to determine the non-financial issues that could most affect their businesses, a new analysis suggests.
Large companies listed on the Singapore Exchange (SGX) tend to rely on internal feedback, peer benchmarks and international standards significantly more than external stakeholder feedback in identifying material sustainability-related factors, shows a report co-authored by Professor Mak Yuen Teen of the National University of Singapore and Tina Thomas, Baker Tilly's head of environmental, social and governance (ESG) and sustainability. The report is published by Governance for Stakeholders – an advocacy platform run by Prof Mak – and Sustainable Finance Institute Asia.
The study assesses disclosures about materiality identification by 300 listed companies – 100 each from the Australia, Malaysia and Singapore stock exchanges. The companies come from 10 industry sectors that are either high emitters of greenhouse gases or major sectors with many large companies.
Materiality identification is a critical aspect of ESG and managing sustainability-related risks and opportunities (SROs). In essence, companies need to prioritise SROs. The more important ones should be addressed and disclosed, while the less important ones do not need to be reported.
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One of the questions the study asks is how companies identify material SROs. The analysis grouped the identification methods into five key channels:
Internal stakeholder feedback
External stakeholder feedback
External sustainability consultancy
Peer benchmarking
International standards alignment
There are two additional methods for unspecified channels:
Unspecified stakeholder feedback
Unspecified standards alignment
The study finds that of the 100 Singapore-listed companies, only 20 report using external stakeholder feedback, which is fewer than half of the 42 that report using internal stakeholder feedback. It's also fewer than half of the 46 that use international standards alignment and the 49 that use peer benchmarking.
There is also a drop-off – albeit not as steep – for external stakeholder feedback in Malaysia. On Bursa, 16 companies report using external stakeholder feedback, which is about 65 per cent of the 25 companies that report using internal stakeholder feedback.
Australia-listed companies are more balanced, with 68 using internal stakeholder feedback and 63 using external stakeholder feedback. However, Australian firms are less likely to seek the independent industry-wide perspective. Only 47 companies report using international standards alignment, which is 70 per cent of those that use internal stakeholder feedback.
A significant number of companies from the Singapore and Malaysia samples disclose unspecified stakeholder feedback, but that's unlikely to change the fact that external stakeholders' views are sought less often than internal ones in these markets. That's because it's much easier to obtain feedback from internal stakeholders than external stakeholders, and it's highly probable that most of the unspecified cases will include internal feedback.
Unknown unknowns
It's important that companies in Singapore and Malaysia take greater effort to obtain external stakeholders' views, to guard against blind spots.
The five key channels used in the study reflect three different kinds of perspectives on SROs. From internal stakeholder feedback, companies obtain the internal company-specific perspective on key risks and opportunities. From external stakeholders and external consultancies, companies acquire an external perspective that's specific to them. From peer benchmarking and international standards alignment, companies get an independent, industry-wide perspective of SROs.
However, while benchmarks and standards are independent, they do not reflect idiosyncratic circumstances that a company faces. Meanwhile, interpreting and applying those benchmarks and standards to account for circumstances is an internal process.
Therefore, the external stakeholders' perspective is valuable because it helps a company to obtain independent views that account for the company's circumstances. Without that perspective, companies risk blind spots – the unknown unknowns. For example, a producer of plant-based health foods might not be aware of customer and civil society concerns about human rights and labour issues at the farms that supply the producer's chickpeas.
Companies must also seek out a diversity of external views. The study finds that Singapore and Malaysia companies in the sample engage with non-government organisations less than their Australia-listed counterparts.
Defining impact
The study notes that there is currently uncertainty about how materiality assessment will evolve as implementation begins for the accounting profession's IFRS sustainability and climate reporting standards. SGX has mandated phased alignment with the IFRS standards starting this year.
The phased implementation calls for a climate-first approach, which could lead to climate issues rising in importance in companies' materiality assessments, the study says.
But closer alignment to the IFRS standards could eventually narrow the scope of material factors. Most Singapore-listed companies are using the Global Reporting Initiative (GRI) standards, which approach materiality from a broad understanding of impact. By contrast, the IFRS focuses on financial materiality.
When SGX eventually moves towards the full adoption of the IFRS standards, 'the scope of disclosure would narrow', the study states.
'Only topics that present a financial material impact to the company would be required to be reported, potentially reducing the visibility of broader environmental and social issues currently captured under the GRI framework if companies do not voluntarily report'.
The IFRS approach doesn't mean that non-financial factors won't be deemed material, but the onus is placed on companies to determine the potential financial impact of ESG factors, which can be challenging when gazing at medium-to-long-term horizons.
This raises the importance of engaging with external stakeholders, who can help companies to better understand impact over longer periods.
Investors will also have to raise their game when it comes to imposing market discipline. Professional and institutional investors, especially, can play a bigger role in calling companies to task if they're not properly capturing material issues.
For Singapore-listed companies, the materiality landscape could change in the coming years. It's good to have some outside insights.
Climate risk
When protection hurts
If there's one sector where climate change directly impacts profit, it might be in insurance.
Swiss Re Institute estimates that global insured losses from natural catastrophes stood at US$80 billion in the first half of 2025. That's almost double the 10-year average. The main source of losses came from the Palisades wildfires that hit Los Angeles in the first quarter of the year. Without that fire, total insured losses would have been below trend.
The Palisades fires hit especially hard because of the value of assets affected by the blaze.
'With changing climates, unexpected and unseasonal weather conditions may occur more frequently, making loss outcomes more volatile and difficult to predict,' the institute says.
The institute worked out that global insured losses from natural catastrophes have been growing at a long-term trend of 5 per cent to 7 per cent. If that trend holds in 2025, full-year losses could approach US$150 billion.
Insurers have begun to walk away from parts of the world where catastrophe risk has risen too much. For example, home insurance is too costly to be practical in parts of hurricane-prone Florida.
But even in places where catastrophe risk is still manageable, the physical risk of climate change is an unavoidable problem. Asset owners in coastal or low-lying areas must plan for potentially damaging flooding. Assets close to vegetation must confront the higher possibility of wildfires. Either invest in climate adaptation and resilience, or pay higher insurance premiums.
These problems exist for a significant portion of the global population. That's why climate change is a global problem, and why businesses should consider climate change to be a material sustainability-related risk or opportunity. That's true even for businesses that don't belong to emissions-intensive sectors.
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Business Times
40 minutes ago
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SingPost's sale of its Australia business raises questions about its long-term strategic direction
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The opportune timing of the sale of FMH does not appear to have made shareholders of SingPost any more optimistic about the future, though. In fact, a number of them expressed concern during the AGM about the group's future direction now that FMH is no longer in its fold. One shareholder even suggested SingPost liquidate its remaining assets, return its capital to investors, and seek a delisting. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up The anxiety is understandable. While the sale of FMH put SingPost in a net cash position at the end of its financial year to Mar 31, 2025, it also removed a major contributor to its revenue and earnings. Moreover, SingPost has since put a number of other assets on the block to further streamline its business profile and unlock value. 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'SingPost's core postal and logistics business faces weak profitability amid persistent structural decline, the high fixed cost of operating its postal office network, and rising competition in a highly fragmented market,' said S&P Global Ratings in a research note on Jul 25 , which downgraded SingPost's credit rating to 'BBB-' from 'BBB'. S&P went on to note that SingPost is in the process of overhauling its board and senior management. 'We await clarity on the company's strategy to regain competitiveness and profitability.' It added: 'That said, SingPost is in talks with the government to address the financial sustainability of (its) postal services and the post office network.' Not like SMRT or SPH The way I see it, any plan by SingPost to reposition itself is unlikely to be well-received by investors if the weak profitability of its postal services business is not also somehow tackled. 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CNA
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Straits Times
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The Morgan Stanley analysts do recognise the risks that can hinder Singapore's progress on these initiatives, but they believe its proactive policymaking will keep it a step ahead of others. The Singapore Government is trying to be as proactive as it can be. Soon after the April 2 launch of Mr Trump's reciprocal tariff policy, the Republic set up the Singapore Economic Resilience Taskforce to help businesses and workers navigate the immediate uncertainties arising from the US tariffs and related global developments. On Aug 4, it launched an Economic Strategy Review (ESR) to help ensure Singapore thrives in the new global economic landscape. The ESR comprises five committees, each co-chaired by two political office-holders who will be joined by private sector, union and other stakeholders. The committees will engage widely with businesses and workers and other stakeholders and publish their recommendations by mid-2026. Most analysts believe similar initiatives helped the country manage crises in the past, including the more recent Covid-19-induced downturn. Mr Lord said: 'So the question is: Can Singapore adapt more successfully than others? And the track record would suggest it probably can.'
