Climate Governance Initiative


3 August 2023

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In Singapore, regulators are increasingly scrutinising financial institutions’ and companies’ responses (or lack thereof) to climate risks and, more generally, environmental risks. In June 2020, the Monetary Authority of Singapore (MAS), a founding member of the NGFS, urged financial institutions to report the impact of material climate-related risks on their business and operations in accordance with international guidelines such as the TCFD recommendations.1

In December 2020 the MAS, in its capacity as central bank and financial regulator, issued its Guidelines on Environmental Risk Management for the banking, insurance, and asset management sectors.2 These guidelines establish the expectation that financial institutions will assess, monitor, mitigate and disclose environmental risks, including physical and transition risks, and financial institutions have been required to implement these expectations from June 2022. In May 2022, the MAS published information papers to provide an overview of the progress by selected institutions in implementing these guidelines.3

In February 2023, the Green Finance Industry Taskforce (GFIT), convened by the MAS, launched its final public consultation on a green and transition taxonomy for Singapore-based financial institutions.4 The final GFIT Taxonomy will cover eight sectors which account for close to 90% of greenhouse gas emissions in South East Asia.

In addition, since 2016 the Singapore Exchange (SGX) has required listed companies to furnish annual sustainability reports containing their identification and evaluation of material environmental, social and governance issues on a comply or explain basis.5 In 2021, the SGX issued amendments to the listing rules regarding sustainability issues, in particular climate change.6 These include a requirement for the annual sustainability report to include climate-related disclosures, and for first-time directors to undertake mandatory sustainability training. 

Singapore has had a carbon tax in place since 2019, which has to date been set at S$5/tCO2. The Carbon Pricing (Amendment) Act 2022 ("Act")7, which came into force on 7 March 2023 and amends the Carbon Pricing Act 2018, seeks to advance Singapore's transition towards net-zero. The Act prescribes for the carbon tax to be raised to S$25/tCO2e in 2024 and 2025, and S$45/tCO2e in 2026 and 2027,  with a view to reaching  S$50-80/tCOby 2030. Companies will be permitted to use high-quality international carbon credits to offset up to 5% of their taxable emissions from 2024.8 Directors, particularly of companies with high emissions, should be alert to the potential increased costs this may entail.

Directors' Duties and Climate Change

Singapore is a common law jurisdiction where both statute (principally the Companies Act (Cap 50)) and common law inform directors’ duties. The Companies Act imposes several specific obligations on company directors. Section 157(1) of the Companies Act provides that directors shall “… at all times act honestly and use reasonable diligence in the discharge of the duties of his office”. The assessment of reasonable diligence is an objective one, requiring investigation as to whether the director exercised the same degree of care and diligence as a reasonable director would have in the relevant circumstances.9 This duty exists in addition to the similar duty at common law to exercise care, skill, and diligence in relation to the company.10 Section 157(2) requires that a director not make improper use of his office or any information in that capacity to gain, directly or indirectly, an advantage for himself or another, or to cause detriment to the company.

As fiduciaries, directors also have a duty to act bona fide in the best interests of the company,11 and to avoid any action that may result in them being in a position of conflict of interests with the company.12 Furthermore, there are numerous offence-creating provisions in Singapore’s environmental legislation that specifically provide for the directors of companies to be criminally liable for their companies’ breaches of these laws.13

In 2021, Singapore’s former Deputy Solicitor General Jeffrey Chan Wah Teck SC and other lawyers released a legal opinion on directors’ responsibilities and climate change under Singaporean law (the Chan et al Opinion). They concluded that:

[A]t this time, directors in Singapore are obliged, when carrying out their responsibilities as directors, to take into account climate change and its associated risks, particularly insofar as those risks are or may be material to the interests of the company.14

The Chan et al Opinion identified that such obligations arise from the directors’ duties of care and diligence and to act in good faith, as well as statutes addressing environmental sustainability and climate change. Notably, the Chan et al Opinion observed that directors may be held criminally liable under Singaporean environmental sustainability and climate change statutes for failing to ensure that their companies have in place principles and systems for compliance.15

Moreover, the Chan et al Opinion highlighted that the “business judgement rule” in Singapore will not protect a director who fails to make a conscious decision, does not exercise their judgment, or fails to properly inform themselves of the relevant facts and circumstances before undertaking a course of action.16 Furthermore, the Chan et al Opinion posited that Singaporean law requires “at the very least” that directors consider their companies’ exposure to the physical, transitional, and liability risks associated with climate change, with directors who fail to do so potentially facing criminal prosecution as well as personal liability.17 Accordingly, the Chan et al Opinion urges directors to institute governance and management processes for identifying, monitoring, managing, and reporting on climate risks.18

Directors' Disclosure Obligations and Climate Change

Companies listed in Singapore have an obligation of continuous disclosure with respect to information that is likely to have a material effect on the price or value of their securities.19 The Chan et al Opinion highlighted that there are numerous ways in which climate risks may have a material effect on the price or value of securities, including through:

  1. Legislative changes rendering certain company assets or activities unusable or untenable at cost (such as the phase-out of petrol and diesel vehicles);
  2. Damage caused by extreme weather events in particular geographical locales which might be especially susceptible (such as flood-prone or coastal areas); 
  3. The commencement of climate change litigation against the company or one of its subsidiaries;
  4. Rising financing or insurance costs for certain company activities or assets (such as coal-fired power plants); and 
  5. The exposure of its counter-parties to the above risks.20

Accordingly, the Chan et al Opinion opines that where these circumstances are present, directors ultimately hold responsibility for ensuring that their company discloses in compliance with the Singapore Exchange Listing Rules.21 Singaporean companies are also required to furnish an annual sustainability report which must include material environmental, social and governance factors; policies, practices and performance; targets; sustainability reporting frameworks; and board statements.22

Regarding disclosure obligations and climate change under Singaporean law, the Chan et al Opinion concluded that:

[…] directors who fail to disclose physical and transition risks to the valuation of the assets and liabilities under their stewardship may face various civil liabilities, even within the context of existing financial reporting standards.23

Further, the SGX has now amended the Singapore Listing Rules to require listed companies to disclose climate change risks in alignment with the recommendations of the Taskforce on Climate-related Financial Disclosures.24 These requirements applied on a ‘comply or explain’ basis from January 2022; as of January 2023, climate-related disclosures became mandatory for issuers in the financial, energy, and agriculture, food and forest products industries; and from 2024, such disclosures will be made mandatory for issuers in the materials, buildings and transportation industries.25 The SGX amendments explicitly extend the requirement for the sustainability report to include a statement of the board on its consideration of sustainability risks to include: a description of the board’s oversight of climate-related risks and opportunities, and a description of management’s role in assessing and managing such risks. Issuers are also required to describe their process for identifying, assessing and managing climate-related risks, their metrics and targets used to assess and manage climate-related risks, and disclose their Scope 1, 2 and, if appropriate, Scope 3 emissions.

Additional provisions for regulated financial institutions 

As set out above, the MAS has encouraged financial institutions to issue disclosures which comply with the TCFD recommendations.

Additionally, under the Banking Act (Cap 19) the MAS may also require banks to publicly disclose information relating to their risk profile and risk management processes.26 Foreseeably, the MAS could seek information pursuant to its recently released Guidelines on Environmental Risk Management to examine banks governance of climate risks.

The MAS has also issued a Circular on Disclosure and Reporting Guidelines for Retail ESG Funds.27 This was introduced to mitigate the risks of greenwashing and help retail investors better understand the ESG funds they invest in, and requires ESG-focused funds to disclose their ESG investment focus, the relevant metrics and targets, and their investment strategy to achieve their focus (among other things). The Circular applies to all ESG funds seeking authorisation or recognition from 1 January 2023 onwards.

Further, the MAS has announced that it will set supervisory expectations to steer financial institutions’ transition planning processes to facilitate credible decarbonisation efforts by their clients. The guidance on transition planning will cover financial institutions’ governance frameworks and client engagement processes to manage climate-related financial risks and enable transition in the real economy towards net-zero. MAS will issue a consultation paper later this year.28

Biodiversity loss

The CCLI has published a report on how companies in Singapore and other jurisdictions may depend on biodiversity for the functioning of their business models.29 In particular biodiversity risks may constitute material financial risks which boards are required to consider within the purview of directors’ duties. 

Singapore is estimated to have lost at least 35% of its plant species and up to 73% of its plants and animals.30 As one of the busiest ports in the world and a major international oil refining centre, coastal vegetation and marine wildlife is significantly affected by pollutants and threatened by oil spills. More than 95% of original vegetation, including forests and mangroves, has been cleared, swamps and mudflats have been filled and topsoils removed or compacted as part of the ‘garden city’ project .31

Regulatory focus on biodiversity loss as a material financial risk may be increasing. SGX includes biodiversity as an environmental factor to be reported in listed companies’ annual sustainability reports where material.32 

Litigation risks relating to biodiversity loss may be increasing. While there have been no cases relating to biodiversity loss brought to date, it has been opined that enforcement of directors’ duties in Singapore is more likely to take the form of regulatory action than litigation, with broad powers of regulatory authorities including fines, imprisonment, disqualification from directorship and threats of delisting or suspension from an exchange.33 Judicial attitudes towards offences under the Endangered Species (Import and Export) Act 2006 have taken account of the legislative intention to give effect to the provisions of the Convention on International Trade of Endangered Species of Wild Fauna and Flora. This could be precedent for judicial decisions relating to the Global Biodiversity Framework.34

As a result of the above factors, biodiversity loss could be emerging as a risk which directors should consider to ensure that they are meeting their legal duties and disclosure responsibilities.  

Practical Implications for Directors

Given that regulators in Singapore have become increasingly emphatic regarding the need for companies and their directors to adopt climate resilience measures in business practices and disclosure, and in particular the above-noted recognition of climate risk by the MAS, its guidelines for Environmental Risk Management and disclosure for banking, insurance, and asset management, the Singapore Exchange regulations regarding sustainability reporting and training, and the Chan et al Opinion, well-counselled boards should:

  1. ensure that board members have adequate training on sustainability management, including risk and opportunity identifications and oversight (including climate risks), and delegate sustainability risk identification and evaluation to a clearly-identified team in management which reports directly to the CEO and board; 
  2. put on the agenda for the board within 3 or 6 months a process to start developing a climate transition roadmap to 2050 with transparent net-zero-aligned reduction targets, with clear interim targets to 2040, 2030, and within the current rolling multi-year strategic plan, and periodically thereafter report back to the board;
  3. delegate to the appropriate committee(s) of the board, such as risk, audit, legal and governance, scenarios/strategy, nominations/remuneration, or sustainability/corporate responsibility, the task of translating the long-term strategy into a clear decision-making process for each aspect that is relevant to each committee; and
  4. discuss with disclosure counsel, to develop an external engagement and communications plan and to oversee rigorous disclosure and accounting.


  • Commonwealth Climate and Law Initiative
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End notes:

1:  MAS, ‘Consultation Paper on Proposed Guidelines on Environmental Risk Management for Banks’ (25 June 2020) <>; MAS, Consultation Paper on Proposed Guidelines on Environmental Risk Management for Insurers (25 June 2020) <>.
2:  MAS, ‘Guidelines on Environmental Risk Management for Asset Managers’ (8 December 2020) <>; MAS, ‘Guidelines on Environmental Risk Management for Insurers’ (8 December 2020) <>; MAS, ‘Guidelines on Environmental Risk Management for Banks’ (8 December 2020) <>.
3:  MAS, Information Paper on Environmental Risk Management for Banks (May 2022) <>; MAS, Information Paper on Environmental Risk Management for Insurers (May 2022) <>; MAS, Information Paper on Environmental Risk Management for Asset Managers (May 2022) <>
4:  MAS, Industry Taskforce launches Third Consultation on Green and Transition Taxonomy, (15 February 2023) <>.
5:  Singapore Exchange Listing Rules, rr 711A and 711B.
9Lim Weng Kee v Public Prosecutor
2002:  2 SLR(R) 848 at [28].
10Bristol and West Building Society v Mothew
1998:  Ch 1 at 16.
11Re Smith and Fawcett Ltd
1942:  Ch 304 at 306.
12Bray v Ford
1896:  AC 44 at 51
13:  For example, see Environmental Protection and Management Act (Cap 94A, 2002 Rev Ed.) s. 71(1).
14:  Jeffrey Chan SC et al, ‘Legal Opinion on Directors’ Responsibilities and Climate Change Under Singaporean Law’ (April 2021) at [79], <>.
15Ibid at [45].
16Ibid at [76].
17Ibid at [79].
18Ibid at [80].
19:  Singapore Exchange Listing Rules, r 703.
20:  Jeffrey Chan SC et al, ‘Legal Opinion on Directors’ Responsibilities and Climate Change Under Singaporean Law’ (April 2021) at [64].
21Ibid at [65].
22:  Singapore Exchange Listing Rules, rr 711A and 711B.
23:  Jeffrey Chan SC et al, ‘Legal Opinion on Directors’ Responsibilities and Climate Change Under Singaporean Law’ (April 2021) at [69].
24:  Singapore Exchange Listing Rules, r 711B(aa); Singapore Exchange Listing Rules Practice Note 7.6, at [4.7]-[4.17].
25:  SGX, SGX mandates climate and board diversity disclosures (15 December 2021) <>.
26:  Sections 10B(1) and (2), Banking Act (Cap 19) (see also s. 26(1)).
28:  MAS, MAS to Set Expectations on Credible Transition Planning by Financial Institutions (8 June 2023) <>.
29:  CCLI, Biodiversity Risk: Legal Implications for Companies and their Directors (December 2022) <>.
30:  Brook, B., Sodhi, N. & Ng, P. Catastrophic extinctions follow deforestation in Singapore. Nature 424, 420–423 (2003) <>
31:  Joseph Chun, Wildlife Law in Singapore: Protecting Wildlife in the 'Garden City' (2007), 203, 230-231 <>.
32:  Singapore Exchange Listing Rules Practice Note 7.6.
33:  Jeffrey Chan SC et al, ‘Legal Opinion on Directors’ Responsibilities and Climate Change Under Singaporean Law’ (April 2021) at [79], <>. See also Ernest Lim and Umakanth Varottil, “Climate Risk: Enforcement of Corporate and Securities Law in Common Law Asia” (2022) 22 Journal of Corporate Law Studies 391.
34:  Joseph Chun, Wildlife Law in Singapore: Protecting Wildlife in the 'Garden City' (2007), 203, 237-238 <>.