Could Singapore's New Mandatory Climate-Related Disclosure Rules Set a New Pattern in Southeast Asia?

By: Selina Sher Lin Yap

Singapore continues to advance its sustainability initiatives. In February 2024, it introduced mandatory climate-related disclosure rules, marking a significant step in its sustainability efforts. The obligations will be implemented in phases, beginning in the financial year (FY) 2025 for listed companies and FY2027 for large non-listed companies. [1] Could Singapore’s move toward stricter climate disclosures influence regulatory trends across Southeast Asia?

1. Understanding Singapore’s New Climate-Related Disclosure Rules
Singapore’s Accounting and Corporate Regulatory Authority (ACRA) and the Singapore Exchange Limited (SGX) have aligned the new disclosure requirements with international standards. [2] Listed and large non-listed companies will be required to report greenhouse gas emissions (GHG) in a phased approach. External assurances on these reports will also be introduced over time. Below is a brief overview of the implementation timeline:[3]

ACRA will review the experience of the above countries, before introducing reporting requirements for other companies outside of the two categories.[8]

2. The “MERLION EFFECT” – Can Singapore INFLUENCE REGIONAL CLIMATE POLICIES?

Singapore has long been a leader in the Association of Southeast Asian Nations (ASEAN) region and its role in financial markets makes it a powerful player in regulatory influence. [9] Drawing inspiration from the “Brussels Effect,” a concept introduced by Professor Anu Bradford to describe the European Union’s influence in shaping global regulatory standards, Singapore has the potential to initiate what may be termed the “Merlion Effect”—a regional movement towards stricter climate disclosure standards. [10] The Merlion is Singapore’s official mascot and features a lion’s head with a fish’s body and tail, symbolizing the city-state’s heritage and identity.

Professor Bradford’s Brussels Effect theory is grounded in five elements: market size, regulatory capacity, stringent standards, inelastic targets, and non-divisibility. [11] Applying these elements, the Merlion Effect begins to take shape:

Large Market Size. Singapore has a large consumer market that attracts companies from across the globe including Australia, Bermuda, the Cayman Islands, China, France, Japan, Malaysia, Philippines, Singapore, Thailand, the U.K., and the U.S. [12] In 2023, Singapore’s exports totalled approximately $487.78 billion, making it the world’s 15th largest exporter. [13] This achievement is notable given the country’s relatively small population of 6 million. [14] While Singapore’s market is relatively small in the context of global trade, its regulatory impact extends beyond its borders due to its significant import and export activity. This influence likely extends to regional markets with substantial trade flows through or within Singapore, such as Malaysia, Indonesia, Thailand, and China. [15] Notably, Southeast Asia’s economy is on track to become the world’s fourth largest and is rapidly growing across industries, attracting interest from major world players. [16] Given Singapore’s position as a leader in these emerging markets, it can be argued that the collective economic activity of these regions contributes to for the market size required for Singapore exercise regulatory influence.
Regulatory Capacity & Stringent Standards. Singapore has a transparent regulatory climate with robust anti-corruption laws and a stable political and security environment. [17] These display the capabilities of the Singapore Government to regulate its markets to a high standard.
Inelastic Targets. As the largest trading partner in Southeast Asia for Global North jurisdictions such as the U.S. and the EU, as well as a crucial trade partner for Eastern powerhouses such as China, Singapore acts as a bridge between Western and Eastern jurisdictions [18] Singapore’s status as a trusted gateway to the Asia-Pacific has made it the top choice for regional headquarters and subsidiaries of major multinational corporations. [19] As a result, many of these countries fall under Singapore’s mandatory reporting and regulatory frameworks. This concentration of global corporate activity means that Singapore’s regulatory reach extends well beyond its domestic market, further solidifying the inelasticity of its regulatory targets.
Non-Divisibility. Singapore’s strategic importance as a global trade and corporate hub prevents companies from jurisdiction shopping, effectively ensuring that businesses operating within its market must adhere to its regulatory framework. Due to Singapore’s high regulatory standards, corporations are inclined to standardize their practices accordingly, using its stringent requirements as a benchmark.

3. Will Other Countries Follow Singapore’s Lead?

There are signs that Singapore’s regulatory approach to climate-related disclosure may influence other jurisdictions in the region. Several of Singapore’s ASEAN neighbors have begun adopting similar regulatory measures. Thailand, Indonesia, the Philippines, and Vietnam require listed companies to disclose certain environmental, social, and governance (ESG) metrics, while Malaysia has recently introduced a phased approach to mandatory reporting that mirrors Singapore's framework. [20] However, many of these countries have yet to extend their rules to large non-listed companies, making Singapore a regional leader in this space. [21] As a result, companies with the majority of their operations in Asia, particularly those not subject to the EU’s mandatory reporting regulations, are likely to encounter higher reporting standards first through Singapore.

In other areas of law, there have been clear indications of the Merlion Effect. Singapore’s anti-money laundering framework has notably influenced legislation in other ASEAN countries. [22] It was also one of the first in the region to implement data protection laws aligned with international standards, such as the EU’s General Data Protection Regulation (GDPR). [23] Additionally, Singapore is recognized as the first country in Southeast Asia to have a dedicated fintech regulatory system, introducing the Fintech Regulatory Sandbox in 2016. [24]

One potential challenge to this influence is the composition of Singapore’s corporate landscape. Small and medium enterprises (SMEs) dominate the SGX, making up approximately about 80% of listed firms. [25] Critics might argue that these businesses are too small to drive broader regional change. However, many of Singapore’s SMEs operate across multiple jurisdictions, and their compliance with stricter reporting rules could encourage similar adoption elsewhere. [26] As these businesses integrate Singapore’s regulatory standards into their regional standards, other nations may face pressure to align their regulations to maintain competitiveness in cross-border trade.

4. Looking Ahead: Can Singapore Balance Business and Sustainability?
There is no “one size fits all” approach to climate disclosure, and Singapore will need to ensure that its new regulations don’t undermine its status as a business-friendly hub. So far, Singapore has demonstrated its ability to balance economic growth with regulatory leadership. If the Merlion Effect gains momentum, Singapore’s commitment to sustainability could set a new standard, encouraging its neighbors to follow suit in adopting greener policies.

The key question now is how businesses will adapt and whether ASEAN policymakers start mirroring Singapore’s approach. If history is any guide, we may be seeing the early stages of a broader regional transformation, one where Singapore’s leadership in climate-related disclosure reporting helps shape the future of sustainable finance across Southeast Asia.

Selina Yap is a graduating LL.M. student at Columbia Law School (Class of 2025) focussing on international law. During her LL.M., in addition to serving as a committee member of Columbia’s Society of International Law, she was awarded the Parker Certificate of Achievement in International and Comparative Law and contributed to Professor Petros C. Mavroidis’ critical research on international trade law as a Research Assistant. Prior to Columbia, Selina practiced as an attorney in Singapore with over six years of experience specializing in complex commercial dispute resolution.

[1] https://www.sgxgroup.com/media-centre/20240923-sgx-regco-start-incorporating-ifrs-sustainability-disclosure.

[2] Id.

[3] https://www.sgxgroup.com/media-centre/20240228-climate-reporting-help-companies-ride-green-transition.

[4] Id.

[5] Id.

[6] https://www.sgxgroup.com/media-centre/20240923-sgx-regco-start-incorporating-ifrs-sustainability-disclosure.

[7] Id.

[8] https://www.sgxgroup.com/media-centre/20240228-climate-reporting-help-companies-ride-green-transition.

[9] https://seamap.lowyinstitute.org/country/singapore/#15/103.85/1.291; https://www.statista.com/statistics/264623/leading-export-countries-worldwide/.

[10] https://academic.oup.com/book/36491/chapter/321182245.

[11] https://www.sgxgroup.com/media-centre/20240228-climate-reporting-help-companies-ride-green-transition.

[12] https://www.sgx.com/securities/corporate-information.