The S-Reits industry, as with all other sectors, is experiencing growing pressure from investors, tenants, regulators, and other stakeholders to report key environment, social and governance (ESG) information.

It is also increasingly clear that S-Reits now recognise the importance of addressing environment and sustainability matters to ensure the delivery of steady distributions in the long term.

The latest joint study, Climate risk disclosures in Reits: a study of Singapore Reits, by EY and the Reit Association of Singapore (Reitas) showed that S-Reits have made “considerable progress in climate-related disclosures” since SGX RegCo introduced mandatory climate reporting on a phased approach in 2021. The study reviewed the coverage and quality of disclosures by S-Reits against global peers and best practices based on the Task Force on Climate-related Financial Disclosures (TCFD) recommendations.

It accorded a 91 per cent coverage score (based on the number of TCFD recommendations addressed) and a 46 per cent quality score (based on level of detail or depth of disclosure) to the overall S-Reits sector.

Across the sub-segments, diversified S-Reits have, on average, the highest coverage and quality scores of 98 per cent and 55 per cent respectively.

The study also found that S-Reits perform better in climate-related disclosures than their global peers. 

To promote the alignment between reporting parties and users of ESG information, the Monetary Authority of Singapore (MAS) and SGX launched ESGenome last year, a disclosure portal to collect consistent and comparable ESG data. 

Early adopters of the portal include several S-Reits, such as Manulife US Reit and CapitaLand China Trust, demonstrating S-Reits’ advancements of ESG reporting and willingness to communicate with stakeholders.

Both S-Reits reported close to 30 ESG metrics, such as greenhouse gas emissions, energy consumption, water usage, employee diversity, anti-corruption measures and more, which aligned with the recommendations of SGX Core Metrics. 

As issuers disclosure more transparent and consistent ESG data, the creation of more ESG-related financial products is made possible. The iShares MSCI Asia ex-Japan Climate Action ETF launched last week, aimed to offer investors access to companies that are deemed to be better positioned for the transition to a low-carbon economy.

The ETF’s underlying index, MSCI AC Asia ex Japan Climate Action Index, is designed to represent the performance of companies that have been assessed to lead their sector peers in terms of their positioning and actions relative to climate transition. 

The index consists of 605 constituents and includes four S-Reits – CapitaLand Ascendas Reit, CapitaLand Integrated Commercial Trust, Mapletree Logistics Trust and Mapletree Pan Asia Commercial Trust. The four S-Reits have a combined index weightage of 0.62 per cent. 

Source: SGX Research S-Reits & Property Trusts Chartbook.

REIT Watch is a weekly column on The Business Times, read the original version.

Enjoying this read?

• Subscribe now to the weekly SGX My Gateway newsletter for a compilation of latest market news, sector performances, new product release updates, and research reports on SGX-listed companies.
• Stay up-to-date with our SGX Invest Telegram channel.