Philippine corporate regulator Securities and Exchange Commission (SEC) is preparing the country’s listed firms for mandatory sustainability reporting by 2026.
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The commission plans to adopt a “transitional or phased approach” towards mandating sustainability reporting from companies to allow them to smoothly adjust to new reporting requirements, it said. This is as the country aligns itself with the International Sustainability Standards Board (ISSB) regulation.
ISSB is responsible for developing the IFRS sustainability disclosure standards, widely seen as the global baseline for reporting.
SEC commissioner McJill Bryant Fernandez told Eco-Business that it plans to conduct a market readiness study this year to “address possible barriers to implementation”. These include studying the need for transitional reliefs and to roll out mandatory climate-related disclosures aligned with IFRS S1 and S2 guidelines with a tiered approach for enterprises that are differently-sized, beginning in 2026.
SEC will also request for companies to provide evidence of compliance from 2028 to 2030, he shared.
Sustainability disclosures for the financial year of 2024 that are due this year could still use old rules issued in 2019, which require listed companies to submit these reports using a “comply or explain” approach. This allows them to report corporate sustainability data when available, and provide explanations for details where there are none.
SEC said it has recorded a consistent compliance rate, reaching 95 per cent in 2023, since it required listed companies to submit their sustainability reports six years ago.
The regulator is working with the Philippine Stock Exchange to benchmark itself with its Southeast Asian neighbours to determine the tiering approach for implementation of sustainability disclosures most appropriate for the local setting.
Fernandez said SEC is studying how Malaysia looks at the asset size of listed companies to determine which firms will be required to regularly submit their sustainability reports.
The Philippines, along with Cambodia, Myanmar, Laos, and Timor-Leste, are the only countries in the region which have not adopted mandatory sustainability reporting guidelines.
Malaysia has required all public listed companies to do so since 2016, as did Vietnam. Last year, Malaysia took further steps to mandate sustainability reporting for large non-listed companies with annual revenue of RM2 billion (US$225 million) and above for the first time.
Singapore mandated climate reporting starting this year, while Thailand started doing so in 2022. Indonesia required banks to make mandatory sustainability disclosures in 2019, and for listed companies to do so in 2020.
Fernandez said he is determined to implement stricter environmental, social and governance (ESG) reporting rules to strengthen investor trust. “With improved ESG reporting standards, the Philippines can enhance its financial market stability, encourage green and social investments, and align with international sustainability trends,” he said.
