Singapore CFOs struggle to embed ESG into finance

Southeast Asia is falling behind on ESG.

Singapore’s top companies have made significant progress in sustainability reporting, but many CFOs still face major challenges in embedding ESG into financial decision-making, according to Deloitte.

Nikki Kemp, Executive Director of the Singapore Green Finance Centre, cited a 2024 survey that shows Singapore is one of only seven countries globally where all top 100 companies report on sustainability. “Climate change is a financial risk where 55% of companies globally recognise climate change as a financial risk to their business. In Singapore, that’s 76% of those top 100 companies, and that’s up from 49% just two years ago,” she said.

She also mentioned that 84% of Singapore’s top 100 companies now integrate ESG information into their annual reports, well above the global average of 62%.

Despite these strong corporate disclosures, Deloitte’s Asia Pacific CFO survey shows Singapore’s finance leaders lag behind regional counterparts in integrating ESG into financial operations.

“Only about 1/3 of CFOs are reporting that they are undertaking ESG risk assessment, and just 40% reporting on ESG initiatives to stakeholders,” said Kok Yong Ho, AP CFO Programme Leader at Deloitte.

Kok Yong identified multiple barriers CFOs face: “A lot of them are telling us that talent, resources, shortages, capabilities, difficulty in measuring ESG impact and competing business priorities are key consideration points,” he said. “CFOs face tough trade offs that come with advancing climate and ESG priorities.”

One area of progress is incentive alignment. Kemp noted that “about 82% or eight out of 10 companies are incorporating ESG metrics within executive incentive plans.” This compares to the global average of 81% and Europe’s 94%. “But the challenge still exists about how these incentives are linked to each function within the organisation,” she said.

Kok Yong advised that CFOs strengthen internal governance, conduct regular ESG reviews, and adopt third-party audits. “Having both a third party and an internal audit of ESG data can convey a simple but powerful message to your investors,” Kok Yong said.