Speech by Ms Indranee Rajah, Minister in The Prime Minister's Office and Second Minister for Finance and National Development at The ISCA Professional Accountants in Business (PAIB) Conference in Singapore, on 25 August 202225 Aug 2022
Mr Teo Ser Luck, President of ISCA,
Ladies and Gentlemen
1. It is the first time we have been able to meet in person after more than two years of virtual meetings. It is great also to see all the energy in the room.
A Snapshot of our Times
2. The last 2 years have been a little surreal. If you had said to someone in 2019 that within a year, we would be in the throes of a global pandemic, followed shortly after, by a war in Europe that would reshape the post-World War II geopolitical architecture that kept world peace and world order for the last 50 years, precipitating global food shortages, an energy crisis and inflation, the likes of which have not been seen since the 1970s, few people would have believed you. And yet here we are.
3. And all of this is happening while the world contends with yet another looming crisis – climate change.
4. The challenges ahead are daunting, but not insurmountable. As Singaporeans, we are no strangers to difficult odds. The question is how do we intend to secure the future this time round, with this particular backdrop and in this context?
5. We have recently initiated the process to address this, and that is the Forward SG movement recently announced by DPM Lawrence Wong.
a. For those who are not so familiar with it, Forward SG is an exercise to review and refresh our social compact and chart a roadmap for the next decade and beyond.
b. It is not something that is to be done by the government alone. It has to be done by the government and people working together, and also, people and people working together.
6. It is going to be organised along 6 pillars, and let me just recap them briefly, these are:
a. Empower – that deals with Jobs and Economy;
b. Equip – which has to do with Education and Lifelong Learning;
c. Care – that will touch on Health and Social Support;
d. Build – which is about Home and the Living Environment;
e. Steward – which is about Environmental and Fiscal Sustainability and finally;
f. Unite – the Singapore Identity.
7. The range of coverage of the pillars provides ample opportunity for everyone to contribute and participate in this exercise to secure our future.
8. I just wanted to bring everyone back to remember, to think about how far we have come in the last 20 years. On the back of the Remaking Singapore committee, the Economic Restructuring committee, our Singapore Conversations, the Future Economy council, SG Together – when you actually look back over the last 20 years, out of each and every one of these national engagements, has come change, has come development, has come growth, and we have reshaped and come so far the last 20 years. We now stand at yet another watershed, in a very changed and different world, and the question is what to do going ahead.
9. While there is a lot and the subject is probably endless, today, I want to talk specifically about what accountants can do, and how you can bring your skillsets to bear in the context of climate change and sustainability, which effectively straddle the Empower and the Steward pillars.
Climate Change and Sustainability
10. Climate change is already happening.
a. Ice caps in the Arctic are melting at extreme rates.
b. Many countries are experiencing extreme heatwaves. Delhi, India, recently recorded its highest temperature ever at 49 degrees Celsius.
c. Others have been experiencing droughts. A couple of days ago, I read that in China, the Yangtze river has been receding and in one case revealing a submerged island and a trio of 600-year-old Buddhist statues!
d. It is almost as if the world is undergoing a change where new things are coming to light and other things are receding, and if we do not do something we are all going to be adversely affected.
e. The window to act is narrowing, and the world have to act now, if we want to significantly cut down the amount of greenhouse gases emitted into the atmosphere.
11. Singapore is firmly committed to playing our part in the global effort to tackle climate change.
12. We have launched the Singapore Green Plan 2030 which sets out our green targets for the next 10 years.
13. Areas of the Green Plan relevant to accountants’ work, especially the consultancy and advisory side, would include:
a. Our efforts towards an energy reset, and the move towards green and renewable energy
b. Generating a green economy, such as:
i. Ensuring that carbon intensive investments brought in are best in class in terms of carbon and/or energy efficiency and carbon tax policies
ii. Transforming Jurong Island into a sustainable energy and chemicals park
iii. Developing Singapore as a carbon services hub
iv. Growing Singapore into a leading Asian and global centre for green finance, and also facilitating the green transition
v. Strengthening Singapore as an R&D Centre for sustainability solutions
vi. Developing and trialling new technologies for carbon capture, utilisation and storage
c. And also, building a resilient future through our 30 by 30 initiative, which is intended to produce 30% of our nutritional needs by 2030, and that requires the growth of our local agriculture and aquaculture, adoption of resource-efficient urban farming technologies and R&D for food production. So just with that list alone, which is by no means exhaustive, you can already see a huge range of things which accountants will be able to advise and use your skillsets.
14. Earlier this year in the Budget statement, DPM Wong announced Singapore’s commitment to achieve net zero emissions by or around mid-century.
15. Many other countries and companies, too, have set themselves net-zero targets.
a. The momentum is encouraging, but the problem is that some may not have credible plans to back up their net zero targets. Easy to say, not so easy to do.
b. This is not necessarily due to a lack of desire to do so, but in some cases because they may not know how to measure their emission levels, or chart their path towards net zero.
c. This is compounded by the current lack of consensus on how to hold countries and companies accountable for their sustainability efforts.
Accountants and the Sustainability Agenda
16. This is where accountants can play a critical role in advancing the sustainability agenda.
a. The accountants’ traditional role is the oversight of an organisation’s finances, capital and assets.
b. But your professional skills also enable you to exercise stewardship and advise over a much broader range of issues.
c. Over the years, the accountants’ role has expanded to support corporate governance, risk management, strategic business decisions, and optimisation of operations.
d. Going forward, as the green momentum picks up, the accountants’ stewardship role will likely expand to include sustainability and environmental issues.
17. There are three important areas in which accountants can lead the charge.
Area 1 – Ambition
18. First, ambition. Accountants are in the best position to set sustainability ambition and drive transformation within the companies you advise.
a. Some accountants sit on companies’ Boards, and they are therefore in a position to provide strategic direction and influence.
b. Others are CFOs or work within the corporate finance units, from which you have a good vantage point of the companies’ financial performance and business strategies.
c. Yet others work in accounting firms providing business advisory and consultancy to their clients.
19. In all these positions, accountants have the power to help their companies understand the importance of mitigating climate-related risks and to work towards sustainable goals.
a. You can influence strategic decisions, business practices and even organisational change, setting companies on the path towards more sustainable practices, products, and processes.
Area 2 - Adoption
20. Second, adoption.
a. A big part of an accountant’s job is to assess the costs and benefits of a business decision.
b. You are therefore in the best position to accelerate adoption of sustainability practices, by articulating the value of sustainability and proposing ways for businesses to embark on more sustainable business models.
c. Familiarity with companies’ finances also enables you to assess the impact which environmental practices have on their organisations’ financial performance.
21. The Chief Financial Officer (CFO) of KTC Group, Mr Liaw Chun Huan, who is accounting-trained and a fellow of ISCA, exemplifies this.
a. KTC Group focuses on civil engineering and construction business which has significant environmental impacts. With the growing importance on sustainability, Mr Liaw now starts to track the company’s diesel and electricity consumption and is also actively searching for more sustainable and renewable energy alternatives.
b. Drawing from Mr Liaw’s expertise in cost benefit analysis and financial remodeling, KTC Group has invested in a solar panel system for their office, which is expected to bring close to 80% cost savings in their monthly electricity costs.. But you can see how an accountant or someone with accounting training can make a difference to sustainability in this way.
Area 3 – Accountability
22. The third area in which you can make a difference is accountability.
a. Being able to hold companies accountable for their sustainability targets will be critical in driving real change.
b. Increasingly, consumer behaviour is shifting towards buying from socially responsible and sustainable firms. If consumers cannot verify a company’s sustainability credentials, the company may lose credibility. And consequently, their net zero target or plans may be perceived as empty promises. This is particularly so among young consumers. I think you would have already experienced that, so it is real and it is happening.
23. This is where there has been an increasing demand from investors for higher quality sustainability disclosures.
a. To meet this demand, the International Sustainability Standards Board or ISSB was formed to be a new global standard setter to guide companies’ sustainability reporting.
b. At home, the Singapore Exchange (SGX) has taken the first steps by mandating climate-related disclosures for all listed companies on a “comply or explain” basis, starting from FY 2022.
c. There are also plans to extend sustainability reporting to non-listed companies in Singapore. Recently, the Accounting and Corporate Regulatory Authority (ACRA) and Singapore Regulation Exchange (SGX RegCo) set up the Sustainability Reporting Advisory Committee to develop a roadmap for wider implementation of sustainability reporting for Singapore-incorporated companies, beyond SGX-listed companies.
24. As sustainability reporting picks up, there will be demand for accountants to provide assurance and verify these sustainability reports, so as to hold companies accountable for their plans.
a. This will increase the confidence of consumers and investors alike – to buy from, and invest in sustainable companies. As you can see, lots to do, lots of work. And Singapore with our thrust in this area, is hopefully at the vanguard of sustainability at least in Southeast Asia, and there is a lot of opportunity for accountants to take part in this growth trajectory.
25. But to do so and as sustainability gains traction, there will be increased demand for accountants to play the roles highlighted above.
26. To do so effectively, accounting professionals will have to keep abreast of developments in this space and to have a robust knowledge of these areas.
a. ISCA and SAC Capital, a Singapore investment banking firm, have jointly developed the Sustainability E-Training for Directors programme to enhance understanding of sustainability reporting and the balancing of both financial and non-financial pressures from stakeholders and the environment.
27. I strongly encourage all accounting professionals to actively participate in such programmes. This will not be the only program, there will be others and some of you will develop your own. But please equip yourselves with relevant skillsets to take advantage of the emerging opportunities.
28. We will be doing more in conjunction with Forward SG, so Forward SG as what I mentioned, is an engagement exercise. We will engage with the accountants. Accountants do not only have to comment on the accounting things. Obviously, I am sure that you will be interested in health, in home and build and so on. But given your specific skill sets, I think that there will be an advantage in engaging with accountants on what you as a profession, and as a sector can do and contribute to Forward SG.
29. Do watch this space – look out for the opportunities and sign up as and when you can. Because Singapore is built not just on aspiration and ambition alone, Singapore has been built on the ideas contributed by all Singaporeans, and more importantly, our participation in the execution of the plans and the policies. And this is a very unique opportunity to take Singapore forward on the next chapter of the Singapore Story.
30. In conclusion, let me say that sustainability has the potential to be a huge growth area and accountants can play a very important role in this. Doing it well will help Singapore in its effort to combat climate change and help us advance our Forward SG agenda.
31. This is obviously not the only area in which you can contribute to the various pillars. But it is an important part, as we embark on the task of reshaping and redesigning our post-pandemic future.
32. Thank you all very much and I wish all of you a fruitful conference.