• New sustainability standards SLFRS S1, S2 effective from ’25
• Top 100 firms must disclose GHG emissions, sustainability initiatives
• Move aligns with global sustainability reporting practices, not ESG index rollout
• CSE’s proposed ESG index likely to launch in ’25 if reporting standards improve

The Colombo Stock Exchange (CSE) has introduced mandatory sustainability reporting for the top 100 listed companies in terms of market capitalisation.

Speaking to The Sunday Morning Business, CSE Chairman Dilshan Wirasekara revealed that the CSE had amended the CSE Listing Rules in order to introduce a mandatory obligation for sustainability reporting. 

This will be applicable only for the top 100 listed companies in terms of market capitalisation.  

Accordingly, the top 100 listed companies will henceforth be obligated to disclose in their annual reports information such as the amount of greenhouse gases (GHGs) emitted by their operations and sustainability initiatives introduced by them. 

Wirasekara added: “Two new accounting standards have been introduced on the integrated reporting framework, which were applicable from 1 January. These two standards are known as SLFRS S1 and SLFRS S2 and both are sustainability standards. It has now become mandatory for the top 100 listed firms in terms of market capitalisation to report these disclosures in their annual reports.”

He revealed that the CSE would mandate a cutoff date to identify the top 100 listed companies in order to impose this mandatory obligation.

Wirasekara further noted that this decision had not been made as a precursor to the proposed introduction of the Environmental, Social, and Governance (ESG) rating system and an ESG index by the CSE. 

Instead, he said that the decision had been made for the purpose of complying with the global movement for sustainability, which has seen many regulators and exchanges introduce mandatory ESG reporting obligations. 

Nevertheless, the CSE Chairman conceded that this move would complement the ongoing parallel process to introduce an ESG index at the Colombo bourse. 

Addressing the possible timeline for the establishment of the ESG index, he pointed out that the initial plan had been to introduce the index in 2024. 

However, these plans were postponed following studies done by the CSE which established that such a move was too premature considering that most listed entities had to improve their ESG reporting.

Wirasekara opined that the CSE would be able to introduce this proposed ESG index in 2025 provided that the standard of ESG reporting reached required standards, particularly in the aftermath of the introduction of the mandatory sustainability report obligation for the top 100 listed entities.   

As the national accounting standard setter, the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) in collaboration with the International Sustainability Standards Board (ISSB) introduced the following Sustainability Disclosure Standards with effect from 1 January:

• SLFRS S1 – General requirements for disclosure of sustainability-related financial information
• SLFRS S2 – Climate-related disclosures