Philippines SEC pushes closer link between sustainability and financial reporting

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Highlights

Philippines SEC adopts PFRS S1 and S2 sustainability disclosure standards, beginning phased rollout with larger publicly listed companies before expanding further.
SEC Commissioner Rogelio V. Quevedo emphasizes integrated sustainability and financial reporting to help investors assess impacts on corporate performance, risk, and long-term resilience.
SEC Memorandum Circular No. 4, Series of 2026 raises the threshold for mandatory audited financial statements, easing compliance costs for qualifying smaller corporations.

Phased rollout of new disclosure standards

As reported by BusinessWorld Online, the Securities and Exchange Commission said sustainability disclosures should be more closely integrated with corporate financial reporting so investors can better assess their effects on companies' results and prospects.

SEC Commissioner Rogelio V. Quevedo raises the issue during the 43rd session of the United Nations Conference on Trade and Development’s Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting in Geneva, Switzerland, according to a regulator statement issued over the weekend.

Quevedo says connected reporting helps investors and other users understand how sustainability-related risks and opportunities affect a company’s financial position, performance, cash flows, access to financing, cost of capital and long-term resilience. He also says reporting requirements should remain proportionate to a company’s size and complexity while still producing disclosures that are useful to investors and other users.

The SEC has adopted Philippine Financial Reporting Standards on Sustainability Disclosures, PFRS S1 and S2, with implementation set to proceed in phases. SEC representative Joseph Anthony S. Perez says the rollout begins with larger publicly listed companies before expanding to other entities based on their readiness.

Compliance burden and support for smaller companies

Perez says companies will require further training and support to comply with the standards and integrate sustainability disclosures into their financial reporting. That signals a broader transition effort as the regulator extends the framework beyond the largest listed firms.

Separately, Quevedo points to SEC Memorandum Circular No. 4, Series of 2026, which raises the threshold for mandatory audited financial statements and allows qualifying smaller corporations to submit certified financial statements instead. The SEC says the measure is intended to reduce compliance costs and administrative requirements for smaller companies.

In our earlier article on the state of the internal audit profession in the Philippines, we noted that companies are facing more volatile and interconnected risks—from technology and cybersecurity to climate and regulatory change—raising expectations for more forward-looking assurance and reporting. The survey findings pointed to capability gaps in areas such as IT audit, cybersecurity, database management, and audit automation, underscoring the need for continuous learning and technology-enabled methods to support resilience and long-term value creation.

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