S-REITs have emerged as a popular investment vehicle, offering investors a steady stream of income and exposure to the property market. However, the success of REITs hinges on robust corporate governance and transparency. This is where the Singapore Governance & Transparency Index (SGTI) plays a crucial role. SID just release the latest SGTI Report for 2024
Some S-REITs that are currently or formerly listed at SGX are excluded from the SGTI 2024 ranking.
- REITs/business trusts that are suspended from trading.
- REITs/business trusts which did not release annual report for 2 years.
The Importance of SGTI for Singapore REITs
The SGTI provides a comprehensive assessment of the corporate governance practices of Singapore-listed companies, including S-REITs. By evaluating factors such as board composition, audit committee effectiveness, shareholder rights, and disclosure practices, the index helps investors gauge the quality of management and the overall health of a REIT.
- Investor Confidence: REITs rely on investor confidence to thrive. A high SGTI score indicates strong governance practices, which can enhance investor trust and attract capital.
- Risk Management: Effective governance helps REITs identify and manage potential risks, protecting investors' interests.
- Performance: Studies have shown that companies with strong governance tend to outperform their peers. This applies to REITs as well.
- Regulatory Compliance: The SGTI promotes adherence to regulatory requirements, ensuring that REITs operate within the legal framework.
Key Governance Indicators for REITs
While the SGTI covers a broad spectrum of governance practices, certain areas are particularly important for REITs:
- Board Composition: REITs should have a diverse board with a balance of independent and executive directors. The board should possess relevant industry expertise and a strong understanding of real estate.
- Financial Reporting: Transparent and accurate financial reporting is essential for REITs. Investors need to have a clear picture of the REIT's financial performance, including revenue, expenses, and cash flow.
- Asset Management: Effective asset management is crucial for REITs to generate sustainable returns. This includes property valuation, lease management, and risk assessment.
- Distribution Policy: REITs are required to distribute a significant portion of their income to unit-holders. A clear and consistent distribution policy is vital for investor confidence.
How Investors Can Utilize SGTI
Investors can use the SGTI as a valuable tool when evaluating S-REITs:
- Compare REITs: By comparing the SGTI scores of different REITs, investors can identify those with stronger governance practices.
- Monitor Governance Trends: Tracking changes in SGTI scores over time can provide insights into a REIT's governance improvement efforts.
- Engage with Management: Investors can use the SGTI as a basis for engaging with REIT management on governance-related issues.