21 March 2023
Written by Presley Tan
Taiwan is actively promoting ESG compliance and sustainable business practices in response to the increasing global awareness of these issues. At the same time, the Taiwanese government is taking measures to enhance transparency and disclosure in the corporate sector. As part of this effort, the National Development Council has released Taiwan's roadmap to achieve net-zero emissions by 2050.
Principal Regulators Concerning ESG Issues
Several regulators are responsible for overseeing the enforcement of ESG issues in Taiwan. These include the Environmental Protection Administration (EPA), National Council for Sustainable Development (NCSD), Ministry of Economic Affairs (MOEA), Bureau of Energy (BOE), Taiwan's Financial Supervisory Commission (FSC), Taiwan Stock Exchange (TWSE) and Taipei Exchange(TPEx).
To achieve the 2050 goal, the EPA and NCSD oversee the mandatory reporting of greenhouse gas emissions by businesses each year, under the Greenhouse Gas Reduction and Management Act (GGRMA).
The MOEA and BOE are responsible for energy-related laws, regulations, and policies that facilitate Taiwan's climate change policies.
The FSC, TWSE, and TPEx are primarily responsible for overseeing ESG issues in the capital markets. The FSC has announced important ESG-related policies and regulations, including the Corporate Governance 3.0: Sustainable Development Roadmap and the Green Finance Action Plan 3.0.
Greenhouse Gas Reduction and Management Act (GGRMA)
Corporate Governance 3.0 -Sustainable Development Roadmap
ESG-related Regulations
Taiwan Financial Supervisory Commission (FSC) launched the Corporate Governance 3.0: Sustainable Development Roadmap to promote sustainable corporate development, establish a competent ESG ecosystem, and strengthen the international competitiveness of Taiwan's capital markets. To achieve these goals, the FSC requires listed companies to include ESG-related information in their annual reports, including environmental performance, social responsibility, and corporate governance practices. The FSC also encourages companies to adopt international ESG reporting standards, such as the Global Reporting Initiative (GRI) or the Sustainability Accounting Standards Board (SASB) framework.
FSC announced its Green Finance Action Plan 3.0 which aimed to establish a foundation to promote the effective operation of green and sustainable financial markets in Taiwan. As part of the Green Finance Action Plan 3.0, the Taiwan Academy of Banking and Finance (TABF), the Taiwan Insurance Institute (TII), and the Securities and Futures Institute (SFI) released sustainable finance evaluation indicators in line with the FSC's plan. The sustainable finance evaluation indicators cover both qualitative and quantitative topics and include 112 industry-wide indicators and 58 indicators on specific types of business.
The sustainable finance evaluation consists of "sustainable finance composite indicators" and three separate single-category indicators for Environmental (E), Social (S), and Governance (G) issues. The composite indicators aim to provide an overall assessment of a company's ESG performance, while the single-category indicators focus on each area of ESG.
The FSC's Green Finance Action Plan 3.0 also encourages financial institutions to integrate ESG considerations into their investment and lending decisions. To support this effort, the FSC introduced the Taiwan Stewardship Code in 2020, which aims to encourage institutional investors to engage with the companies they invest in and to promote ESG best practices.
The FSC has also been working with the Taiwan Stock Exchange (TWSE) to promote ESG reporting and disclosure of listed companies. In 2019, the TWSE introduced the Corporate Governance Evaluation System which includes ESG considerations. The system evaluates companies based on their ESG performance and provides a scorecard that investors can use to assess a company's sustainability performance.
In 2021, the TWSE also introduced the ESG Reporting Guidelines which provide a framework for listed companies to report on their ESG performance. The guidelines cover a range of topics including climate change, energy consumption, water usage, waste management, labor practices, human rights, and community engagement.
The TWSE also launched the Taiwan ESG Index in 2020, which includes companies that have demonstrated strong ESG performance. The index provides investors with a benchmark for assessing companies' sustainability performance and encourages companies to adopt best practices in ESG.
Corporate Governance 3.0 -Sustainable Development Roadmap
To further promote ESG investing in Taiwan, the Taiwan Stock Exchange (TWSE) launched the Taiwan ESG Index in 2015. The index tracks the performance of companies listed on the TWSE that meet certain ESG criteria.
Link: https://www.fia.org/marketvoice/articles/taifex-launched-asias-first-esg-index-futures