The Taiwan Monthly

Jun. 2019

Corporate Governance

Climate risk management and ESG investing trends

On May 7, Taiwan Stock Exchange (TWSE) joined the Task Force on Climate Change-related Financial Disclosures (TCFD), Taiwan Institute for Sustainable Energy, Cozeta Energy Service Corporation, and Aberdeen Standard Investments in holding Climate-related Financial Disclosures Forum and the ESG Investing Forum. The forums invited experts from different countries and representatives of listed companies to share ways for companies to promote climate-related financial disclosures in response to global warming and climate change in order to adapt to the implications of climate change on business activities. The ESG Investing Forum also had institutional investors from around the world share experience of fulfilling stewardship responsibilities to strengthen sustainable development in Taiwan.


TWSE President Lih-chung Chien pointed out in his speech that all major sustainability rating agencies included recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) in their reports and rating questionnaires. Therefore, TWSE strengthens non-financial information disclosure of listed companies in Taiwan by requiring that listed companies for whom CSR reports are compulsory start following the GRI Standards in their reports published in 2019 and onwards. GRI 201: Economic Performance explicitly requires companies disclose financial implications and other risks and opportunities due to climate change. The Corporate Governance Evaluation also incorporates " Did the company set management policies for energy conservation, reduction of carbon/greenhouse gas (GHG) emissions, water use, or other waste/pollutants? " into the evaluation. Climate-related disclosure becomes a new trend in sustainability disclosure.


TCFD Secretariat Curtis Ravenel shared the challenge of facing international climate change. To improve transparency in corporate information, the Financial Stability Board (FSB) announced officially the recommendations on climate-related financial disclosures. FSB requires companies follow the structure of the recommendations: governance, strategy, risk management, and metrics and targets. Companies should understand the financial implications that climate change may potentially have on business, and provide stakeholders relevant and reliable financial measurements. TCFD uses a set of flexible recommendations to guide companies worldwide to invest more resources in management of climate risks.


Dr. Eugene Chien, Chairman of Taiwan Institute for Sustainable Energy, mentioned that Taiwan companies had made great progress in sustainability in the last decade. According to a reporting platform in Taiwan, the number of CSR reports has risen from barely a dozen in 2008 to 528 in 2018. The number of entries to the Taiwan Corporate Sustainability Awards (TCSA) has reached 236. The total revenue of these companies combined accounts for 82% of the GDP in 2017. Meanwhile, the Alliance for Sustainable Development Goals was founded in 2018. The alliance brings together industry, government, and academia experts to collaborate on sustainable development. Up to 21 Taiwanese companies were included in DSJI World and DSJI Emerging Markets Indices in 2018. The internationally renowned financial data company Bloomberg ranks Taiwan in the 7th place in the world in terms of transparency in ESG disclosure. Furthermore, 2 companies have been named in the CDP A List. These achievements prove Taiwan's progress in sustainable development is starting to gain international recognition in recent years. David A. Smith, Head of Corporate Governance Asia Pacific of Aberdeen Standard Investments, shared that institutional investors achieved better returns and managed investment risks more effectively when ESG factors were included in the decision making process.


Chung-Pue Yu, Vice President of Corporate Governance Department of TWSE, pointed out the trend that in fulfilling stewardship responsibilities, more and more institutional investors would sign the Stewardship Principles as they accounted a growing percentage of the total volume in Taiwan’s capital market. In addition, institutional investors participate in corporate governance by attending annual general meetings, exercising voting rights, and engaging management teams of companies they invest in as appropriate. He commented that listed companies in Taiwan should stay open to such participation and be prepared for interaction with institutional investors, while institutional investors should release stewardship reports to disclose fulfillment of their stewardship responsibilities to clients or beneficiaries.


The forums were attended by closely to 400 directors and CEOs of listed companies and institutional investors. Participants discussed and shared their views on international trends in adapting to climate change and practices in Taiwan through keynote speeches and panel discussions. With industry, government, and academia working alongside NGOs, ESG performance becomes a part of the decision making process for investors, and corporations are working together to achieve sustainable development in Taiwan's capital market and thereby make Taiwan’s companies more competitive.


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