The Taiwan Monthly

Oct. 2020

Corporate Governance

TCFD Training attracted the attention of listed companies

On August 26, the Taiwan Stock Exchange (TWSE) and Ernst & Young jointly held the second session of the Task Force on Climate-related Financial Disclosures (TCFD) training of this year. This training aims to share the current situation of TCFD introduction by global and Taiwanese enterprises, to analyze international practices, and to work with TWSE-listed companies to jointly improve the quality of disclosure of climate-related information in Taiwan’s capital market. This training session received overwhelming response and this highlights the fact that the TWSE-listed companies attach importance to the issue of sustainability.

 

Pony B.L. Huang, Head of Corporate Governance Department of the TWSE, said that the TWSE amended the “Rules Governing the Preparation and Filing of Corporate Social Responsibility Reports by TWSE Listed Companies” at the beginning of this year, requiring listed companies to disclose the governance of climate-related risks and opportunities in their corporate social responsibility reports to encourage listed companies to face up to the importance of climate-related financial disclosure. With the impact of COVID-19, enterprises attach much greater importance to ESG and ESG- related investments have become the focus of investors. According to the data of Morningstar, in the first quarter of 2020, there were 3,200 funds employing ESG as their main investment strategy, with a total net inflow of USD 45.7 billion; at the same time, the net outflow of non-ESG funds was USD 430.4 billion and the scale of Taiwan's ESG-related ETF assets has also increased significantly, indicating that the capital market has set off a wave of global ESG investing. In addition, as the registration is very active for the training session, the TWSE and Ernst & Young are planning to conduct relevant training sessions again by the end of September.

 

As pointed out by Roger Tseng, Partner and certified accountant of Ernst & Young on climate change and sustainable development services, according to the “2019 EY Global Climate Risk Disclosure Barometer” survey report (based on the analysis of TCFD contents disclosed in the annual reports, corporate social responsibility reports, and CDP of 970 enterprises in 34 markets and 11 industries in the world), compared with the performance of global enterprises, the sample Taiwanese enterprises’ rate of compliance with the disclosure requirements on the four core elements of TCFD is higher than the global market performance, but there is much room for quality improvement. In terms of “risk management”, Tseng suggested that enterprises should strengthen the process of identifying and managing climate-related risks and opportunities, and clarify the responsibilities and segregation of duties of their units from top to bottom, including the board of directors, the management and the execution team. In terms of “corporate governance,” enterprises may explore the reporting of climate-related risks and opportunities, the division of work and communication frequency of their communication structure, and the connectivity of the company's overall operating strategy. In terms of “strategy,” in addition to widely disclosing climate related risks and opportunities, attention should be paid to the “time dimension” and “linkage to climate situation information” to help enterprises more comprehensively and truly grasp possible impact in the future, and then formulate countermeasures to transform risks into competitive advantages.

 

This time, the TWSE worked with Ernst & Young in the hope of helping domestic enterprises further master the requirements and norms of the competent authorities and guide them to gradually grasp the impact of climate change risks on their business operations. Sustainable operations and management as well as coexistence and co-prosperity with the environment are not only the important responsibilities of enterprises, but may also highlight the value of “taking from society and giving back to society.” The TWSE expects that through relevant training, more enterprises will disclose more climate-related information, so that the efforts of Taiwanese enterprises in the sustainability field will be globally recognized.

 

 For further inquiries, please contact Mr. Kao at 1219@twse.com.tw